In this article, we will analyze the list of the best unstoppable stocks that pay dividends.
It’s undeniable that dividends have played a key role in the market’s returns over the past year. While they hit a rough patch for a bit, these stocks still have plenty of room to grow. Their rising significance is tied to the fact that US companies are boosting their dividend payouts, thanks to strong cash flow. Many US firms, particularly in the tech sector, have substantial cash reserves on their balance sheets. Due to this, several major tech companies have introduced dividend policies this year, sparking renewed interest in dividend stocks.
In addition, with the market shifting away from top-performing stocks and the Federal Reserve likely to reduce interest rates, dividend stocks remain a valuable option for investors seeking solid returns. Dan Lefkovitz, a strategist for Morningstar Indexes, also supported investing in dividend stocks this year. Here are some comments from the analyst:
“Investing in dividend-paying stocks is a good way to participate in equities over the long term. There have been long stretches when the dividend-paying section of the market has outperformed. Eventually, they’ll come back into favor.”
When it comes to dividend stock investing, the attention is often split between high yields and dividend growth. Analysts tend to favor dividend growth, as it offers a more reliable income stream. In contrast, high yields can sometimes be misleading, hinting at potential financial difficulties. A report from RBC Wealth Management highlights that high-yield stocks have been lagging behind those with lower yields this year. By July 2024, stocks yielding less than 1% delivered an average return of 18%, significantly outperforming the 0.9% average return of stocks yielding over 3%. The report also mentioned that the Dividend Aristocrats, companies that have raised their payouts for at least 25 consecutive years, have historically performed well both during and after economic downturns. Their success is built on appealing valuations relative to the broader market and business models that have proven durable in the face of economic uncertainty. Currently, these equities are trading at a trailing twelve-month P/E of 24.95, which indicates confidence in the stability and growth of these companies.
Several reports have highlighted that while dividend growth companies might not deliver instant gratification, they provide significant long-term advantages. Nuveen, an Illinois-based financial planning firm, also expressed a positive view on dividend growth strategies this year, noting their strong historical track record. The report emphasized that companies focused on growing their dividends possess qualities that pave the way for solid performance in the future. Over the long haul, companies that consistently boost or introduce dividends have outpaced other market segments, achieving higher annualized returns with less volatility. While they may not always shine in every market condition, their steady, risk-adjusted returns over time make them a cornerstone for any equity portfolio—truly a case of “slow and steady wins the race.” With that, we will take a look at unstoppable stocks that pay dividends.
Photo by Sharon McCutcheon on Unsplash
Our Methodology:
For this article, we first used a stock screener to identify stocks that have reported positive returns in 2024 so far. From this selection, we chose dividend stocks with year-to-date (YTD) gains of at least 30%, as of the close of September 9. The stocks were then arranged in ascending order of their YTD gains.
We also measured hedge fund sentiment around each stock according to Insider Monkey’s database of 912 funds as of Q2 2024. 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 275% since May 2014, beating its benchmark by 150 percentage points. (see more details here).
10. The Allstate Corporation (NYSE:ALL)
Year-to-Date Return as of September 9: 30.03%
The Allstate Corporation (NYSE:ALL) is an Illinois-based insurance company that offers related services to its consumers. In early August, the company revealed that it had reached an agreement to sell its subsidiaries, which offer employer voluntary benefits, to StanCorp Financial Group (The Standard) for $2 billion in cash. This move comes amid a slowdown in economic demand, leading companies to step away from ventures that don’t align with their core objectives. Investors are particularly excited about the venture as the stock has climbed by over 30% since the start of 2024.
In addition to The Allstate Corporation’s (NYSE:ALL) strategic planning, the company’s recent quarterly earnings are also encouraging for investors. In the second quarter of 2024, the company reported revenue of $15.4 billion, which showed a 12.4% growth from the same period last year. Its operating and financial results for the quarter highlighted its capability to effectively carry out its profit improvement plan while advancing the Transformative Growth strategy. The company’s financial health and capital position remain robust, with an insurance company statutory surplus of $16.0 billion and $3.0 billion in assets held at the holding company.
Ariel Investments also gave a positive outlook on The Allstate Corporation (NYSE:ALL) in its Q2 2024 investor letter. Here is what the firm has to say:
“We added property and casualty insurer, The Allstate Corporation (NYSE:ALL). A challenging macro-environment, inflation and lower reserve development led to significant underwriting losses across key markets, presenting us with an attractive entry point. Looking ahead, we expect the strong pricing environment, coupled with lower inflationary pressure and future premium growth to yield upside for shares. Additionally, management is committed to improving its adjusted expense ratio and recently made upgrades to its claims handling processes to minimize loss development and lower claim severities.”
The Allstate Corporation (NYSE:ALL), one of the best unstoppable stocks, has been growing its dividends consistently for the past 14 years. The company pays a quarterly dividend of $0.92 per share and has a dividend yield of 1.97%, as of September 9.
At the end of Q2 2024, 61 hedge funds tracked by Insider Monkey held stakes in The Allstate Corporation (NYSE:ALL), up from 59 in the previous quarter. These stakes are valued at over $1.6 billion. Among these hedge funds, Diamond Hill Capital was the company’s leading stakeholder in Q2.
9. Costco Wholesale Corporation (NASDAQ:COST)
Year-to-Date Return as of September 9: 36.8%
Costco Wholesale Corporation (NASDAQ:COST) is an American retail company that specializes in a wide range of products for its consumers. The company recently announced a 7.1% increase in monthly net sales, reaching $19.83 billion in August, compared to $18.51 billion in the same month last year. This strong performance is part of a broader trend, as the company has consistently maintained solid fundamentals. One key factor is that the company operates in a sector that tends to withstand economic downturns well, and its growth continues. In 2024, the company plans to open 28 new stores globally, with the majority in the US. As it expands its locations, membership and revenue are expected to grow, supporting long-term sales and earnings growth.
In the past five years, Costco Wholesale Corporation (NASDAQ:COST) returned over 206% to shareholders, outperforming the broader market, which gained over 82% during this period. The company has consistently adapted to emerging trends, which has helped attract investors. It has effectively taken advantage of the growing shift toward online shopping. The retailer expects that its wide selection of competitively priced products will keep attracting customers, whether they shop online or visit its physical stores. ClearBridge Investments highlighted consumer sentiment in its Q2 2024 investor letter. Here is what the firm said about COST:
“Consumer staples holdings were also standouts in the quarter, such as Costco Wholesale Corporation (NASDAQ:COST), which continues to execute well and delivered better than expected earnings, helped by strong traffic driving better expense leverage. Customers also looked to be shifting toward more discretionary purchases.”
On July 10, Costco Wholesale Corporation (NASDAQ:COST) declared a quarterly dividend of $1.16 per share, having raised it by 13.7% in April this year. The company is a strong dividend payer and has raised its payouts for 20 consecutive years. The stock’s dividend yield on September 9 came in at 0.52%. With a year-to-date return of nearly 37%, COST is one of the best unstoppable stocks that pay dividends.
The number of hedge funds tracked by Insider Monkey owning stakes in Costco Wholesale Corporation (NASDAQ:COST) jumped to 71 in Q2 2024, from 65 in the previous quarter. These stakes have a collective value of nearly $6 billion.
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