In this article, we will take a look at some of the best Strong Buy stocks that pay dividends.
Dividend-paying stocks have consistently rewarded investors with steady and reliable returns, particularly during times of economic uncertainty. Their performance has generally been more stable than many other types of investments, which is why more investors are turning to them to benefit from compounding over time. This growing interest has also led several companies, including many in the tech sector, to begin issuing dividends in 2024.
Dividends have played a major role in driving long-term returns from equity investments. A study by London-based Guinness Global Investors, which examined market performance since 1940, found that dividends and reinvested payouts made up about 94% of the index’s total return over that period. To illustrate, a $100 investment made at the end of 1940 would have grown to roughly $525,000 by the end of 2019 with reinvested dividends, compared to only $30,000 if dividends had been taken as cash.
The study also showed that the importance of dividends increases with the length of the holding period. Since 1940, dividends have accounted for around 27% of total returns over a typical one-year holding period. That figure rises to 36% over three years, 40% over five years, and 47% over ten years. For investments held over twenty years, dividends contributed about 57% of the total return. Because of this long-term impact, many analysts recommend including dividend-paying stocks in a portfolio. Given this, we will take a look at some of the best Strong Buy stocks that pay dividends.
Our Methodology
We used Finviz and Tipranks to make a list of Strong Buy dividend stocks and then selected the top 10 with consensus Strong Buy ratings and the highest number of hedge fund holders as of Q1 2025. We sourced the hedge fund sentiment data from Insider Monkey’s database. The list is sorted in ascending order of hedge fund holders.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
10. Energy Transfer LP (NYSE:ET)
Number of Hedge Fund Holders: 36
Energy Transfer LP (NYSE:ET) is among the best Strong Buy stocks. The company’s generous yield rests on a solid and dependable financial base. Around 90% of its yearly earnings come from long-term, fee-based agreements and government-regulated pricing, which ensure consistent cash flow. In addition, it returns only a modest share of its cash flow to shareholders. In the first quarter, the midstream firm reported $2.3 billion in distributable cash flow—more than double the $1.1 billion it paid out.
With this surplus, Energy Transfer LP (NYSE:ET) can continue expanding its operations without compromising its financial strength. Its leverage ratio currently sits at the lower end of its 4.0 to 4.5 target range, marking its strongest financial standing to date.
This robust position also supports ongoing increases to its distribution. Energy Transfer LP (NYSE:ET) is aiming for quarterly raises, with a goal of 3% to 5% annual growth. Over the past year, it has already lifted its payout by more than 3%. On July 24, the company declared a 0.8% hike in its quarterly dividend to $0.33 per share. This marked the company’s 14th consecutive quarter of dividend increases. The stock has a dividend yield of 7.29%, as of July 29.
9. Diamondback Energy, Inc. (NASDAQ:FANG)
Number of Hedge Fund Holders: 45
Diamondback Energy, Inc. (NASDAQ:FANG) is among the best dividend stocks for income investors. As a policy, the company plans to return half of its free cash flow to shareholders through a mix of base and variable dividends, along with share repurchases. The company still has $1.845 billion left under its $6 billion share repurchase program.
By the end of the first quarter, Diamondback Energy, Inc. (NASDAQ:FANG) had bought back $829 million worth of its shares, roughly $2.80 per share. The company reported strong earnings in the first quarter of 2025, with revenues of $4.05 billion, up 81.7% from the same period last year. The revenue also beat analysts’ estimates by $294.2 million. Its cash position also remained stable with an operating cash flow of $2.4 billion and free cash flow of $1.5 billion.
Diamondback Energy, Inc. (NASDAQ:FANG) initiated its dividend policy in 2018 and has raised its payouts multiple times since then. The company currently offers a quarterly dividend of $1.00 per share and has a dividend yield of 3.44%, as of July 29.
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