In this article, we will discuss 10 dividend growth stocks with over 3% yield. You can skip our detailed analysis of dividend growth stocks and their performance over the years, and go directly to read 5 Dividend Growth Stocks with over 3% Yield.
Should you invest in dividend stocks with strong history of growth in payouts or those with high yields? That’s an age-old debate in the dividend investing world that keeps surfacing intermittently. Analysts tend to lean toward dividend growth as it indicates a healthy financial situation, whereas excessively high yields might suggest underlying financial troubles. The S&P 500 Dividend Aristocrats Index, which tracks the performance of companies with at least 25 consecutive years of dividend growth, has delivered strong returns in the past. In a blog post published in January 2019 titled “Exploring Dividend Growth Strategies for Market Downturns”, S&P’s Phillip Brzenk, global head of multi-asset indexes, analyzed how dividend growth strategies perform, particularly when the market experiences negative trends. Here are some comments from the analyst:
“Since year-end 1989, there have been six calendar years of negative performance for the S&P 500—and in all six years, the S&P 500 Dividend Aristocrats outperformed the equity benchmark by an average of 13.28%. In fact, the S&P 500 Dividend Aristocrats produced a positive total return in three of those years.”
In addition to this, the performance of dividend aristocrats has shown a consistent upward trend in different market conditions when compared with high-yield stocks. According to data from Bloomberg, dividend aristocrats delivered a 12.50% return in falling interest rate periods and an 11.55% return in rising interest rate periods between February 2005 and December 2023. On the other hand, Dow Jones U.S. Select Dividend Index returned 7.90% and 10.46% returns during falling and rising interest rate periods, respectively, underperforming dividend growth stocks.
Though dividend growth stocks are preferred over high-yield stocks, our research shows that a balance of both can offer advantages to investors, potentially maximizing risks while eliminating risks. In our article titled 15 Best S&P 500 Dividend Stocks To Buy Now, we cited S&P Dow Jones data and revealed that the S&P 500 High Dividend Growth Index, which seeks the performance of companies with minimum five consecutive years of dividend growth with an average yield of 3%, returned 11.94% on an annual average basis from 2010 to 2022, compared with an 11.88% return of the S&P 500. We also mentioned that the index’s dividend growth surpassed the US long-term inflation rate at 13.8%. The index is up by 15.15% over the past 12 months and its year-to-date returns came in at 5.71%, as of the close of May 10.
Altria Group Inc. (NYSE:MO), Verizon Communications Inc. (NYSE:VZ), and 3M Company (NYSE:MMM) are some of the best dividend growth stocks to consider as these companies have not only maintained impressive records of dividend growth, but they also offer above-average yields. In this article, we will further discuss some of the best dividend growth stocks with yields above 3%.
Our Methodology:
For this list, we first used a stock screener to pick companies that have raised their dividends for at least 10 consecutive years or more. From that list, we narrowed down our options to companies with dividend yields of at least 3% as of May 11, demonstrating robust financial standings and consistent cash flow. From these companies we picked 10 stocks with the highest number of hedge fund investors, using Insider Monkey’s database of 933 hedge funds and their holdings as of Q4 2023. Hedge funds’ top 10 consensus stock picks outperformed the S&P 500 Index by more than 140 percentage points over the last 10 years (see the details here).
10. Exxon Mobil Corporation (NYSE:XOM)
Dividend Yield as of May 11: 3.22%
Exxon Mobil Corporation (NYSE:XOM) is a Texas-based multinational oil and gas company that is involved in various aspects of related industries. The company’s cash position remained strong in the first quarter of 2024. It generated over $14.7 billion in operating cash flow and its free cash flow for the period came in at $10.7 billion. The company returned nearly $4 billion to shareholders through dividends.
Exxon Mobil Corporation (NYSE:XOM), one of the best dividend growth stocks, has been growing its dividends for the past 41 years. The company offers a quarterly dividend of $0.95 per share and has a dividend yield of 3.22%, as recorded on May 11.
The number of hedge funds tracked by Insider Monkey owning stakes in Exxon Mobil Corporation (NYSE:XOM) grew to 85 in Q4 2023, from 79 in the previous quarter. The consolidated value of these stakes is over $4.4 billion.
Madison Investments mentioned Exxon Mobil Corporation (NYSE:XOM) in its Q1 2024 investor letter. Here is what the firm has to say:
“This quarter we are highlighting Exxon Mobil Corporation (NYSE:XOM) as a relative yield example in the Energy sector. XOM is a leading integrated oil and natural gas company. It has upstream assets that develop and produce oil and natural gas, along with downstream refining and chemical manufacturing assets. We believe it has attractive low-cost acreage in the Permian basin and has a sizeable growth opportunity in Guyana. Further, we think XOM has a sustainable competitive advantage due to size and scale, and its ability to integrate refining and chemical assets provides a low-cost advantage versus competitors. (Click here to read the full text)
9. Chevron Corporation (NYSE:CVX)
Dividend Yield as of May 11: 3.93%
Chevron Corporation (NYSE:CVX) is another energy company that made it to our list of the best dividend growth stocks with high yields. On April 26, the company declared a quarterly dividend of $1.63 per share, which fell in line with its previous dividend. This year, the company achieved its 37th consecutive annual dividend hike. As of May 11, the stock has a dividend yield of 3.93%.
In the first quarter of 2024, Chevron Corporation (NYSE:CVX) reported an operating cash flow of $6.8 billion and its free cash flow amounted to $2.7 billion. During the quarter, the company returned $3 billion to shareholders through dividends.
As of the close of Q4 2023, 71 hedge funds in Insider Monkey’s database owned stakes in Chevron Corporation (NYSE:CVX), compared with 72 in the previous quarter. These stakes are worth over $21.6 billion. Warren Buffett’s Berkshire Hathaway was the company’s leading stakeholder in Q4, owning over 126 million shares.
Ariel Investments highlighted Chevron Corporation (NYSE:CVX) in its Q3 2024 investor letter. Here is what the firm has to say:
“Also in the quarter, we initiated a position in Chevron Corporation (NYSE:CVX), the second largest integrated energy company in the U.S., operating in exploration, production and refining on a global scale. We view the company as competitively advantaged with a strong balance sheet, sustainable growth pathway and an effective management team. Going forward CVX expects improved cost efficiencies and production growth via its differentiated position in the Permian Basin and recent acquisition of Noble Energy. Additionally, management believes a combination of its new higher-margin projects along with operational improvements will drive a double-digit return of capital employed by 2027. Although oil and gas prices, which lay outside of the company’s control, ultimately dictate Chevron’s earnings and cashflow profile, the organization is laser focused on capital discipline. It is this lack of predictability, and potential fear of a global recession which presented us with an opportunity to initiate a position in this high barrier to entry producer at reasonable prices.”
8. United Parcel Service, Inc. (NYSE:UPS)
Dividend Yield as of May 11: 4.42%
United Parcel Service, Inc. (NYSE:UPS) is a global package delivery and logistics company that offers a wide range of related services. The company currently pays a quarterly dividend of $1.63 per share, having raised it by 0.6% in January this year. This marked the company’s 22nd consecutive year of dividend growth, which makes UPS one of the best dividend growth stocks on our list. The stock has a dividend yield of 4.42%, as of May 11.
At the end of Q4 2023, 46 hedge funds tracked by Insider Monkey held stakes in United Parcel Service, Inc. (NYSE:UPS), up from 42 in the preceding quarter. These stakes are collectively valued at over $2.15 billion. With over 8 million shares, Viking Global was the company’s largest stakeholder in Q4.
7. Eversource Energy (NYSE:ES)
Dividend Yield as of May 11: 4.62%
Eversource Energy (NYSE:ES) is an American electric services company that provides essential energy services to its consumers. On May 2, the company announced a quarterly dividend of $0.715 per share, which fell in line with its previous dividend. It is one of the best dividend growth stocks with high yields as the company maintains a 26-year track record of consistent dividend growth. The stock’s dividend yield on May 11 came in at 4.62%.
Insider Monkey’s database of Q4 2023 indicated that 29 hedge funds held stakes in Eversource Energy (NYSE:ES), compared with 30 in the previous quarter. These stakes are worth over $265.5 million.
6. LyondellBasell Industries N.V. (NYSE:LYB)
Dividend Yield as of May 11: 4.93%
LyondellBasell Industries N.V. (NYSE:LYB) is a multinational chemical industry company that offers services in petrochemical and related industries. The company’s quarterly dividend comes in at $1.25 per share and has a dividend yield of 4.93%, as of May 11. It has been raising its dividends consistently for the past 13 years. It ranks sixth on our list of the best dividend growth stocks with high yields.
In the fourth quarter of 2023, LyondellBasell Industries N.V. (NYSE:LYB) reported an operating cash flow of $1.5 billion. The company returned $406 million to shareholders through dividends. In FY23, the company achieved 98% cash conversion.
LyondellBasell Industries N.V. (NYSE:LYB) was a popular stock among elite funds at the end of Q4 2023, as the hedge fund positions grew to 46, from 36 in the previous quarter. These stakes are worth nearly $520 million in total. Among these hedge funds, Cliff Asness’ AQR Capital Management was the company’s leading stakeholder in Q4.
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Disclosure. None. 10 Dividend Growth Stocks with over 3% Yield is originally published on Insider Monkey.
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