In this article, we will discuss some of the best dividend stocks for reliable income.
The year 2024 proved favorable for dividends, even though the Dividend Aristocrats Index lagged behind the broader market. Throughout the year, US companies consistently increased or upheld their dividend payouts. In addition, several major tech firms began offering dividends, signaling to investors that it’s possible for a company to focus on both growth and shareholder returns. By September 30, 2024, approximately 80% of the companies in the S&P index were distributing dividends, a figure that has remained fairly stable over the past decade. Notably, nearly 24% of these dividend-paying firms were in the technology sector, a significant increase from 13% ten years ago. Sectors such as healthcare and industrials also experienced notable growth in the number of companies offering dividends. This broader distribution of dividends has expanded the range of investment opportunities, giving equity-income investors more access to high-growth, dynamic, and innovative companies. Given these developments, analysts remain optimistic about their performance heading into 2025.
Also read: 10 Best Canadian Dividend Stocks to Buy For Income Investors
Analysts note that, from a broad perspective, earnings growth has traditionally been the primary driver of dividends. Last year saw strong earnings growth, and they anticipate an even better performance in 2025. Goldman predicts an 11% increase in earnings per share for this year, up from an estimated 8% in 2024. This is expected to result in a 7% rise in dividends, compared to a 6% increase last year. Ohsung Kwon, a US equity strategist at BofA Securities, offers a more optimistic outlook, forecasting a 12% boost in dividends this year, fueled by accelerating earnings growth.
Dividends historically accounted for 40% of the market’s total return from 1936 to 2012 but have contributed only 16% over the past ten years, according to a research note from BofA Securities released late last year. Looking forward, Kwon anticipates that dividends will have a more significant impact on total returns compared to the previous decade.
Dividends hold particular significance, especially as the broader market has experienced consecutive gains of over 20%, a scenario not seen since the late 1990s. Moreover, the low payout ratio, currently at 29% compared to the historical average of 50%, suggests there is considerable potential for companies to increase their dividend payouts. Kwon pointed out that another key factor supporting dividend investing is the growing number of retired baby boomers seeking income. With cash products yielding around 4%, there is a strong demand for dividends, as investors are looking for immediate cash returns and are pressuring companies to increase their dividend distributions.
This optimism about dividend stocks is largely rooted in their historical performance, as they have been instrumental in reducing overall portfolio volatility and can help cushion losses when stock prices decline. Research indicates that dividend-paying stocks often outperform their non-dividend-paying counterparts during bear markets, such as during the tech bubble burst in the early 2000s and the global financial crisis. This may be because companies that pay dividends are typically larger, more established, and more profitable, making them more resilient than the broader market.
From October 2019 to September 2024, a period marked by significant fluctuations in the market’s total performance, equity income funds demonstrated lower volatility and reduced downside risk compared to the broader market. Given this, we will discuss the most reliable dividend stocks to invest in.
Photo by Sharon McCutcheon on Unsplash
Our Methodology:
For this list, we used a stock screener to identify companies with a history of dividend growth spanning over 10 years. From this group, we selected companies offering dividend yields of at least 1% as of January 12. From that selection, we identified the ten stocks that hedge funds favored the most during the third quarter of 2024, based on data from Insider Monkey’s database. The stocks are ranked in ascending order 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 275% since May 2014, beating its benchmark by 150 percentage points. (see more details here).
12. Comcast Corporation (NASDAQ:CMCSA)
Number of Hedge Fund Holders: 72
Comcast Corporation (NASDAQ:CMCSA) is an American telecommunications company that offers a wide range of mobile phone and cable TV services. The stock is down by nearly 16% in the past 12 months. The media giant faced a setback after cautioning that it anticipates losing over 100,000 broadband subscribers this quarter. This drop surpasses the total net loss experienced during the first half of the year and highlights a worsening trend, building on the 87,000 internet accounts it shed in the third quarter.
That said, Comcast Corporation (NASDAQ:CMCSA) generated strong earnings in the third quarter of 2024. The company reported revenue of $32.07 billion, marking a 7% rise from the same period in the previous year. It demonstrated robust performance, with broadband average revenue per user (ARPU) increasing by 3.6% and a 5% growth in its connectivity segment. The Connectivity & Platforms division achieved an adjusted EBITDA margin of 40.9%. In addition, Comcast successfully hosted the Paris Summer Olympics, which significantly boosted Peacock’s revenue and subscriber numbers, while also reinforcing NBC’s status as the leading network for the 2023-2024 season.
From a dividend standpoint, Comcast Corporation (NASDAQ:CMCSA) upheld a solid cash position. In the most recent quarter, it generated more than $7 billion in operating cash flow, with free cash flow surpassing $3.4 billion. Additionally, the company returned $1.2 billion to shareholders through dividend payments. On January 7, the company declared a quarterly dividend of $0.31 per share, which was in line with its previous dividend. Overall, it has been growing its dividends for the past 16 years, which makes CMCSA one of the best dividend stocks on our list. The stock has a dividend yield of 3.41%, as of January 12.
Comcast Corporation (NASDAQ:CMCSA) experienced a positive hedge fund sentiment as the company ended Q3 2024 with 72 hedge fund positions, up from 61 in the previous quarter, as per Insider Monkey’s database. The stakes held by these funds have a total value of more than $5.44 billion.
11. QUALCOMM Incorporated (NASDAQ:QCOM)
Number of Hedge Fund Holders: 74
QUALCOMM Incorporated (NASDAQ:QCOM) is an American semiconductor company, based in California. The company offers a wide range of wireless technology services. In fiscal Q4 2024, it posted strong earnings, with revenues totaling $10.24 billion, an 18% increase from the same period the previous year. Net income climbed 33% year-over-year to $3.5 billion. In addition, the company recorded an annual earnings per share growth exceeding 30% for fiscal 2024.
QUALCOMM Incorporated (NASDAQ:QCOM) has secured a strong foothold in the smartphone chip sector and is poised to benefit from the fast-growing generative AI smartphone market. IDC forecasts this market to expand at an annual rate of 78% through 2028, with yearly shipments expected to hit 912 million units by the end of the forecast period. Moreover, the company is the second-largest player in the smartphone application processor market, commanding a 31% market share, as reported by Counterpoint Research. In the past 12 months, the stock has surged by nearly 12%.
Madison Investments highlighted QCOM in its Q3 2024 investor letter. Here is what the firm has to say:
“Alphabet Inc., Eli Lilly and Company, QUALCOMM Incorporated (NASDAQ:QCOM), Microsoft Corporation, and Apple Inc. were the largest detractors. Qualcomm has given back some of its first half gains after the CFO commented at a conference that its entrance into the AI PC business would take time to ramp. We continue to see Qualcomm as well positioned with growth from AI moving into the mobile phone, from new opportunities in the Internet of Things (IoT), and within the Auto industry but will also look to future growth as they enter the PC market.”
QUALCOMM Incorporated (NASDAQ:QCOM) holds a solid cash position to support its dividend distributions. By the close of the quarter, the company had $8 billion in cash and cash equivalents. Its operating cash flow rose to $12.2 billion, compared to $11.3 billion in the same quarter of the previous year. Throughout the quarter, QUALCOMM returned $2.2 billion to shareholders through dividends and share repurchases. The company offers a quarterly dividend of $0.85 per share and has a dividend yield of 2.17%, as of January 12. It is one of the best dividend stocks on our list as the company has been rewarding shareholders with growing dividends for the past 20 years.
At the end of Q3 2024, 74 hedge funds tracked by Insider Monkey held stakes in QUALCOMM Incorporated (NASDAQ:QCOM), worth over $3.2 billion in total. With over 2 million shares, Two Sigma Advisors was the company’s leading stakeholder in Q3.