In this piece, we will take a look at the 16 most profitable dividend stocks. If you want to skip our introduction to dividends and the general investing climate, then take a look at 5 Most Profitable Dividend Stocks.
In a stock market that continues to remain unpredictable, dividends offer a sense of stability. A regular income from shares which is unrelated to trading profits provides stability in a high inflationary environment, and if dividend stocks are utilized well, then the prudent investor can make a lot of money over a long time duration. The best example of this principle is Warren Buffett of Berkshire Hathaway, who has built a multi-billion dollar portfolio by simply picking the right stocks and then reinvesting their dividends to buy more shares.
Another little known fact about dividend stocks is that they are particularly attractive to hold during a high interest rate environment. In fact, data shows that dividend stocks outperform the S&P500 in terms of total returns in periods of high interest rates. Such periods generally see poor stock market performance since high rates affect the business environment, but dividend stocks pay out higher rates of dividends during periods of tight monetary policy. We took a detailed look at the benefits of dividend stocks in our coverage of 25 Things Every Dividend Investor Should Know so you should check it out to learn more unknown facts about dividend investing.
A key differentiator between dividend and non-dividend paying companies is the nature of their business. In accounting, any profit that a firm earns is put under the retained earnings account except for the money paid out to investors as dividends. Firms that seek to gain market share by developing more products or opening more offices tend to use the retained earnings as their wallet. However, companies that have already grown or are operating in stable and mature markets such as the crude oil industry often seek out investors by paying them dividends. Naturally, dividends paid also beef up the value of a firm’s shares, and you’re likely to see the share price fall if a company announces a dividend cut or suspension since dividend lovers are likely to sell the shares and park their money elsewhere.
Putting two and two together, the higher the profits that a firm earns the more it can afford to pay out dividends. An added cherry on top is if the company is growing. This growth would boost its dividends as well as its share price. And since we’re on the topic of growth, the compounding effect of dividends a.k.a. buying more shares from the dividends has the potential to deliver returns like Warren Buffett’s if done over the course of decades. S&P Global’s research shows that $1 invested in non-dividend stocks in 1930 would be worth a cool $197 by 2021. However, a dividend paying stock would be worth a whopping $6,430 by the end of the same time period – making Warren Buffett’s investment portfolio appear less of an intriguing mystery and more of a tale of patience and stock picking prowess. For those of you who love percentages, the difference between the annualized return (which includes dividends) and the price return (which is share price appreciation) is 70% for stocks of the S&P in a period of ten years. Growth, it seems, is at the heart of dividend investing, and we’ve also taken a look at 12 Best Dividend Stocks For Steady Growth out of which the top three stock picks are L3Harris Technologies, Inc. (NYSE:LHX), Tractor Supply Company (NASDAQ:TSCO), and Morningstar, Inc. (NASDAQ:MORN).
Today, we’ll take a look at the best of all worlds, namely companies that pay dividends and also make unbelievably large profits. The firms that top today’s list are Apple Inc. (NASDAQ:AAPL), Microsoft Corporation (NASDAQ:MSFT), and Saudi Arabian Oil Company (TADAWUL:2222.SR).
Image by Steve Buissinne from Pixabay
Our Methodology
To compile our list of the most profitable dividend stocks, we first ranked all companies that are publicly traded according to their net profits. Then, the firms that pay dividends were selected and the most profitable companies that pay dividends are as follows.
Most Profitable Dividend Stocks
16. TotalEnergies SE (NYSE:TTE)
Trailing Twelve Month Net Income: $20.5 billion
Trailing Annual Dividend Yield: 4.98%
TotalEnergies SE (NYSE:TTE) is a diversified oil company with operations from the field to the pump. The firm is currently expanding its global gas production after a drop in oil prices brought its revenue and profits down to Earth earlier this year.
By the end of this year’s second quarter, 20 out of the 910 hedge funds part of Insider Monkey’s database had held a stake in TotalEnergies SE (NYSE:TTE). Out of these, the firm’s largest shareholder is Ken Fisher’s Fisher Asset Management since it owns 20.4 million shares that are worth $1.1 billion.
Along with Microsoft Corporation (NASDAQ:MSFT), Apple Inc. (NASDAQ:AAPL), and Saudi Arabian Oil Company (TADAWUL:2222.SR), TotalEnergies SE (NYSE:TTE) is one of the most profitable dividend stocks in the world.
15. PetroChina Company Limited (SSE:601857.SS)
Trailing Twelve Month Net Income: $21.05 billion (1CNY = 0.14USD)
Trailing Annual Dividend Yield: 5.41%
PetroChina Company Limited (SSE:601857.SS) is one of the biggest energy companies in the world. It is owned by the Chinese government and operates in several areas of the oil supply chain, from exploration and production to refining and marketing. Even as other Chinese firms have felt the brunt of a slowing economy, PetroChina Company Limited (SSE:601857.SS) has weathered the storm and it posted record profits for the first half of this year.
14. Tencent Holdings Limited (OTCMKTS:TCEHY)
Trailing Twelve Month Net Income: $25.69 billion (1CNY = 0.14USD)
Trailing Annual Dividend Yield: 5.08%
Tencent Holdings Limited (OTCMKTS:TCEHY) is one of the largest technology companies in the world. It is a diversified company with interests in businesses such as video game distribution and social media. The firm is currently one of the few Chinese consumer technology companies that are taking an aggressive approach to AI.
13. Bank of America Corporation (NYSE:BAC)
Trailing Twelve Month Net Income: $26 billion
Trailing Annual Dividend Yield: 3.07%
Bank of America Corporation (NYSE:BAC) is one of the largest domestic banks in America. A high interest rate environment is proving to be a boon for the bank as it has beaten analyst EPS estimates in all four of its latest quarters.
Insider Monkey took a look at 910 hedge funds for their Q2 2023 investments and found that 90 had held a stake in the bank. Bank of America Corporation (NYSE:BAC)’s biggest investor is Warren Buffett’s Berkshire Hathaway since it owns 1 billion shares that are worth $29 billion.
12. Equinor ASA (NYSE:EQNR)
Trailing Twelve Month Net Income: $28.7 billion
Trailing Annual Dividend Yield: 3.48%
Equinor ASA (NYSE:EQNR) is a Norwegian state owned oil company. The firm is currently seeking to increase the power of electricity generated by wind farms in the U.S.
By the end of June 2023, 13 out of the 910 hedge funds part of Insider Monkey’s database had bought Equinor ASA (NYSE:EQNR)’s shares. Peter Rathjens, Bruce Clarke, and John Campbell’s Arrowstreet Capital is the largest hedge fund stakeholder through a $265 million investment.
11. Bank of China Limited (SSE:601988.SS)
Trailing Twelve Month Net Income: $31.6 billion (1CNY = 0.14USD)
Trailing Annual Dividend Yield: 6.25%
Bank of China Limited (SSE:601988.SS) is a Chinese diversified bank with operations in several Chinese territories and other regions. Along with other banks, it is currently facing pressure from the Chinese government to offer easier mortgages to customers to jump start the country’s economy.
10. Chevron Corporation (NYSE:CVX)
Trailing Twelve Month Net Income: $35.5 billion
Trailing Annual Dividend Yield: 3.52%
Chevron Corporation (NYSE:CVX) is another oil giant. The firm is currently embroiled in worker strife in Australia, and the latest bit on this front is the workers’ decision to stop the strike for more negotiations. The stock is rated Buy on average and analysts have penned in a $20 upside.
As of June 2023, 73 hedge funds out of the 910 part of Insider Monkey’s research had invested in Chevron Corporation (NYSE:CVX). Warren Buffett’s Berkshire Hathaway is the company’s biggest shareholder due to its $19.3 billion stake.
9. Agricultural Bank of China Limited (SSE:601288.SS)
Trailing Twelve Month Net Income: $35.94 billion (1CNY = 0.14USD)
Trailing Annual Dividend Yield: 6.43%
Agricultural Bank of China Limited (SSE:601288.SS) is one of the biggest banks in the world with operations in most global financial capitals. It’s part of a group of Chinese mega banks that have extended support to Russian banks after U.S. sanctions due to the Ukraine war. This bid is part of China’s strategy to grow the Yen’s share in global currency trade and make it an alternative to the U.S. dollar.
8. JPMorgan Chase & Co. (NYSE:JPM)
Trailing Twelve Month Net Income: $37.6 billion
Trailing Annual Dividend Yield: 2.75%
JPMorgan Chase & Co. (NYSE:JPM) is the largest private bank in the world in terms of assets. Like Bank of America, high interest rates have also resulted in strong earnings for the bank, and these days it is part of a group of large companies that are eager to bring back workers to the office.
Insider Monkey scoured through 910 hedge fund portfolios for this year’s June quarter and discovered 106 JPMorgan Chase & Co. (NYSE:JPM) investors. Ken Fisher’s Fisher Asset Management is the largest hedge fund shareholder since it owns $1.3 billion worth of shares.
7. Shell plc (NYSE:SHEL)
Trailing Twelve Month Net Income: $42 billion
Trailing Annual Dividend Yield: 1.84%
Shell plc (NYSE:SHEL) is another oil giant. However, it has successfully diversified its business to an extent as it is also one of the biggest players in the liquefied natural gas (LNG) market. Shell plc (NYSE:SHEL) is currently evaluating to set up new LNG facilities in Africa as it expects strong demand for the fuel in the future.
During 2023’s second quarter, 43 out of the 910 hedge funds part of Insider Monkey’s database had bought Shell plc (NYSE:SHEL)’s shares. Out of these, the largest stakeholder is Ken Fisher’s Fisher Asset Management through its $1.3 billion investment.
6. China Construction Bank Corporation (SSE:601939.SS)
Trailing Twelve Month Net Income: $45.37 billion (1CNY = 0.14USD)
Trailing Annual Dividend Yield: 6.45%
China Construction Bank Corporation (SSE:601939.SS) is a Chinese mega bank that is one of the largest of its kind in the world. The firm’s profits for the first half of this year grew by 3% but its net interest margin dropped between March and June. It joins Apple Inc. (NASDAQ:AAPL), Microsoft Corporation (NASDAQ:MSFT), and Saudi Arabian Oil Company (TADAWUL:2222.SR) in our list of the most profitable dividend stocks.
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Disclosure: None. 16 Most Profitable Dividend Stocks is originally published on Insider Monkey.