In this article, we discuss the 10 best dividend stocks for college students.
As the mania around cryptocurrencies and high-growth stocks consumes the younger generation, it might be a good idea to teach college students about the prudence of value investing and the benefits that a well-thought dividend portfolio offers in the long-term. This is demonstrated by the performance of the Dow Jones Industrial Average in the past six or seven decades. Between 1966 and 1982, the index, which comprises 30 prominent companies with stable revenues, made no net progress. Since then, it has grown over 1,800%.
Over the past decade or so, the returns of the index have slightly beaten the overall returns of the growth-heavy S&P 500 benchmark. The debates around capital gains and dividend increases, the two hallmarks of growth versus value offerings, in the past few months are also slightly favoring the value side as inflation wreaks havoc with the economy, wiping out billions in high-growth investments. College students are starting to realize that diversification is as important to a portfolio as finding the next tech unicorn.
In this context, some of the top dividend stocks to buy for college students include Johnson & Johnson (NYSE:JNJ), The Coca-Cola Company (NYSE:KO), and The Procter & Gamble Company (NYSE:PG), among others discussed in detail below. The rise of stock trading applications over the past few years, most of which charge little to no fees, has made it even easier for college students to begin a value-focused portfolio, reducing brokerage costs and increasing the chances of returns climbing into double digits.
Value Investing Trends Amid Rising Inflation
There is also a general need to bust myths around dividend stocks and value investing that discourage college students from this sector of the market. For example, even though the S&P 500 is growth-heavy, the digital reshaping of the economy is starting to give rise to a new kind of stock: the growth dividend play. A study by investment bank Goldman Sachs reveals that the overall dividend payouts of companies on the benchmark index will increase 6% in 2022. In 2021, more than half of all companies that halted dividend payouts because of the virus crisis resumed these payments and some even posted small increases towards the end of the year.
Data from Dow Jones Indices indicates that between June and September 2021, there were 568 common dividend increases reported by companies on the S&P 500, up 130% year-on-year. Another indicator of the market tilt towards dividend stocks is the net inflows into dividend ETFs. At the end of July 2021, the net inflows into dividend ETFs were $25 billion, up from $1.8 billion worth of net inflows in dividend ETFs at the end of July 2020. Rising interest rates will serve to further increase interest in stable, dividend-paying businesses.
Market statistics also indicate that as growth stocks undergo a period of correction, their value counterparts are performing better than ever. As per a report in the Financial Times, between September 2020 through to April 2021, the Russell 1000 Value Index gained more than 31%, compared to the 14% return of the growth counterpart during the same time period. College students who are just beginning to invest should carefully consider these stats and make informed choices that are likely to offer them solid returns in the long-term.
Our Methodology
For college students, budget, growth potential, and steady payouts are some of the most important factors to take into consideration before investing in stocks. Companies that are trading at cheap prices but have growth potential moving forward, and also offer the solidity of steady dividend payouts, offer college students all they need to begin their adventure at the market. Hence, the companies that have sound business fundamentals and positive analyst ratings were selected for the list. Hedge fund sentiment was included as a classifier as well. Data from around 900 elite hedge funds tracked by Insider Monkey was used to identify the number of hedge funds that hold stakes in each firm.
Photo by Adam Nowakowski on Unsplash
Best Dividend Stocks for College Students
10. Genuine Parts Company (NYSE:GPC)
Number of Hedge Fund Holders: 29
Genuine Parts Company (NYSE:GPC) deals in automotive and industrial parts. The hedge fund sentiment around the stock is largely positive. At the end of the fourth quarter of 2021, 29 hedge funds in the database of Insider Monkey held stakes worth $632 million in Genuine Parts Company (NYSE:GPC), up from 28 in the preceding quarter worth $469 million.
Genuine Parts Company (NYSE:GPC) has an impressive dividend history with more than six decades of consecutive growth. On February 14, the company declared a quarterly dividend of $0.895 per share, an increase of 10% from the previous dividend of $0.815 per share.
Just like Johnson & Johnson (NYSE:JNJ), The Coca-Cola Company (NYSE:KO), and The Procter & Gamble Company (NYSE:PG), Genuine Parts Company (NYSE:GPC) is one of the stocks on the radar of elite investors.
Here is what Amana Mutual Funds Trust has to say about Genuine Parts Company (NYSE:GPC) in its Q1 2020 investor letter:
“Genuine Parts Company (NYSE:GPC) presents something of a conundrum. As a supplier of replacement automotive parts, the decline in new car sales would be good. On the other hand, people aren’t driving nearly as much.”
9. Illinois Tool Works Inc. (NYSE:ITW)
Number of Hedge Fund Holders: 29
Illinois Tool Works Inc. (NYSE:ITW) markets industrial products and equipment. The company posted earnings for the fourth quarter of 2021 in early February, reporting earnings per share of $1.93, beating estimates by $0.03. The revenue over the period was $3.7 billion, up 5.7% year-on-year.
Elite hedge funds hold large stakes in Illinois Tool Works Inc. (NYSE:ITW). At the end of the fourth quarter of 2021, 29 hedge funds in the database of Insider Monkey held stakes worth $408 million in Illinois Tool Works Inc. (NYSE:ITW), compared to 39 the preceding quarter worth $422 million.
8. 3M Company (NYSE:MMM)
Number of Hedge Fund Holders: 41
3M Company (NYSE:MMM) is a diversified technology company. Major hedge funds hold bullish positions in the stock. Among the hedge funds being tracked by Insider Monkey, Washington-based firm Fisher Asset Management is a leading shareholder in 3M Company (NYSE:MMM) with 5.7 million shares worth more than $1 billion.
On February 15, Wells Fargo analyst Joseph O’Dea kept an Equal Weight rating on 3M Company (NYSE:MMM) stock with a price target of $173, noting that the margins of the firm would be pressured in 2022 based on respirator headwinds.
7. Stanley Black & Decker, Inc. (NYSE:SWK)
Number of Hedge Fund Holders: 42
Stanley Black & Decker, Inc. (NYSE:SWK) markets tools and storage for industrial users. The company has posted over five decades of consecutive growth in dividend payouts. On February 16, the firm declared a quarterly dividend of $0.79 per share, in line with previous. The forward yield was 1.89%.
Stanley Black & Decker, Inc. (NYSE:SWK) is one of the favorite hardware stocks on Wall Street. Among the hedge funds being tracked by Insider Monkey, New York-based investment firm Pzena Investment Management is a leading shareholder in Stanley Black & Decker, Inc. (NYSE:SWK) with 1 million shares worth more than $190 million.
Here is what Saturna Capital has to say about Stanley Black & Decker, Inc. (NYSE:SWK) in its Q3 2021 investor letter:
“Stanley Black & Decker, Inc. (NYSE:SWK) performed well through the first part of the year but struggled over the summer. China accounts for much of its production, and their zero-tolerance approach to pandemic safety measures has led to disruption, compounded by shipping difficulties and rising materials expenses. We still believe one outcome of the pandemic will be a buoyant home improvement market, given that one never knows when the next pandemic lockdown may occur.”
6. Emerson Electric Co. (NYSE:EMR)
Number of Hedge Fund Holders: 43
Emerson Electric Co. (NYSE:EMR) markets electrical components and equipment. Elite hedge funds have large stakes in the company. Among the hedge funds being tracked by Insider Monkey, New York-based firm Millennium Management is a leading shareholder in Emerson Electric Co. (NYSE:EMR) with 2.1 million shares worth more than $200 million.
On March 9, Oppenheimer analyst Christopher Glynn upgraded Emerson Electric Co. (NYSE:EMR) to Outperform from Perform with a price target of $110, highlighting that the shares of the firm had “excellent persistent capital preservation characteristics”.
In addition to Johnson & Johnson (NYSE:JNJ), The Coca-Cola Company (NYSE:KO), and The Procter & Gamble Company (NYSE:PG), Emerson Electric Co. (NYSE:EMR) is one of the stocks that value investors are buying.
5. Colgate-Palmolive Company (NYSE:CL)
Number of Hedge Fund Holders: 48
Colgate-Palmolive Company (NYSE:CL) makes and sells consumer products. Elite hedge funds are bullish on the stock. Among the hedge funds being tracked by Insider Monkey, New York-based investment firm First Eagle Investment Management is a leading shareholder in Colgate-Palmolive Company (NYSE:CL) with 11.5 million shares worth more than $988 million.
On January 31, Credit Suisse analyst Kaumil Gajrawala kept an Outperform rating on Colgate-Palmolive Company (NYSE:CL) stock with a price target of $90. The company has registered close to two decades of consecutive growth in dividend payments.
Here is what First Eagle Investment Management has to say about Colgate-Palmolive Company (NYSE:CL) in its Q1 2021 investor letter:
“The leading detractors in the quarter (included) Colgate-Palmolive Company. After a strong 2020 fueled in part by lockdown-driven demand, consumer staples stocks generally cooled during the first quarter as investors shifted attention to the more economically sensitive areas of the market likely to benefit from re-openings and improved discretionary spending. The effects of this rotation could be seen in the share price underperformance of names like Colgate-Palmolive.”
4. Becton, Dickinson and Company (NYSE:BDX)
Number of Hedge Fund Holders: 54
Becton, Dickinson and Company (NYSE:BDX) makes and sells medical supplies. On March 18, Raymond James analyst Jayson Bedford assumed coverage of the stock with a Market Perform rating, underlining that the firm was capable of sustainable 5% revenue growth and should be able to generate 10% earnings growth annually.
Hedge funds have been piling into Becton, Dickinson and Company (NYSE:BDX) stock in recent months. At the end of the fourth quarter of 2021, 54 hedge funds in the database of Insider Monkey held stakes worth $2.8 billion in Becton, Dickinson and Company (NYSE:BDX), up from 51 the preceding quarter worth $2.3 billion.
In its Q2 2021 investor letter, Madison Funds, an asset management firm, highlighted a few stocks and Becton, Dickinson and Company (NYSE:BDX) was one of them. Here is what the fund said:
“Becton, Dickinson and Company (“BD”) is one of the world’s largest medical supply, devices, laboratory equipment, and diagnostic products manufacturers. We like BD because it is a leader in the medical and life science industries with a durable mid-single digit growth profile and attractive returns on capital. They generate about 85% of revenue from consumables and 15% from equipment, and each year, they manufacture billions of needles, syringes, catheters, tubes, and medical devices which results in significant economies of scale that can be matched by few competitors. Their Life Sciences segment produces products that provide diversity in the steadily growing diagnostic testing and life sciences research fields.
Regarding the short-term issues, it’s been a challenging past 18 months for the company. In February 2020, they announced the FDA required an updated 510(k) clearance for their Alaris infusion pump. As a result, BD had to suspend selling new pumps until the updated regulatory filing received FDA clearance. In addition to the regulatory headwind, BD’s business was negatively impacted by the COVID-19 pandemic as individuals postponed doctor office visits and hospitals deferred non-emergency medical procedures. We believe these postponements are just now normalizing. Lastly, while BD’s Life Sciences business swiftly brought COVID-19 tests to market, there is uncertainty over the magnitude and duration of these revenues.
We believe these..”[read the entire letter here]
3. The Procter & Gamble Company (NYSE:PG)
Number of Hedge Fund Holders: 67
The Procter & Gamble Company (NYSE:PG) markets branded consumer packaged goods. It is one of the top consumer goods stocks in the finance world. Among the hedge funds being tracked by Insider Monkey, London-based investment firm Cedar Rock Capital is a leading shareholder in The Procter & Gamble Company (NYSE:PG) with 6 million shares worth more than $985 million.
On March 22, Truist analyst Bill Chappell upgraded The Procter & Gamble Company (NYSE:PG) stock to Buy from Hold and raised the price target to $175 from $165, noting that the product superiority and the trusted brand name would help the company stand out among peers in the marketplace in the coming months.
2. The Coca-Cola Company (NYSE:KO)
Number of Hedge Fund Holders: 70
The Coca-Cola Company (NYSE:KO) is a beverage company. The company has a stellar dividend history with over five decades of consecutive dividend growth. On February 17, the company declared a quarterly dividend of $0.44 per share, an increase of close to 5% from the previous dividend of $0.42 per share.
Major hedge funds hold large stakes in The Coca-Cola Company (NYSE:KO). Among the hedge funds being tracked by Insider Monkey, Nebraska-based firm Berkshire Hathaway is a leading shareholder in The Coca-Cola Company (NYSE:KO) with 400 million shares worth more than $23 billion.
1. Johnson & Johnson (NYSE:JNJ)
Number of Hedge Fund Holders: 83
Johnson & Johnson (NYSE:JNJ) makes and sells health care products. It is one of the top health stocks in the hedge fund universe. At the end of the fourth quarter of 2021, 83 hedge funds in the database of Insider Monkey held stakes worth $7.3 billion in Johnson & Johnson (NYSE:JNJ), compared to 88 in the previous quarter worth $6.8 billion.
On January 26, Raymond James analyst Jayson Bedford kept an Outperform rating on Johnson & Johnson (NYSE:JNJ) stock and raised the price target to $185 from $178, noting the stock felt “safe” given an attractive valuation and a more active capital deployment program in place.
You can also take a peek at 10 Best Medical Stocks Under $10 and 15 Best Warren Buffett Stocks to Buy Now.
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Disclosure. None. 10 Best Dividend Stocks for College Students is originally published on Insider Monkey.
