In this article, we take a look at 10 best January dividend stocks to buy.
While January might be over, many dividend stocks aren’t done paying their dividends for 2023.
Considering many dividend stocks pay dividends quarterly, many of the same companies that paid a dividend in January will pay another dividend in April.
If the company has the profits or the financial resources to do so, some of those companies might even raise their quarterly dividends during that time. Some of the same companies could also buy back stock as another form of return of excess capital in the mean time too.
Good dividend stocks are not necessarily the ones that have a lot of upside, as many stocks that have a lot of upside also have a lot of downside. In terms of January, the S&P 500 rallied 6.6% for the month as fourth quarter U.S. GDP was slightly stronger than expected and as the Federal Reserve indicated that the “disinflationary process has started” after 2022’s substantial interest rate increases.
While macroeconomic conditions are looking better than they did before, economic data can always miss estimates. If inflation increases more than expected, growth slows more than expected, the Federal Reserve tightens more than expected, or a number of other things, the market could always decline and individual stocks could always decline.
Instead good dividend stocks have relatively more stability, substantial competitive advantages, and considerable normalized earnings power. With competitive advantages and substantial normalized earnings power, those companies are more likely to maintain or even increase their dividends over time if they maintain their market shares. While the best dividend stocks also have downside, the hope is that those companies’ strong competitive advantages and dividend returns will limit the downside in the long term.
Given 2023 could also be a volatile year, it could be a good idea for long term investors to own a well diversified portfolio of leading stocks across many different sectors.
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Methodology
For our list of 10 Best January Dividend Stocks to Buy, we took all the stocks that had ex-dividend dates in January and filtered for only leading consumer staples stocks with substantial competitive advantages or leading companies with considerable scale.
We then ranked each stock based on the number of hedge funds in our database that held shares of the same stock at the end of the third quarter.
In terms of record date and ex-dividend dates, Investor.gov writes,
“When a company declares a dividend, it sets a record date when you must be on the company’s books as a shareholder to receive the dividend. Companies also use this date to determine who is sent proxy statements, financial reports, and other information.
Once the company sets the record date, the ex-dividend date is set based on stock exchange rules. The ex-dividend date for stocks is usually set one business day before the record date. If you purchase a stock on its ex-dividend date or after, you will not receive the next dividend payment. Instead, the seller gets the dividend. If you purchase before the ex-dividend date, you get the dividend.”
Every company is different so investors should always check to see company specific circumstances for every dividend payment.
10 Best January Dividend Stocks to Buy
10. The Bank of Nova Scotia (NYSE:BNS)
Number of Hedge Fund Holders: 15
Dividend Yield as of 2/3: 5.51%
The Bank of Nova Scotia (NYSE:BNS) is Canada’s third largest bank by assets that offers personal and commercial banking, wealth management, and corporate and investment banking. In terms of scale, the bank serves over 21 million customers in more than 55 countries around the world. In fiscal 2021, the bank generated nearly a third of its earnings outside of Canada. As of 2/3, the stock has a dividend yield of 5.51%.
Alongside American Express Company (NYSE:AXP), JPMorgan Chase & Co. (NYSE:JPM), and Mastercard Incorporated (NYSE:MA), The Bank of Nova Scotia (NYSE:BNS) is a January dividend stock owned by many of the hedge funds in our database at the end of Q3.
9. Keurig Dr Pepper Inc. (NASDAQ:KDP)
Number of Hedge Fund Holders: 23
Dividend Yield as of 2/3: 2.28%
Keurig Dr Pepper Inc. (NASDAQ:KDP) is a leading consumer staple that makes coffee systems and beverages such as Dr Pepper. In terms of stock performance, Keurig Dr Pepper Inc. (NASDAQ:KDP) has done well since 2013 with the stock more than tripling thanks to substantial growth. Although fast growth might be harder in the future given Keurig Dr Pepper Inc. (NASDAQ:KDP) is now a substantially larger company, the stock nevertheless trades for a reasonable forward P/E of 19.48 and analysts expect the company’s EPS to continue to grow in the future. As of 2/3, Keurig Dr Pepper Inc. (NASDAQ:KDP) had a dividend yield of 2.28%.
8. The Clorox Company (NYSE:CLX)
Number of Hedge Fund Holders: 27
Dividend Yield as of 2/3: 3.05%
The Clorox Company (NYSE:CLX) is a leading maker of household products that rallied substantially in 2020 given the early part of the pandemic. With demand having normalized somewhat from 2020, The Clorox Company (NYSE:CLX) shares have declined from 2020 and they are now around 2019 levels which was before the pandemic.
Although shares trade for a forward P/E of 29.22, analysts do expect earnings growth in the leading consumer staple’s next few years. According to consensus estimates, analysts see the company earning $4.10 per share in 2022, $4.19 per share in 2023, $5.29 per share in 2024, and $6.14 per share in 2025. While the company’s valuation still seems a little high given 2024 earnings estimates and the company’s stock price of nearly $155, The Clorox Company (NYSE:CLX) also has a dividend yield of 3.05%.
Of the companies on our list, The Clorox Company (NYSE:CLX) might be a little riskier given its premium valuation. If the company doesn’t grow as the market expects, there is a chance that The Clorox Company (NYSE:CLX) could decline as its premium valuation might decline.
7. Campbell Soup Company (NYSE:CPB)
Number of Hedge Fund Holders: 29
Dividend Yield as of 2/3: 2.91%
Food, snack, and beverage maker Campbell Soup Company (NYSE:CPB) has a pretty fair forward P/E ratio of 16.12 and the stock has a dividend yield of 2.91% as of 2/3. While the stock is down 10.34% year to date, Campbell Soup Company (NYSE:CPB) shares are still up 14.23% in the last year.
If the company maintains its leading brands and their market share, Campbell Soup Company (NYSE:CPB) has earnings growth potential in the future. For Q1, FY23, the company’s organic sales rose 15% year over year and its adjusted EPS also increased 15% year over year to $1.02 per share. Of the 920 hedge funds in our database, 29 owned shares of Campbell Soup Company (NYSE:CPB) at the end of Q3, ranking the stock #7 on our list of 10 Best January Dividend Stocks to Buy.
6. The Bank of New York Mellon Corporation (NYSE:BK)
Number of Hedge Fund Holders: 50
Dividend Yield as of 2/3: 2.95%
The Bank of New York Mellon Corporation (NYSE:BK) is a leading bank with a dividend yield of 2.95% as of February 3. Although it isn’t one of the four biggest banks in the United States, The Bank of New York Mellon Corporation (NYSE:BK) nevertheless has considerable scale. At the end of Q4 2022, the company had $1.8 trillion in AUM and total sales of $3.9 billion. In addition to its dividend, The Bank of New York Mellon Corporation (NYSE:BK)’s board of directors also authorized a $5 billion common equity share repurchase program effective January 2023.
Like The Bank of New York Mellon Corporation (NYSE:BK), American Express Company (NYSE:AXP), JPMorgan Chase & Co. (NYSE:JPM), and Mastercard Incorporated (NYSE:MA) are January dividend stocks owned by many hedge funds in our database at the end of the third quarter.
5. Colgate-Palmolive Company (NYSE:CL)
Number of Hedge Fund Holders: 57
Dividend Yield as of 2/3: 2.53%
Colgate-Palmolive Company (NYSE:CL) is a consumer staple that has raised its annual dividend for 60 consecutive years through multiple recessions. Considering its dividend raises, the company has a dividend yield of 2.53% as of February 3 and a forward P/E ratio of 21.43. Although analysts don’t see Colgate-Palmolive Company (NYSE:CL) growing its EPS very much over the next five years, the company has leading brands and decent normalized earnings power.
4. Lowe’s Companies, Inc. (NYSE:LOW)
Number of Hedge Fund Holders: 61
Dividend Yield as of 2/3: 1.94%
Lowe’s Companies, Inc. (NYSE:LOW) is one of the leading home improvement retailers with a dividend yield of 1.94% as of 2/3. Given earnings growth over time, the company has raised its annual dividend for 49 consecutive years. Considering management has had excess capital in addition to its dividend, Lowe’s Companies, Inc. (NYSE:LOW)’s board of directors authorized a new $15 billion stock repurchase program in December of 2022. 61 hedge funds in our database owned shares of Lowe’s Companies, Inc. (NYSE:LOW) at the end of Q3, ranking the stock #4 on our list of 10 Best January Dividend Stocks to Buy.
3. American Express Company (NYSE:AXP)
Number of Hedge Fund Holders: 68
Dividend Yield as of 2/3: 1.16%
American Express Company (NYSE:AXP) is a globally integrated payments company whose platform includes card issuing merchant acquiring and card network businesses. For 2022, American Express Company (NYSE:AXP) earned $9.85 per share and its sales rose 25% year over year. For full year 2023, American Express Company (NYSE:AXP) expects sales to grow 15% to 17%. As of 2/3, American Express Company (NYSE:AXP) has a dividend yield of 1.16%.
2. JPMorgan Chase & Co. (NYSE:JPM)
Number of Hedge Fund Holders: 110
Dividend Yield as of 2/3: 2.84%
JPMorgan Chase & Co. (NYSE:JPM) is one of the four biggest banks in the United States with one of the best CEOs in the industry with Jamie Dimon. As a result, the company has considerable earnings power in normal economic conditions if it makes the right loans. In terms of capital returns, JPMorgan Chase & Co. (NYSE:JPM) has a pretty attractive dividend yield of 2.84% as of 2/3. The bank may also potentially restart its stock buyback program this year if economic conditions don’t worsen too much.
Vltava Fund commented on JPMorgan Chase & Co. (NYSE:JPM) in a Q3 2022 investor letter,
We regard JPM to be the strongest and best- managed bank in the world. It is a leader in investment banking, commercial banking, credit cards, and asset management. Its size (the largest bank in the USA, with nearly USD 4,000 billion in assets) and diversification give it a strong competitive advantage that is compounded by its cost advantages and the high costs to clients associated with switching banks. JPM’s management prides itself on running the only large bank to avoid major instability over the long term.
JP Morgan’s quality and strength first became fully evident in 2008 under the leadership of its CEO Jamie Dimon. Not only did JP Morgan help to stabilize the market by taking over the failing Bear Stearns in the spring of that year, but throughout the Great Financial Crisis it was the only big US bank that did not require government assistance and it was highly profitable even in the difficult year of 2008.
A well-functioning and efficient bank can be a very good long-term investment, because the interest compounding effect works well here. JPM’s return on equity (ROE) is well into the double digits and this puts it in a good position to continue producing better long-term returns than does the market. JPM has been very profitable even during years when interest rates were close to zero. The current – and perhaps not temporary – return to somewhat more normal, higher interest rates should have a significantly positive impact on the bank’s interest income and overall profitability.
1. Mastercard Incorporated (NYSE:MA)
Number of Hedge Fund Holders: 146
Dividend Yield as of 2/3: 0.61%
Mastercard Incorporated (NYSE:MA) ranks #1 on our list of 10 Best January Dividend Stocks to Buy given 146 hedge funds in our database owned shares of the company at the end of Q3. In Q4 2022, the leading payment leader’s net sales rose 12% year over year and its adjusted diluted EPS increased 13% year over year. In terms of its dividend, Mastercard Incorporated (NYSE:MA) has raised its annual dividend for 11 consecutive years. As of 2/3, the company had a dividend yield of 0.61%.
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Disclosure: None. 10 Best January Dividend Stocks to Buy is originally published on Insider Monkey.
