In this article, we discuss 12 best S&P 500 dividend stocks to buy.
Last year’s economic condition has investors turn their attention toward income-generating stocks. Over the years, dividend companies with resilient business models have helped investors to weather inflationary periods smoothly. Considering the risks of recession and investors’ appetite for dividend stocks, companies are trying to maintain or raise their payouts. According to a report by S&P Dow Jones Indices, cash dividends within the S&P 500 set a record payment in the fourth quarter of 2022, growing by 10.2% from the same period last year. The report also mentioned that S&P 500 dividend payments have grown for 13 consecutive years.
According to analysts, dividend stocks are a good investment option for investors as dividend companies can often grow their payouts faster than inflation. This complies with Guinness Atkinson Funds‘ report that sheds light on the dividend strategies relative to inflation. The report highlighted that the S&P 500 dividend growth surpassed the rate of inflation by over three times from December 1940 to April 2015.
In the past 12 months, dividend stocks have outperformed the broader market. The S&P 500 High Dividend Index fell by only 0.79% in the period, compared with an 8.9% drop in the wider market, as of January 24.
Over the years, dividends have contributed significantly to the market’s overall returns. On average, dividends represented 76% of the total return of the S&P 500 in each decade when annualized returns were below 10% since 1929, as reported by Lord Abbett. Dividend companies like Exxon Mobil Corporation (NYSE:XOM), PepsiCo, Inc. (NASDAQ:PEP), and The Procter & Gamble Company (NYSE:PG) have not only raised their payouts for decades but also boast strong balance sheets, which makes them solid investment options.
Photo by Nick Chong on Unsplash
Our Methodology:
For this list, we identified the dividend-paying stocks in the S&P 500 Index. After that, we sorted these dividend stocks using Insider Monkey’s proprietary hedge fund sentiment data, which means that these stocks are the most popular dividend stocks among the elite hedge funds. The list is ranked in ascending order of the number of hedge funds having stakes in the companies. Our list reflects the 12 best S&P 500 dividend stocks according to hedge funds. However, it should be kept in mind that hedge funds usually invest in dividend stocks not for their dividend yields but for their upside capital gains potential.
12 Best S&P 500 Dividend Stocks To Buy
12. Danaher Corporation (NYSE:DHR)
Number of Hedge Fund Holders: 89
Danaher Corporation (NYSE:DHR) is an American diversified conglomerate that manufactures products related to medical, commercial, and industrial markets. In December, Deutsche Bank initiated its coverage on the stock with a Buy rating and a $310 price target. The firm recommended the stock for its defensive posturing.
In its recently announced Q4 2022 earnings, Danaher Corporation posted revenue of $8.37 billion, which showed a 2.8% growth from the same period last year. For FY22, the company’s operating cash flow of $8.5 billion, and its free cash flow came in at $7.4 billion. Due to its strong balance sheet and solid dividend policy, the company is among the best S&P 500 dividend stocks to buy.
On December 6, Danaher Corporation declared a quarterly dividend of $0.25 per share, which fell in line with its previous dividend. The company has been raising its dividends consistently for the past eight years. In addition to dividend stocks like Exxon Mobil Corporation, PepsiCo, Inc., and The Procter & Gamble Company, investors are also paying attention to DHR for stable income.
At the end of Q3 2022, 89 hedge funds in Insider Monkey’s database owned stakes in Danaher Corporation, growing from 82 in the previous quarter. The collective value of these stakes is nearly $5 billion. Fisher Asset Management owned the largest stake in the company in Q3.
Stewart Asset Management mentioned Danaher Corporation in its Q3 2022 investor letter. Here is what the firm has to say:
“We also need to point out one global consequence of the rapid rise in interest rates: an irrepressibly strong dollar. This hurts the reported earnings of U.S. companies who sell their goods and services overseas. Foreign currency earnings translate into fewer dollars and thus lower earnings. Most of the companies in your portfolios gain a notable amount of earnings from their international operations. While the strength or weakness of a currency doesn’t change the quality of a business or its longer-term earnings power, it can change the reported earnings of a company over short periods of time. It is difficult to forecast this effect accurately because many of our companies manufacture where they sell, which to some extent dulls the sharp negative effect of a surging dollar. Danaher (NYSE:DHR), among others, is a good example.”
11. The Home Depot, Inc. (NYSE:HD)
Number of Hedge Fund Holders: 89
The Home Depot, Inc. (NYSE:HD) is a Georgia-based home improvement company that sells tools and construction-related products to its consumers. In the third quarter of 2022, the company posted revenue of $38.8 billion, up 5.6% growth from the same period last year. It also reported a 4.3% year-over-year growth in comparable sales. The company is among the best S&P 500 dividend stocks on our list.
The Home Depot, Inc. currently pays a quarterly dividend of $1.90 per share and has a dividend yield of 2.40%, as of January 24. The company has been raising its dividends for 12 years in a row.
Cowen appreciated the best-in-class execution of The Home Depot, Inc. and raised its price target on the stock to $379 with an Outperform rating on the shares.
At the end of September, 89 hedge funds in Insider Monkey’s database owned stakes in The Home Depot, Inc., growing from 80 in the previous quarter. These stakes are collectively valued at over $5.6 billion.
Matrix Asset Advisors mentioned The Home Depot, Inc. in its Q3 2022 investor letter. Here is what the firm has to say:
“During the quarter, we re-established a position in The Home Depot, Inc. (NYSE:HD) sold earlier this year, after the shares declined sharply on big picture concerns about a softer housing market and lower consumer spending. We believe that HD is a very well-managed company, positioned to continue showing good profits even as the economy decelerates. The products it carries in inventory are in year-round demand from contractors and homeowners wanting to maintain and improve their homes. The company has historically been shareholder friendly, repurchasing shares and increasing the dividend, most recently by 15% earlier this year. On September 30, HD’s current dividend yield was 2.8%.”
10. S&P Global Inc. (NYSE:SPGI)
Number of Hedge Fund Holders: 90
Another best S&P 500 dividend stock on our list is S&P Global Inc., which is a New York-based company specializing in financial information and analytics. The company is just one year away from becoming a Dividend King as it has been raising its dividends consistently for the past 49 years. It currently pays a quarterly dividend of $0.85 per share and has a dividend yield of 0.92%, as of January 24.
Through the third quarter of 2022, S&P Global Inc. returned over $11.7 billion to shareholders, including $749 million in dividends. At the end of the first nine months of 2022, its operating cash flow amounted to nearly $1.5 billion and its free cash flow came in at $1.23 billion.
In January, Argus raised its price target on S&P Global Inc. to $380 with a Buy rating on the shares, appreciating the company’s passive investments and its financial businesses.
As of the close of Q3 2022, 90 hedge funds tracked by Insider Monkey owned stakes in S&P Global Inc., compared with 84 in the previous quarter. These stakes have a collective value of $6.2 billion. TCI Fund Management was the company’s largest stakeholder in Q3.
Baron Funds mentioned S&P Global Inc. in its Q3 2022 investor letter. Here is what the firm has to say:
“Shares of rating agency and data provider S&P Global Inc. (NYSE:SPGI) fell 9% during the third quarter due to continued weak debt issuance activity and headwinds to the Indices business from equity market declines. Credit markets were exceptionally soft during the quarter with non-financial corporate bond issuance down 36% for investment grade and down 84% for high yield, reflecting greater investor risk aversion, rising interest rates, and a drop-off in M&A activity. We believe this ratings weakness is temporary and diversification benefits from the acquisition of IHS Markit should support earnings growth next year. Over the long term, the company should continue benefiting from the secular trends of increasing bond issuance, growth in passive investing, and demand for data and analytics, while enjoying meaningful and durable competitive advantages that, in our view, are only strengthening following the merger with IHS Markit.”
9. Thermo Fisher Scientific Inc. (NYSE:TMO)
Number of Hedge Fund Holders: 92
Thermo Fisher Scientific Inc. (NYSE:TMO) is an American company that deals in scientific instrumentation and provides related services. In the third quarter of 2022, the company reported revenue of $10.6 billion, which showed a 14.4% growth from the prior-year period. The company’s operating cash flow came in at nearly $2 billion and its free cash flow amounted to $1.4 billion.
Deutsche Bank lifted its price target on Thermo Fisher Scientific Inc. to $620 in December with a Buy rating on the shares. The firm presented a positive outlook on life sciences tool companies.
Thermo Fisher Scientific Inc. has been raising its dividends consistently for the past five years. It currently pays a quarterly dividend of $0.30 per share and has a dividend yield of 0.21%, as of January 24.
As of the close of Q3 2022, 92 hedge funds in Insider Monkey’s database owned stakes in Thermo Fisher Scientific Inc., with a total value of over $6.8 billion.
Polen Capital mentioned Thermo Fisher Scientific Inc. in its Q4 2022 investor letter. Here is what the firm has to say:
“Thermo Fisher Scientific Inc. (NYSE:TMO) is a leader in attractive end markets with a skilled management team who has demonstrated the ability to consistently and wisely allocate capital. It is the world leader in serving science. It is a globally scaled supplier serving more than 400,000 customers working within pharmaceutical and biotech companies, hospitals and clinical diagnostic labs, research institutions, and government agencies. Thermo provides many of the products and services that companies in these industries, particularly pharma and biotech, need to operate and drive science forward. The company manufactures and sells instruments, reagents, and consumables used for a wide range of applications in labs. (Click here to view the full text)
8. Activision Blizzard, Inc. (NASDAQ:ATVI)
Number of Hedge Fund Holders: 96
Activision Blizzard, Inc. (NASDAQ:ATVI) is a California-based video game company that specializes in interactive entertainment. The company pays an annual dividend of $0.47 per share for a dividend yield of 0.63%, as of January 24.
In the third quarter of 2022, Activision Blizzard, Inc. reported revenue of $1.78 billion, and its operating cash flow came in at $257 million. At the end of the quarter, the company had over $7.3 billion available in net cash.
In December, Edward Jones upgraded Activision Blizzard, Inc. to Buy from Hold, highlighting the company’s overall performance.
Activision Blizzard, Inc., one of the best S&P 500 dividend stocks, remained a popular stock among elite funds in Q3 2022, as 96 funds in Insider Monkey’s database owned stakes in the company, up from 84 in the previous quarter. These stakes have a total value of over $9 billion.
Cooper Investors mentioned Activision Blizzard, Inc. in its Q2 2022 investor letter. Here is what the firm has to say:
“Activision Blizzard, Inc. (NASDAQ:ATVI) – our investment preceded news that the company was under investigation for workplace bullying. When it became clear management had misled the market on the extent of the problem we sold, led by our principles of Responsible Investing. We did not benefit from the subsequent M&A premium paid by Microsoft.”
7. Bank of America Corporation (NYSE:BAC)
Number of Hedge Fund Holders: 97
Bank of America Corporation (NYSE:BAC) is an American multinational investment bank and financial services company. In December, the company’s credit card delinquency rate slightly improved to 1.03%, compared with 1.02% in November. Moreover, its lending activity also increased from previous months. The company is among the best S&P 500 dividend stocks to buy.
Bank of America Corporation has been raising its dividends consistently for the past nine years. It currently pays a quarterly dividend of $0.22 per share and has a dividend yield of 2.55%, as of January 24.
In January, Citigroup raised its price target on Bank of America Corporation to $38 with a Buy rating on the shares, highlighting the company’s quarterly earnings.
At the end of Q3 2022, 97 hedge funds tracked by Insider Monkey owned investments in Bank of America Corporation, worth over $35.6 billion collectively. Berkshire Hathaway was the company’s leading stakeholder in Q3.
Ariel Investments mentioned Bank of America Corporation in its third-quarter 2022 investor letter. Here is what the firm has to say:
“We initiated three new positions in the quarter. We added leading financial institution Bank of America Corporation (NYSE:BAC) which serves individual consumers, small and middle-market businesses, and large corporations with a full range of banking, investing, asset management, and other financial and risk management products and services. The current company was formed through various mergers including NationsBank, FleetBoston, US Trust, Countrywide Financial, and Merrill Lynch with the legacy commercial bank to form a national banking powerhouse and bulge bracket investment firm. As one of the ‘Big Four’ U.S. banks it enjoys scale driven cost advantages and economies of scale which provide meaningful competitive advantages and potential for strong returns in the largely commoditized banking industry. A survivor of the financial crisis, BAC has emerged with a solid capital base and stands to benefit from a rising interest rate environment.”
6. JPMorgan Chase & Co. (NYSE:JPM)
Number of Hedge Fund Holders: 110
JPMorgan Chase & Co. is a multinational financial services company that provides related services to its consumers. Citigroup raised its price target on the stock to $165 in January with a Buy rating on the shares, following the company’s recent quarterly earnings.
On December 13, JPMorgan Chase & Co. declared a quarterly dividend of $1.00 per share, consistent with its previous dividend. The stock’s dividend yield on January 24 came in at 2.89%. It can be added to dividend portfolios alongside Exxon Mobil Corporation, PepsiCo, Inc., and The Procter & Gamble Company.
At the end of Q3 2022, 110 hedge funds in Insider Monkey’s database owned stakes in JPMorgan Chase & Co., up from 104 in the previous quarter. These stakes have a total value of over $6.4 billion.
5. UnitedHealth Group Incorporated (NYSE:UNH)
Number of Hedge Fund Holders: 110
UnitedHealth Group Incorporated (NYSE:UNH) is a Minnesota-based managed healthcare company that also provides health insurance services to its consumers. On January 13, the company announced its Q4 earnings and posted revenue of $82.8 billion, which shows a 12.3% growth from the same period last year. Its operating cash flow for the full year came in at $26.2 billion and returned $13 billion to shareholders through dividends and share repurchases.
UnitedHealth Group Incorporated, one of the best S&P 500 dividend stocks, currently pays a quarterly dividend of $1.65 per share for a dividend yield of 1.36%, as of January 24. The company has been paying regular dividends to shareholders since 1990.
In January, Loop Capital raised its price target on UnitedHealth Group Incorporated to $590 with a Buy rating on the shares, appreciating the company’s Q4 earnings and its outlook for 2023.
UnitedHealth Group Incorporated was one of the most popular stocks among hedge funds in Q3 2022, as 110 funds tracked by Insider Monkey had positions in the company, up from 91 in the previous quarter. These stakes are collectively valued at over $10.3 billion.
Stewart Asset Management mentioned UnitedHealth Group Incorporated in its Q3 2022 investor letter. Here is what the firm has to say:
“Looking at the Great Recession which began at year-end 2007 and lasted to mid-year 2009 is helpful too. Our four largest current holdings in the portfolio weathered that period well. UnitedHealth’s (NYSE:UNH) earnings were resilient. While it reported modestly down earnings in 2008, its earnings rebounded quickly to record highs in 2010 and the shares responded strongly in anticipation of this.”
4. Apple Inc. (NASDAQ:AAPL)
Number of Hedge Fund Holders: 140
Apple Inc. (NASDAQ:AAPL) is another best S&P 500 dividend stock on our list. The multinational tech firm currently pays a quarterly dividend of $0.23 per share and has a dividend yield of 0.65%, as of January 24. The company has been raising its dividends consistently for the past nine years.
In January, UBS maintained its Buy rating on Apple Inc. with a $180 price target ahead of the company’s quarterly earnings.
In fiscal Q4 2022, Apple Inc. reported revenue of $90.1 billion, which saw an 8.1% growth from the same period last year. The company’s cash position remained strong during the quarter with $23.6 billion available in cash and cash equivalents. Moreover, it returned $29 billion to shareholders in dividends and share repurchases.
Apple Inc. was a part of 140 hedge fund portfolios in Q3 2022, growing from 128 in the previous quarter. The collective value of stakes owned by these hedge funds is over $144 billion. Among these funds, Berkshire Hathaway was the company’s leading stakeholder in Q3.
Wedgewood Partners mentioned Apple Inc. in its Q4 2022 investor letter. Here is what the firm has to say:
“Apple grew quarterly revenues +14% (foreign exchange adjusted) driven by +16% growth in iPhone revenues (also foreign exchange adjusted). iPhone revenue growth was particularly impressive because The Company is compounding on +47 growth from a year ago. Apple’s installed base is over 1.8 billion devices which helps drive a software and services business, which in turn has generated almost $80 billion of revenue over the past four quarters and is up +60% compared to calendar 2019 (pre-Pandemic). As we have highlighted in the past, Apple’s relentless focus on the development and integration between hardware (especially integrated circuits) and software, continues to add significant value for customers of their products and services. We expect this favorable competitive dynamic to continue for the foreseeable future.”
3. Mastercard Incorporated (NYSE:MA)
Number of Hedge Fund Holders: 146
Mastercard Incorporated (NYSE:MA) is one of the world’s largest payment processing companies, based in New York, US. It also provides related financial services to its consumers. In January, Truist raised its price target on the stock to $450 with a Buy rating on the shares, as the firm covered the main FinTech names. The firm mentioned that MA is most likely to maintain its momentum due to its outperformance last year.
On December 6, Mastercard Incorporated declared a 16.3% growth in its quarterly dividend to $0.57 per share. With this increase, the company extended its dividend growth streak to 10 years. The stock has a dividend yield of 0.60%, as of January 23.
One of the best S&P 500 dividend stocks to buy, Mastercard Incorporated reported a strong cash generation in Q3 2022. The company had $7.6 billion in cash and cash equivalents, up from $7.4 billion at the end of December 2021. Moreover, it also paid $474 million to shareholders in dividends during the quarter.
Mastercard Incorporated saw significant growth in hedge fund positions in Q3 2022, as 146 funds tracked by Insider Monkey had stakes in the company, up from 137 in the previous quarter. These stakes have a total value of over $13.8 billion.
Ensemble Capital Management mentioned MA in its 2022 annual investor letter. Here is what the firm has to say:
“Mastercard Incorporated (NYSE:MA) (8.43%* weight in fund): Mastercard declined just 1.61% during the Fund’s fiscal year, adding 1.30% to relative performance. After worries last year about Buy Now, Pay Later lenders being disruptive to Mastercard’s payment network provided to be misguided, Mastercard avoided much of the decline in the broader stock market this year. In addition, with inflation worries being the main driver of the market selloff, the company’s inflation resistant business model calmed worried investors.”
2. Visa Inc. (NYSE:V)
Number of Hedge Fund Holders: 165
Visa Inc. (NYSE:V) is an American multinational financial services and credit card company, based in California. In fiscal Q4 2022, the company reported revenue of $7.8 billion, which showed a 19% growth from the same period last year. During the quarter, it returned nearly $3 billion to shareholders in dividends. The company is among the best S&P 500 dividend stocks on our list.
Visa Inc. has been raising its dividends consistently for the past 16 years. It currently offers a per-share dividend of $0.45 every quarter and has a dividend yield of 0.80%, as recorded on January 24.
Due to its strong performance last year and positive outlook for FY23, Visa Inc. gained positive analyst ratings this month. Both Truist and Baird raised their price targets on the stock in January to $260 and $270, respectively.
At the end of Q3 2022, 165 hedge funds in Insider Monkey’s database owned stakes in Visa Inc., compared with 166 in the previous quarter. These stakes are worth over $22.4 billion collectively. TCI Fund Management was the company’s leading stakeholder in Q3.
Wedgewood Partners mentioned Visa Inc. in its Q4 2022 investor letter. Here is what the firm has to say:
“Visa rebounded as the Company continued to report strong growth, while concerns about potential adverse legislation related to its credit card routing practices receded as U.S. legislators failed to take action. Although Visa is not totally free from legislative risk, the Company’s value proposition to merchants as well as bank issuing customers and acquirers is robust enough to help blunt the potential effects any future legislation might portend. Over a multi-year time horizon, it would be difficult for any currently nonexistent or even subscale credit routing network to add the value that Visa (or MasterCard) can already add today, legislative fiat notwithstanding. “
1. Microsoft Corporation (NASDAQ:MSFT)
Number of Hedge Fund Holders: 269
Microsoft Corporation (NASDAQ:MSFT) was the most popular stock among hedge funds in Q3 2022, as 269 funds in Insider Monkey’s database owned stakes in the company, compared with 258 in the previous quarter. The consolidated value of these stakes is over $61 billion. This strong hedge fund inclination makes it one of the best S&P 500 dividend stocks to buy.
Microsoft Corporation offers a quarterly dividend of $0.68 per share for a dividend yield of 1.12%, as of January 24. It is one of the few tech companies that maintain a long dividend growth streak of 16 years.
BMO Capital maintained an Outperform rating on Microsoft Corporation in January with a $267 price target. The firm noted that the company’s upside opportunities are ‘modestly’ higher than downside risk.
Fundsmith mentioned Microsoft Corporation in its yearly 2022 investor letter. Here is what the firm has to say:
“Take the example of Microsoft Corporation (NASDAQ:MSFT) and Intuit. Microsoft shares are currently being valued at a P/E ratio of 25.0 times the consensus EPS estimate for the fiscal year ending June 2023. Meanwhile, Intuit is being valued at 28.4 times the non-GAAP consensus estimate for the fiscal year ending July 2023. Many investors and analysts may accept that Intuit is trading at a higher multiple given expectations of greater growth potential. However, Intuit removes share-based compensation from their non-GAAP EPS whereas Microsoft does not. Given that Intuit’s GAAP EPS guidance for the year ending 31st July 2023 is $6.92–$7.22, its non-GAAP guidance is $13.59–$13.89, and the consensus estimate for 2023 EPS is at $13.69, it seems clear that most sell-side analysts are accepting the company’s non-GAAP adjustments, which includes the removal of some $1.8bn of share-based compensation, in their estimates. If we include the impact of share-based compensation in Intuit’s 2023 EPS to make a more apples-to-apples comparison with Microsoft based upon GAAP EPS, Intuit’s 2023 EPS would be closer to $9, meaning that the shares would be trading at a multiple of about 43 times. I think investors and analysts may find a premium of 14% for Intuit over Microsoft (28.4 times versus 25.0 times) to be reasonable. I’m not so sure they are fully aware that Intuit shares are actually trading at a premium of 73% if share-based compensation is treated in the same manner between the two companies.”
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This article is originally published at Insider Monkey.
