10 Best Stocks To Buy For Income

In this article, we discuss the 10 best stocks to buy for income.

After logging its worst annual performance in 14 years back in 2022, the S&P 500 kicked off 2023 with a very strong January. The benchmarked index gained a little over 6% for the month as the first wave of fourth-quarter earnings reports came in better than many had feared. This performance bodes well for the remainder of 2023, at least from a historical perspective. However, Richard Saperstein, chief investment officer at Treasury Partners, says that the stock market and the economy aren’t in the clear just yet. According to Saperstein:

“Markets have been reacting favorably to moderating inflation and expectations of a reduced pace of Fed tightening, but the lag effects of the Fed’s tightening so far will slow the economy in the second half of 2023 and cause analysts to slash earnings estimates, which ultimately is a headwind for stocks.”

With persisting inflationary pressures and a possibility of a recession, investors are looking towards options to generate stable income. Dividend stocks have previously dealt favorably with uncertain market conditions and boosted investors’ confidence amid fluctuations. According to a report by iShares, dividend stocks reported a 12.5% decline in bear markets from 1978 to 2021, compared with a 30.7% drop in non-dividend stocks. Dividend-paying stocks tend to weather down equity markets better than non-payers. This seems intuitive, as the ability to consistently pay dividends suggests that a company is mature, has cash flow and cash on hand, all of which point towards the company in question being relatively stable.

Companies that have historically raised their dividends consistently are known to demonstrate better income-generating abilities and market resilience compared to their peers. In that regard, Philip Morris International Inc. (NYSE:PM), Verizon Communications Inc. (NYSE:VZ), and AT&T Inc. (NYSE:T) are among the many names on this list that boast decades of dividend growth streaks and are outperforming the broader index this year so far.

Photo by Annie Spratt on Unsplash

Our Methodology:

We scanned Insider Monkey’s database of 920 hedge funds’ holdings and picked the top 10 dividend-paying stocks with yields over 4.5% as of February 14. That means these are some of the best dividend stocks to buy for income according to hedge funds. The dividend stocks mentioned below are reliable options for stable income as they have strong dividend histories in addition to healthy balance sheets and sound financials.

Best Stocks To Buy For Income

10. Realty Income Corporation (NYSE:O)

Number of Hedge Fund Holders: 28

Dividend Yield as of February 14: 4.54%

Organized in Maryland and headquartered in San Diego, Realty Income Corporation (NYSE:O), also known as The Monthly Dividend Company, is a real estate investment trust that invests in free-standing, single-tenant commercial properties in the United States, Spain and the United Kingdom that are subject to NNN Leases.

Earlier this December, Mizuho analyst Haendel St. Juste raised the price target on Realty Income Corporation (NYSE:O) to $64 from $61 and kept a Neutral rating on the shares. According to the analyst, the macro challenges may persist for the triple net real estate investment trusts, along with growing recession risk. In light of that however, he remains favorable towards triple net REITs with “defensive tenancy, low leverage, and pre-funded capital.”

Boasting a dividend growth track record of 28 years, Realty Income Corporation (NYSE:O) offers a monthly dividend of $0.2485 per share and has a dividend yield of 4.54%, as of February 14.

The number of hedge funds tracked by Insider Monkey owning stakes in Realty Income Corporation (NYSE:O) grew to 28 in Q3 2022, from 19 in the previous quarter. These stakes are valued at $422.5 million collectively. Zimmer Partners was the company’s largest stakeholder in Q3, holding roughly 3 million shares valued at $168.9 million.

Realty Income Corporation (NYSE:O) joins the ranks of Philip Morris International Inc. (NYSE:PM), Verizon Communications Inc. (NYSE:VZ), and AT&T Inc. (NYSE:T) as a decent income stock.

9. Hasbro, Inc. (NASDAQ:HAS)

Number of Hedge Fund Holders: 33

Dividend Yield as of February 14: 4.82%

Hasbro, Inc. (NASDAQ:HAS) is an American multinational conglomerate holding company. Its products include toys, puzzles, board games, sports equipment, and electronic games. The company owns the trademarks and products of Kenner, Milton Bradley, Parker Brothers, and Wizards of the Coast, among others. As of February 14, Hasbro, Inc. (NASDAQ:HAS) holds a dividend yield of 4.82%.

On January 27, BMO Capital analyst Gerrick Johnson reiterated a Market Perform rating and $66 price target on Hasbro, Inc. (NASDAQ:HAS) after the company announced preliminary Q4 results below Wall Street estimates. The analyst was not surprised by this announcement as he was expecting worse results. However, Johnson did state that what did end up catching him off guard was the announcement that write-downs were mostly reorganization-related and not operational, with no mention of writing off inventory or minimum royalty guarantees.

According to Insider Monkey’s data, 33 hedge funds were bullish on Hasbro, Inc. (NASDAQ:HAS) at the end of Q3 2022, compared to 30 funds in the prior quarter. Connor Haley’s Alta Fox Capital Management is the leading position holder in the company, with 3.14 million shares worth over $257 million.

8. Kinder Morgan, Inc. (NYSE:KMI)

Number of Hedge Fund Holders: 38

Dividend Yield as of February 14: 6.06%

Kinder Morgan, Inc. (NYSE:KMI) specializes in owning and controlling oil and gas pipelines and terminals. One of the largest infrastructure companies in North America, Kinder Morgan owns an interest in or operates approximately 83,000 mi of pipelines and 143 terminals.

Earlier this December, Citi analyst Spiro Dounis initiated coverage of Kinder Morgan, Inc. (NYSE:KMI) with a Neutral rating and $19 price target. The analyst launched coverage of 23 midstream stocks with a “constructive cash flow outlook” but acknowledged the “need to be selective in this environment.” Dounis states that with leverage and capital spending “down substantially,” the midstream sector has “arguably never been better prepared for macro headwinds.”

On January 18, Kinder Morgan, Inc. (NYSE:KMI) declared a quarterly dividend of $0.2775 per share, which fell in line with its previous dividend. With a dividend yield of 6.06%, as of February 14, the company is one of the best dividend stocks on our list as it has been raising its dividends consistently for the past five years.

As of the end of Q3 2022, 38 hedge funds tracked by Insider Monkey owned stakes in Kinder Morgan, Inc. (NYSE:KMI), compared with 41 in the previous quarter. These stakes have a collective value of over $1.06 billion. Orbis Investment Management was the company’s leading stakeholder in Q3.

7. Dow Inc. (NYSE:DOW)

Number of Hedge Fund Holders: 43

Dividend Yield as of February 14: 4.72%

The Dow Chemical Company, officially Dow Inc. (NYSE:DOW), is an American multinational corporation that operates as a producer and supplier of raw materials for products in a wide variety of industries, including appliance, automotive, agricultural, chemical processing, electronics, oil and gas, and processed foods. The chemical producer had a dividend yield of 4.72% as of February 14.

On February 6, Credit Suisse analyst Matthew Skowronski double upgraded Dow Inc. (NYSE:DOW) to Outperform from Underperform with a $68 price target after assuming coverage of the name. The analyst expects 2023 to be a “trough year” for earnings, as the pricing and margin headwind from new capacity in several derivatives dissipates.

At the end of September, 43 hedge funds tracked by Insider Monkey had investments in Dow Inc. (NYSE:DOW), valued at nearly $710 million. With over 7.5 million shares, Pzena Investment Management was the company’s leading stakeholder in Q3.

6. Altria Group, Inc. (NYSE:MO)

Number of Hedge Fund Holders: 47

Dividend Yield as of February 14: 7.93%

Altria Group, Inc. (NYSE:MO) is an American corporation and one of the world’s largest producers and marketers of tobacco, cigarettes and related products. With a leading portfolio of tobacco products for U.S. tobacco consumers, the company ranks as an undisputed market leader in the U.S. tobacco industry. On January 10, ​​Altria Group, Inc. (NYSE:MO) paid a $0.94 per share quarterly dividend.

The Marlboro maker beat earnings and revenue estimates in the fourth quarter and announced a new $1 billion share buyback plan, which is expected to conclude by December 31, 2023. On February 1, the company also announced that it plans to pay off approximately $1.3 billion in outstanding notes using its readily available cash.

According to Insider Monkey’s data, 47 hedge funds were long Altria Group, Inc. (NYSE:MO) at the end of the third quarter of 2022, compared to 48 funds in the last quarter. Peter Rathjens, Bruce Clarke, and John Campbell’s Arrowstreet Capital held the largest stake in the company, with 9.5 million shares worth $382.6 million.

Much like Philip Morris International Inc. (NYSE:PM), Verizon Communications Inc. (NYSE:VZ), and AT&T Inc. (NYSE:T), Altria Group, Inc. (NYSE:MO) can garner investors hefty rewards.

5. Ford Motor Company (NYSE:F)

Number of Hedge Fund Holders: 47

Dividend Yield as of February 14: 4.63%

Ford Motor Company (NYSE:F) is an American multinational automobile manufacturer headquartered in Dearborn, Michigan, United States. Founded by Henry Ford and incorporated on June 16, 1903, the company sells automobiles and commercial vehicles under the Ford brand, and luxury cars under its Lincoln luxury brand. The vehicle maker currently pays a quarterly dividend of $0.15, with a dividend yield of 4.63% as of February 14.

JPMorgan analyst Ryan Brinkman lowered the price target on Ford Motor Company (NYSE:F) to $15 from $16 and maintained an Overweight rating on the shares. The analyst believes Tesla’s “aggressive” price cuts could help “catalyze and accelerate what may have otherwise been a more modest or protracted pricing normalization process.” According to the analyst, the price cuts are positive for consumers, negative for Tesla, negative for other automakers, but potentially positive for parts suppliers. However, the analyst states that an “undemanding valuation” keeps him positive on Ford Motor Company despite what may be a round of negative earnings revisions.

At the end of the third quarter of 2022, 47 hedge funds in the database of Insider Monkey held stakes worth $1.2 billion in Ford Motor Company (NYSE:F), compared to 46 in the preceding quarter worth $608.8 million.

In its Q3 2022 investor letter, Leaven Partners, an asset management firm, highlighted a few stocks and Ford Motor Company (NYSE:F) was one of them. Here is what the fund said:

“In our last quarterly letter, I briefly mentioned that the consensus estimates for corporate profits appeared to be a bit too sanguine. I referenced a Reuters article that reported, as of June 17, Wall Street expected S&P 500 earnings to grow by 9.6% in 2022, which was up from 8.8% in April and from 8.4% in January. That tune began to change at the end of July and accelerated in August and September, as major players, such as Ford (NYSE:F), have recently issued profit warnings and/or have withdrawn guidance. In response, Wall Street has altered its outlook: lowering third-quarter profit growth to 4.6% [2] from 7.2% in early August and slashing full-year profit growth to 4.5%.”

4. 3M Company (NYSE:MMM)

Number of Hedge Fund Holders: 49

Dividend Yield as of February 14: 5.25%

3M Company (NYSE:MMM), also known simply as 3M, is an American multinational conglomerate operating in the fields of industry, worker safety, U.S. health care, and consumer goods. The company manufactures and distributes a broad range of products, from building materials and adhesives to medical and home cleaning supplies. However, its Safety and Industrial segment generates the most sales and profits. On February 7, 3M Company (NYSE:MMM) declared a quarterly dividend rate of $1.50, a $0.01 increase from the previous rate.

On January 26, Mizuho analyst Brett Linzey lowered the price target on 3M Company (NYSE:MMM) to $120 from $130 and kept a Neutral rating on the shares. According to the analyst, the company’s Q4 results were below expectations with a weak start to 2023 expected. He believes that 3M is taking a “prudent, conservative approach,” focusing on inventory normalization and aligning production with demand entering a “potentially turbulent” 2023.

According to Insider Monkey’s data, 3M Company (NYSE:MMM) was part of 49 public stock portfolios at the end of September 2022, compared to 54 in the prior quarter. Ken Fisher’s Fisher Asset Management is the largest stakeholder of the company, with 6.3 million shares worth $703 million.

Mayar Capital mentioned 3M Company (NYSE:MMM) in its Q2 2022 investor letter. Here is what the firm has to say:

“We also bought back into 3M (NYSE:MMM) as the stock reached attractive levels. We’d sold our shares in 3M last year when the price exceeded our estimated fair value, and as better opportunities to invest in presented themselves at the time. Nonetheless, we’ve always liked this business with its diversified revenues, its R&D leadership and its stable margins.

3. AT&T Inc. (NYSE:T)

Number of Hedge Fund Holders: 61

Dividend Yield as of February 14: 5.80%

The world’s largest telecommunications company by revenue and the third largest provider of mobile telephone services in the US, AT&T Inc. (NYSE:T) is an American multinational telecommunications holding company that provides telecommunications, media, and technology services worldwide.

On January 16, Cowen analyst Gregory Williams raised the price target on AT&T Inc. (NYSE:T) to $25 from $24 and maintained a Market Perform rating on the shares of the company.

On December 15, AT&T Inc. (NYSE:T) declared a quarterly dividend of $0.2775 per share, which fell in line with its previous dividend. The company has been raising its dividends consistently for the past 12 years. As of February 14, the stock has a dividend yield of 5.80%.

At the end of Q3 2022, 61 hedge funds tracked by Insider Monkey owned stakes in AT&T Inc. (NYSE:T), up from 55 a quarter earlier. The collective value of these stakes is over $1.53 billion.

Chartwell Investment Partners mentioned AT&T Inc. (NYSE:T) in its Q2 2022 investor letter. Here is what the firm has to say:

“In the Dividend Equity accounts, the three best performers in Q2 includes AT&T (NYSE:T, 2.5%), up 17.1%. AT&T completed the spin of the WarnerMedia business (HBO, CNN, etc.), and the market seemed to like the “back-to-basics” approach. Also, the telco business is expected to do relatively well in an inflationary environment.”

2. Verizon Communications Inc. (NYSE:VZ)

Number of Hedge Fund Holders: 62

Dividend Yield as of February 14: 6.47%

Verizon Communications Inc. (NYSE:VZ), commonly known as Verizon, is an American multinational telecommunications conglomerate. A corporate component of the Dow Jones Industrial Average, the company offers communications, technology, information, and entertainment products and services to consumers, businesses, and governmental entities worldwide.

Cowen analyst Gregory Williams lowered the price target on Verizon Communications, Inc. (NYSE:VZ) to $49 from $55 and kept an Outperform rating on the shares. According to Williams, the company posted mixed Q4 results, thus muting initial 2023 guidance as price hikes, good FWA, and decent Business Wireless are not enough to offset promotion amortization cost pressures.

Verizon Communications Inc. (NYSE:VZ) holds a 16-year track record of consistent dividend growth, one of the longest in the US telecom industry. It currently pays a quarterly dividend of $0.6525 per share and has a dividend yield of 6.47%, as of February 14.

According to Insider Monkey’s data, 62 hedge funds were bullish on Verizon Communications Inc. (NYSE:VZ) at the end of Q3 2022, compared to 58 funds in the prior quarter. Ken Griffin’s Citadel Investment Group is a significant position holder in the company, with 5.2 million shares worth $200.4 million.

Here is what Mawer Investment Management has to say about Verizon Communications Inc. (NYSE:VZ) in its Q3 2022 investor letter:

“There are a few other segments of our portfolios that displayed weakness in the quarter. Cable and telecommunication companies have been an area that has lagged the broader market as their worlds are increasingly colliding. Companies such as Verizon (NYSE:VZ) have been impacted as wireless operators are spending heavily to attract internet subscribers with fixed wired access and the cable companies are trying to build wireless businesses.”

1. Philip Morris International Inc. (NYSE:PM)

Number of Hedge Fund Holders: 63

Dividend Yield as of February 14: 4.99%

One of the companies comprising Big Tobacco, Philip Morris International Inc. (NYSE:PM) is an American multinational tobacco company, with products sold in over 180 countries. On January 29, Philip Morris International Inc. (NYSE:PM) announced a long-term collaboration with KT&G, South Korea’s leading tobacco and nicotine manufacturer, to continue to commercialize KT&G’s innovative smoke-free devices and consumables on an exclusive, worldwide basis. This agreement builds on three years of successful collaboration that has seen Philip Morris commercialize KT&G’s products in more than 30 markets.

On February 2, Morgan Stanley analyst Pamela Kaufman raised the price target on Philip Morris International Inc. (NYSE:PM) to $118 from $109 and kept an Overweight rating on the shares ahead of the company’s Q4 report. The analyst has increased her 2023 estimates by about 9% to reflect the benefit of the Swedish Match acquisition and improving foreign exchange impacts.

According to Insider Monkey’s data, 63 hedge funds were bullish on Philip Morris International Inc. (NYSE:PM) at the end of Q3 2022, compared to 56 funds in the prior quarter. Rajiv Jain’s GQG Partners is the largest stakeholder of the company, with 17.4 million shares worth $1.4 billion.

Here is what Distillate Capital has to say about Philip Morris International Inc. (NYSE:PM) in its Q3 2022 investor letter:

“It makes intuitive sense that our process that employs bottom-up stock selection based on the combination of valuation and quality would reduce the weight in places that outperformed and add to areas that were weaker. The largest exited positions in the quarter were Philip Morris International Inc. (NYSE:PM), which saw its stability score fall slightly below the threshold for inclusion.”

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Disclosure: None. 10 Best Stocks To Buy For Income is originally published on Insider Monkey.