In this article, we will take a look at some of the best income stocks to invest in.
Dividends have always played a meaningful role in market returns. Hartford Funds and Ned Davis Research examined how dividend policy affects long-term performance and volatility, focusing on large US stocks in the S&P 500 from 1973 through 2022.
The differences were clear. Dividend-paying companies delivered an average annual return of 9.18%. Stocks that paid no dividends lagged far behind, with annual returns of 3.95%. Companies that consistently raised their dividends performed even better, generating 10.24% a year. Firms that kept dividends unchanged posted returns of 6.60%. The weakest group was companies that cut or eliminated payouts, which produced a –0.60% annual return and even trailed non-dividend payers.
Volatility showed a similar pattern. Beta measures how much a stock or group of stocks moves relative to the broader market. A beta below 1 signals smaller price swings. A beta of 1 means the stock moves in line with the market. A beta above 1 points to sharper moves in both directions.
From 1973 to 2022, non-dividend-paying stocks carried a beta of 1.18, making them more volatile than the overall market. Dividend-paying stocks had a beta of 0.94, reflecting steadier performance and fewer extreme swings.
Kirsten Cabacungan, investment strategist in the Chief Investment Office for Merrill and Bank of America Private Bank, said:
“Companies that have consistently increased their dividends tend to be more stable, higher-quality businesses, which historically have weathered downturns and are more likely to have the ability to pay dividends consistently.”
Given this, we will take a look at some of the best dividend stocks.
Our Methodology:
To compile this article, we screened for stocks known for their consistent dividend track records and sustained shareholder payouts over an extended period. This group reflects stability and long-term performance in dividend payouts. From that group, we identified stocks with dividend yields above 2% as of December 28. Finally, we picked companies with the highest number of hedge fund investors, as per Insider Monkey’s database of Q3 2025. The stocks are ranked in ascending order of the number of hedge funds having stakes in them.
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 427.7% since May 2014, beating its benchmark by 264 percentage points (see more details here).
12. Realty Income Corporation (NYSE:O)
Number of Hedge Fund Holders: 27
Dividend Yield as of December 28: 5.72%
Realty Income Corporation (NYSE:O) is one of the best dividend stocks to invest in.
On December 24, Morgan Stanley raised its price target on Realty Income Corporation (NYSE:O) to $65 from $62 and kept an Equal Weight rating on the shares. The update followed changes to the firm’s 2025 and 2026 AFFO per share estimates.
Realty Income follows a straightforward model. It buys single-tenant commercial properties and leases them on a long-term basis using triple-net leases. Under this structure, tenants cover taxes, insurance, and maintenance. That setup lowers operating costs and helps support steady cash flow and reliable monthly dividends.
The REIT focuses on essential, non-discretionary businesses. These are tenants that tend to hold up even when economic conditions soften. Scale also plays a role. As one of the largest net lease REITs, Realty Income Corporation (NYSE:O) operates with an investment-grade-rated balance sheet. That gives it consistent, low-cost access to capital markets. It also opens the door to large acquisition opportunities that smaller competitors often cannot pursue.
The company has been pushing further into Europe. These markets now make up a meaningful share of its investment activity and are offering higher initial cash yields than many US properties. Realty Income currently operates across eight European countries, including the U.K., Spain, Ireland, and Poland.
Dividends remain a core part of the story. Realty Income Corporation (NYSE:O) pays shareholders monthly and has delivered 666 consecutive monthly dividends so far. That record stands out. Since listing on the NYSE in 1994, Realty Income has raised its dividend 133 times and logged 113 straight quarterly increases.
Realty Income Corporation (NYSE:O) is a real estate investment trust that invests in free-standing, single-tenant commercial properties across the US, the United Kingdom, and six other European countries. These properties are leased under NNN agreements, a structure that continues to anchor its long-term strategy.
11. National Fuel Gas Company (NYSE:NFG)
Number of Hedge Fund Holders: 32
Dividend Yield as of December 28: 2.64%
National Fuel Gas Company (NYSE:NFG) is one of the best dividend stocks to invest in.
On December 8, JPMorgan analyst Zach Parham raised the firm’s price target on National Fuel Gas Company (NYSE:NFG) to $96 from $95 and kept a Neutral rating on the shares. The change came as JPMorgan updated its ratings and targets across the exploration and production space for its 2026 outlook. The firm points to growing supply-side risks for oil and liquids. At the same time, it says the “long-awaited demand inflection for natural gas has finally arrived.” Parham adds that the scale of crude oil oversupply, combined with the possibility of an end to the Russia-Ukraine conflict in 2026, creates a “double whammy” for lower oil prices.
Earlier in October, National Fuel Gas Company (NYSE:NFG) announced a definitive agreement with CenterPoint Energy Resources Corp., a subsidiary of CenterPoint Energy, to acquire CenterPoint’s Ohio natural gas utility business.
National Fuel will acquire the equity interests in CNP Ohio for $2.62 billion on a cash-free, debt-free basis, subject to customary closing adjustments. The deal values the business at about 1.6x its estimated 2026 rate base of $1.6 billion. Once completed, the transaction brings a dedicated workforce that operates roughly 5,900 miles of distribution and transmission pipelines. The system serves about 335,000 residential, commercial, industrial, and transportation customers, with annual consumption near 60 Bcf of natural gas.
The company expects the transaction to close in the fourth quarter of 2026. The acquisition significantly expands National Fuel Gas Company (NYSE:NFG)’s regulated footprint. It doubles the size of the company’s gas utility rate base and extends operations into Ohio, a neighboring state known for its supportive stance on natural gas and constructive regulatory environment. The added regulated cash flows, paired with National Fuel’s ability to fund growth capital through free cash flow from its integrated upstream and gathering operations, help reinforce its investment-grade balance sheet.
National Fuel Gas Company (NYSE:NFG) distributes and transports natural gas to hundreds of thousands of customers across Western New York and Northwestern Pennsylvania.
10. Archer-Daniels-Midland Company (NYSE:ADM)
Number of Hedge Fund Holders: 35
Dividend Yield as of December 28: 3.52%
Archer-Daniels-Midland Company (NYSE:ADM) is one of the best dividend stocks to invest in.
On December 16, Morgan Stanley analyst Steven Haynes downgraded Archer-Daniels-Midland Company (NYSE:ADM) to Underweight from Equal Weight and cut the price target to $50 from $57. The firm said expectations tied to the Environmental Protection Agency’s renewable volume obligation now stretch into 2026, masking additional downside risk in ADM’s Carb Solutions unit as margins weaken. Morgan Stanley described the setup for the shares as unfavorable.
The downgrade comes even after a strong start to the year. Archer-Daniels-Midland Company (NYSE:ADM) shares are up more than 15% since early 2025. That rally has not been backed by earnings momentum. In November, the company lowered its 2025 profit outlook for the third straight quarter. Management pointed to ongoing uncertainty around US biofuel policy and global trade disruptions, both of which have weighed on oilseed crush margins. ADM and other agribusiness firms have felt steady pressure as ample global crop supplies and volatile commodity markets continue to squeeze profitability.
The strain showed up clearly in the latest results. Profit in Archer-Daniels-Midland Company (NYSE:ADM)’s agricultural services and oilseed segment, its largest business, dropped 21% in the third quarter to $379 million. A 93% collapse in crushing profits more than offset strength in corn and soymeal exports.
Looking ahead, ADM now expects adjusted earnings of $3.25 to $3.50 per share in 2025. That compares with its earlier forecast of about $4.00 and falls below analysts’ estimate of $3.79 per share. If those numbers hold, it would mark the company’s weakest earnings since 2019.
Archer-Daniels-Midland Company (NYSE:ADM) is a global food-processing and commodities-trading company headquartered in Chicago, Illinois.
9. Stanley Black & Decker, Inc. (NYSE:SWK)
Number of Hedge Fund Holders: 37
Dividend Yield as of December 28: 4.40%
Stanley Black & Decker, Inc. (NYSE:SWK) is one of the best dividend stocks to invest in.
On December 23, Baird analyst Timothy Wojs raised the firm’s price target on Stanley Black & Decker, Inc. (NYSE:SWK) to $85 from $75 and kept a Neutral rating on the shares. The update followed the company’s announcement to sell its Consolidated Aerospace Manufacturing division, which prompted Baird to revise its model.
On December 22, Stanley Black & Decker, Inc. (NYSE:SWK) said it had entered into a definitive agreement to sell its Consolidated Aerospace Manufacturing business to Howmet Aerospace for $1.8 billion in cash. CAM supplies critical fasteners, fittings, and other engineered components used across the aerospace and defense industries.
Chris Nelson, Stanley Black & Decker’s President & CEO, made the following comment:
“Divesting CAM reflects our ongoing dedication to enhancing shareholder value and focusing on growing our biggest brands and businesses. The proceeds from this transaction are expected to significantly reduce our debt, positioning us to achieve our target leverage ratio of 2.5 times net debt to adjusted EBITDA. After achieving this critical financial goal, we will have greater flexibility to pursue additional value-creation opportunities through a more agile capital allocation strategy. I am confident that CAM, along with its talented team, will thrive as part of Howmet Aerospace. I would also like to express my appreciation to all CAM employees for their exceptional dedication and remarkable contributions, which have been instrumental to CAM’s success.”
The business is expected to generate $405 million to $415 million in fiscal year 2025. It produces essential components for aircraft and defense applications, including fasteners, fittings, and other specialized parts that require tight tolerances and long qualification cycles.
The deal fits squarely with Howmet’s focus. The company is a major player in aerospace and defense, with deep expertise in engine components and fastening systems. CAM complements that portfolio without much overlap, which helps explain the strategic appeal.
Stanley Black & Decker, Inc. (NYSE:SWK) is a global leader in Tools and Outdoor products, with manufacturing operations spanning multiple regions worldwide.
8. Fifth Third Bancorp (NASDAQ:FITB)
Number of Hedge Fund Holders: 39
Dividend Yield as of December 28: 3.31%
Fifth Third Bancorp (NASDAQ:FITB) is among the best dividend stocks to invest in.
On December 17, Keefe Bruyette raised its price target on Fifth Third Bancorp (NASDAQ:FITB) to $53 from $50 and kept a Market Perform rating on the shares. The firm refreshed its estimates after recent conference updates and meetings with management.
On December 9, the bank announced a strategic acquisition aimed at strengthening its position in multifamily housing finance across the US. Fifth Third Bancorp (NASDAQ:FITB) entered into a definitive agreement to acquire Mechanics Bank’s Delegated Underwriting and Servicing (DUS) business line. The deal includes an experienced operating team and a $1.8 billion unpaid principal balance servicing portfolio.
John Hein, head of Commercial Real Estate at Fifth Third, made the following comment:
“This acquisition strengthens Fifth Third’s leadership in commercial real estate finance and expands our ability to serve multifamily developers and investors with competitive, permanent financing solutions. Multifamily housing is the largest component of our commercial real estate portfolio, and this move enables us to better support our clients and the housing needs in the communities we serve.”
The DUS program sits at the center of Fannie Mae’s multifamily lending platform and is built to support liquidity and stability in the housing market. By acquiring the DUS license, Fifth Third gains direct access to Fannie Mae products and a proven servicing framework. The move also deepens the bank’s focus on financing solutions that support housing affordability.
Fifth Third Bancorp (NASDAQ:FITB) is a major US bank holding company that provides a broad range of financial services to consumers, businesses, and institutional clients.
7. Becton, Dickinson and Company (NYSE:BDX)
Number of Hedge Fund Holders: 41
Dividend Yield as of December 28: 2.14%
Becton, Dickinson and Company (NYSE:BDX) is among the best dividend stocks to invest in.
On December 17, RBC Capital raised its price target on Becton, Dickinson and Company (NYSE:BDX) to $210 from $202 and kept a Sector Perform rating on the shares. The call came as part of a broader research note looking ahead to 2026 for Medical Supplies & Devices. RBC expects the sector to carry positive momentum into next year. The firm points to aging demographics, wider global access to healthcare, and continued innovation as key supports. For Becton Dickinson, the view is more measured but still constructive. RBC sees the company growing at a mid-single-digit pace, supported by a durable core business and a high level of recurring revenue.
At the same time, some near-term risk has surfaced. According to a Reuters report on December 23, Becton, Dickinson and Company (NYSE:BDX) has been sued by a rival medical device maker over alleged anticompetitive behavior in the US surgical hernia mesh market. The complaint argues that the company’s actions led patients and care providers to pay higher prices.
The lawsuit, filed on December 19 in federal court in Philadelphia by Tela Bio, claims Becton Dickinson used its strength in permanent and resorbable hernia mesh to shut out competition. Tela Bio alleges that its OviTex product was excluded through restrictive practices.
The Pennsylvania-based company also claims Becton, Dickinson and Company (NYSE:BDX) violated antitrust law by penalizing hospitals and healthcare systems that purchased competing products. It says long-term contracts were used to lock customers into buying only from Becton Dickinson.
Becton Dickinson did not immediately respond to requests for comment. Tela Bio declined to comment. BDX is down by over 13% since the start of 2025.
Becton, Dickinson and Company (NYSE:BDX) is a global medical technology company that designs and manufactures medical devices, instrument systems, reagents, and analytics used across healthcare settings worldwide.
6. American Water Works Company, Inc. (NYSE:AWK)
Number of Hedge Fund Holders: 53
Dividend Yield as of December 28: 2.54%
American Water Works Company, Inc. (NYSE:AWK) is one of the best dividend stocks to invest in.
On December 17, Barclays analyst Nicholas Campanella lowered the firm’s price target on American Water Works Company, Inc. (NYSE:AWK) to $122 from $134 and kept an Underweight rating on the shares. The move came as part of Barclays’ 2026 outlook for the utilities sector. Barclays still holds a positive view on the industry overall. The firm frames 2026 as a year of “execution and defense,” following a period when utilities ramped up capital spending and later guided to earnings revisions that moved higher.
Separately, the company announced in October an all-stock transaction valued at about $12 billion, marking the largest US water utility deal on record. The combination brings together American Water and Essential Utilities. The merged company is expected to serve nearly five million customers across 17 states. Management highlighted growing opportunities tied to infrastructure investment and environmental remediation. Executives also pointed to rising water demand from data centers during an investor call held Monday morning.
By total value, the deal is the largest US water utility transaction dating back to the 1990s and the second-largest globally, based on data compiled by Bloomberg. American Water CEO John C. Griffith will lead the combined company, while Essential’s chief executive, Christopher H. Franklin, will take on the role of executive vice chair of the board.
Following the merger, the new company plans to review strategic alternatives for its non-water operations. Those assets include Peoples Natural Gas, which serves more than 700,000 customers in Pennsylvania. Under the terms of the agreement, American Water shareholders will own about 69% of the combined entity, with Essential investors holding the remaining stake.
American Water Works Company, Inc. (NYSE:AWK) provides drinking water, wastewater, and related services across multiple U.S. states and in Ontario, Canada.
4. Sysco Corporation (NYSE:SYY)
Number of Hedge Fund Holders: 53
Dividend Yield as of December 28: 2.91%
Sysco Corporation (NYSE:SYY) is one of the best dividend stocks to invest in.
On December 12, Piper Sandler lowered its price target on Sysco Corporation (NYSE:SYY) to $80 from $81 and kept a Neutral rating on the shares. The firm said restaurant stocks have pulled back recently, driven mostly by concerns around demand trends in the restaurant industry. That matters because restaurants remain the largest customer base for food distributors.
Sysco Corporation (NYSE:SYY) left its full-year outlook unchanged, even after beating first-quarter estimates in October. The decision points to rising caution around economic uncertainty and how it may affect foodservice customers going forward. Cost discipline has helped soften some of the pressure, and the company has focused on improving transportation efficiency, managing warehouse maintenance, and tightening inventory levels. Those steps have helped offset higher product costs, particularly in meat and seafood.
Management said the first-quarter increase in gross profit came largely from effective handling of product cost inflation and better sourcing decisions. Gross margin expanded by 13 basis points to 18.5%. Looking ahead, Sysco Corporation (NYSE:SYY) continues to expect fiscal 2026 sales growth of 3% to 5%. It also projects annual adjusted profit growth in the range of 1% to 3%.
During the quarter, sales in the US foodservice segment rose 2.9%, down from 4.6% growth a year earlier. Adjusted profit reached $1.15 per share, topping analysts’ estimates of $1.12, according to LSEG. Net sales totaled $21.15 billion, slightly ahead of expectations of $21.08 billion.
Sysco Corporation (NYSE:SYY) is the world’s largest food distributor, supplying food, equipment, and related products to restaurants, schools, hospitals, hotels, and other businesses that prepare meals away from home.
3. PepsiCo, Inc. (NASDAQ:PEP)
Number of Hedge Fund Holders: 68
Dividend Yield as of December 28: 3.96%
PepsiCo, Inc. (NASDAQ:PEP) is one of the best dividend stocks to invest in.
On December 19, BofA analyst Peter Galbo raised the firm’s price target on PepsiCo, Inc. (NASDAQ:PEP) to $164 from $155 and kept a Neutral rating on the shares. Looking ahead to 2026, Galbo said the biggest open question for consumer staples remains consumption growth. Valuations across the group are still uneven, and “there feels little to get them off the sidelines in ’26 until fundamentals signal a greater turning of the tide,” he wrote in a year-ahead note.
Earlier in the month, on December 8, PepsiCo, Inc. (NASDAQ:PEP) announced a review of its North America supply chain. The company said it plans to aggressively cut costs to support growth after weeks of discussions with activist investor Elliott Investment Management.
Elliott disclosed a $4 billion stake in PepsiCo in September and has pressed the company to consider several moves. Those include refranchising or spinning off its bottling operations and evaluating the sale of non-core food assets. PepsiCo also said it will make structural changes that will affect some jobs in the US and Canada. The plan calls for more affordable pricing tiers and simpler ingredient lists across its snack portfolio. Cost reduction is a major focus, and the company aims to eliminate nearly 20% of its US product lines by early next year and shut down several manufacturing lines.
Alongside those cuts, PepsiCo, Inc. (NASDAQ:PEP) plans to increase automation and digital tools across production. Management expects those changes to deliver at least 100 basis points of core operating margin expansion in total over the next three fiscal years.
3. Honeywell International Inc. (NASDAQ:HON)
Number of Hedge Fund Holders: 76
Dividend Yield as of December 28: 2.41%
Honeywell International Inc. (NASDAQ:HON) is among the best dividend stocks to invest in.
On December 24, Barclays analyst Julian Mitchell lowered the firm’s price target on Honeywell International Inc. (NASDAQ:HON) to $250 from $269 and kept an Overweight rating on the shares. The update followed the company’s fiscal fourth-quarter report and a refresh of the firm’s model. Mitchell said investor interest could improve in the spring of 2026 as the company approaches its capital markets day and prepares for the planned aerospace spinoff.
A few days earlier, on December 22, Honeywell International Inc. (NASDAQ:HON) released supplemental 2024 and year-to-date 2025 financial information. The update reflects a revised business segment structure that is expected to take effect in the first quarter of 2026, following changes the company first outlined in October.
The company also said it will begin reporting its Advanced Materials business as discontinued operations starting in the fourth quarter of 2025. This follows the successful spin of Solstice Advanced Materials on October 30. As a result, Honeywell adjusted its full-year and fourth-quarter 2025 guidance, while reaffirming its expectations for fourth-quarter performance.
Honeywell International Inc. (NASDAQ:HON) also provided an update on previously disclosed litigation tied to Flexjet. The company expects a one-time charge in the fourth quarter related to these matters. The charge will not affect non-GAAP results or guidance. Any potential settlements are expected to include one-time cash payments totaling about $470 million in aggregate.
Honeywell operates as an integrated company serving customers across a wide range of industries and regions. Its portfolio is supported by the Honeywell Accelerator operating system and the Honeywell Forge digital platform.
2. The Procter & Gamble Company (NYSE:PG)
Number of Hedge Fund Holders: 87
Dividend Yield as of December 28: 2.92%
The Procter & Gamble Company (NYSE:PG) is among the best dividend stocks to invest in.
On December 19, BofA lowered its price target on The Procter & Gamble Company (NYSE:PG) to $170 from $175 and kept a Buy rating on the shares. Looking ahead to 2026, the firm said the biggest unanswered question for consumer staples remains consumption growth. Valuations across the group are still uneven, and “there feels little to get them off the sidelines in ’26 until fundamentals signal a greater turning of the tide,” the analyst wrote in a year-ahead note.
The stock has fallen nearly 13% since the start of 2025. While P&G owns a deep and well-known brand portfolio, competitive pressure is building. Private-label products continue to gain share, especially as consumers become more price-conscious. If disposable income remains under pressure in 2026, shoppers may lean further toward discount and store brands. That shift could weigh on P&G’s growth outlook, pricing power, and margins.
International growth offers some balance. Expansion in emerging markets such as Asia and Latin America remains a key lever. The Procter & Gamble Company (NYSE:PG) is already close to saturation in the US and Europe, which limits incremental growth in those regions. Continued investment outside its core markets becomes more important when economic conditions are uncertain.
The Procter & Gamble Company (NYSE:PG) is a global consumer goods company headquartered in Cincinnati, Ohio, with operations spanning a wide range of household, personal care, and packaged goods categories.
1. The Home Depot, Inc. (NYSE:HD)
Number of Hedge Fund Holders: 104
Dividend Yield as of December 28: 2.63%
The Home Depot, Inc. (NYSE:HD) is one of the best dividend stocks to invest in.
On December 17, Truist raised its price target on The Home Depot, Inc. (NYSE:HD) to $390 from $375 and kept a Buy rating. The call came as part of a broader research note looking ahead to 2026 for Hardlines and Broadlines consumer names. The analyst said some slowing trends in the second half of FY25 are likely to keep consumers selective. Shoppers are expected to stay focused on “Value,” choosing where and how they spend. For Home Depot, Truist pointed to a large pool of untapped demand. More than $35 trillion of home equity is effectively sitting on the sidelines. With recent rate cuts, homeowners now have meaningful “dry powder” to put back into their homes. As long as existing home supply stays tight and prices remain flat to slightly higher, the firm said it remains bullish on the home improvement category.
That optimism sits alongside near-term caution. On December 9, The Home Depot, Inc. (NYSE:HD) forecast fiscal 2026 comparable sales growth and profit below analysts’ expectations. Demand for do-it-yourself projects and big-ticket purchases has cooled.
Management acknowledged the uncertainty. Customers are feeling uneasy, and that mindset is expected to carry into next year. “We have not yet seen a catalyst or an inflection in housing activity,” finance chief Richard McPhail said on an investor conference call. US housing demand has been uneven, pressured by rising unemployment and still-elevated home prices. Even as interest and mortgage rates ease, a clear recovery has not followed. In its latest earnings report, the company projected a steeper drop in fiscal 2025 profit.
Retailers such as The Home Depot, Inc. (NYSE:HD) are seeing consumers pull back on expensive renovations and large projects as borrowing costs stay high. Looking ahead, the company expects fiscal 2026 same-store sales to range from flat to 2%. That trails the 2.34% average estimate from analysts, based on LSEG data. The company also guided for adjusted EPS growth of flat to 4%, compared with expectations for a 5.6% increase.
While we acknowledge the potential of HD to grow, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and have limited downside risk. If you are looking for an AI stock that is more promising than HD and that has 100x upside potential, check out our report about this cheapest AI stock.
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