In this article, we discuss the 10 best dividend stocks for steady growth.
Amid inflation fears and the expected increase in interest rates over the next few months, it might be a good idea for investors to shield their portfolios against some of these new developments by smart investments in the dividend sector. One of the major benefits of investments in this segment are lower taxes – short-term capital gains are taxed at around 25% while dividend income is taxed at around 15%. Over long time periods, dividend plays also outperform growth equities by quite a margin.
Since the yields of US Treasury Bonds are also hovering around 1.45%, below the average 3% inflation rate, it is prudent for investors to look towards dividend stocks as both an inflation hedge and a growth option for steady payouts. A Janus Henderson study projects that dividend payments to investors will reach over $1.3 trillion this year as global dividends jump by over 26% year-on-year. At the end of the second quarter, these payouts stood at around $470 billion.
Some of the best dividend stocks to buy now for steady growth include Altria Group, Inc. (NYSE:MO), Johnson & Johnson (NYSE:JNJ), The Procter & Gamble Company (NYSE:PG), The Coca-Cola Company (NYSE:KO), and Stanley Black & Decker, Inc. (NYSE:SWK), among others discussed in detail below. After the 2020 lows, 84% of companies around the world have increased their dividends or held them steady since June 2020, a testament to the post-pandemic economic recovery over the past few months.
Photo by Joshua Hoehne on Unsplash
Our Methodology
With this context in mind, here is our list of the 10 best dividend stocks for steady growth. The forward dividend yield and consecutive years of dividend growth for each stock are mentioned alongside other details for further clarity.
The list is compiled according to the number of hedge funds having stakes in each company. Data from the 873 funds tracked by Insider Monkey was used for this purpose.
Why pay attention to hedge fund holdings? Insider Monkey’s research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 86 percentage points since March 2017. Between March 2017 and July 2021 our monthly newsletter’s stock picks returned 186.1%, vs. 100.1% for the SPY. Our stock picks outperformed the market by more than 86 percentage points (see the details here). That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to. You can subscribe to our free newsletter on our homepage to receive our stories in your inbox.
Best Dividend Stocks For Steady Growth
10. Universal Corporation (NYSE:UVV)
Number of Hedge Fund Holders: 9
Consecutive Years of Dividend Growth: 50
Forward Dividend Yield: 6.43%
Last month, Universal Corporation (NYSE:UVV) had announced that it would acquire Shank’s Extracts, a specialty ingredients firm with packaging and bottling capabilities. Although the exact terms of the deal were not disclosed, it is expected that the new purchase will start contributing to the earnings of Universal by the first half of 2023. The Virginia-based firm has solid fundamentals. It reported a revenue of $350 million for the first quarter, up 10.8% year-on-year.
Universal Corporation (NYSE:UVV) was founded in 1886 and has a market cap of over $1.2 billion. It processes and sells different kinds of tobaccos, including flue-cured, burley, and oriental that are used to make cigars and other tobacco products.
Among the hedge funds being tracked by Insider Monkey, New York-based investment firm Pzena Investment Management is a leading shareholder in Universal Corporation (NYSE:UVV) with 850,482 shares worth more than $48 million.
9. National Fuel Gas Company (NYSE:NFG)
Number of Hedge Fund Holders: 12
Consecutive Years of Dividend Growth: 51
Forward Dividend Yield: 3.16%
National Fuel Gas Company (NYSE:NFG) pays a healthy and regular dividend to shareholders. Last month, the company declared a quarterly dividend of $0.455 per share, an increase of over 2% from the previous dividend of $0.445. Other financial indicators of the company are also positive. In the third fiscal quarter results, the company beat market expectations on earnings per share $0.11. The revenue over the period was $394 million, up 22% year-on-year.
Earlier this year, investment advisory Morgan Stanley had initiated coverage of National Fuel Gas Company (NYSE:NFG) stock with a Neutral rating and a price target of $51. Zach Parham, an analyst at the advisory, said the shares were “fairly valued”.
At the end of the second quarter of 2021, 12 hedge funds in the database of Insider Monkey held stakes worth $132 million in National Fuel Gas Company (NYSE:NFG), down from 16 in the previous quarter worth $92 million.
In addition to Altria Group, Inc. (NYSE:MO), Johnson & Johnson (NYSE:JNJ), The Procter & Gamble Company (NYSE:PG), The Coca-Cola Company (NYSE:KO), and Stanley Black & Decker, Inc. (NYSE:SWK), National Fuel Gas Company (NYSE:NFG) is one of the stocks attracting the attention of institutional investors.
In its Q1 2021 investor letter, Heartland Advisors, an asset management firm, highlighted a few stocks and National Fuel Gas Company (NYSE:NFG) was one of them. Here is what the fund said:
“The ho-hum Utilities sector isn’t typically a place to hunt for strong growth prospects. However, for investors willing to do their homework, opportunities do exist. Portfolio holding National Fuel Gas Company (NFG) is a prime example.
NFG is a dividend aristocrat—50 consecutive years of dividend increases. Although the business is lumped in with run-of-the-mill power companies, it is much more diverse. In addition to its utility operations, a pipeline and storage division produces almost a quarter of its profits, and the company generates nearly 40% of its bottom line from natural gas exploration and production.
Shares of NFG are trading at a mid-teens discount to their historic average based on price/book. Given the state of the energy industry over the past few years, we believe the company’s gas unit could be an overlooked source of growth. Additionally, the utility recently received regulatory approval on a natural gas pipeline expansion in Pennsylvania, which is expected to produce a windfall in free cash flow.”
8. H.B. Fuller Company (NYSE:FUL)
Number of Hedge Fund Holders: 12
Consecutive Years of Dividend Growth: 52
Forward Dividend Yield: 0.98%
H.B. Fuller Company (NYSE:FUL) is a specialty chemicals firm with an impressive dividend history stretching back over five decades. Late last month, the company declared a quarterly dividend of $0.1675 per share, in line with previous. The firm beat market expectations on revenue in the third fiscal quarter results by close to $30 million. It also raised guidance for the fiscal year, giving a further boost to the shares.
Deutsche Bank analyst David Begleiter had raised the price target on H.B. Fuller Company (NYSE:FUL) stock to $70 from $67 on September 27, maintaining a Hold rating. The target was raised following the release of the “solid” quarterly earnings report of the firm.
Among the hedge funds being tracked by Insider Monkey, New York-based investment firm P2 Capital Partners is a leading shareholder in H.B. Fuller Company (NYSE:FUL) with 1.3 million shares worth more than $86 million.
7. Tootsie Roll Industries, Inc. (NYSE:TR)
Number of Hedge Fund Holders: 12
Consecutive Years of Dividend Growth: 52
Forward Dividend Yield: 1.14%
Tootsie Roll Industries, Inc. (NYSE:TR) is a packaged food and meats company with solid fundamentals. It beat market expectations on earnings per share and revenue in the second quarter. Earlier this month, the company declared a quarterly dividend of $0.09 per share, in line with previous. The company is especially popular among retail investors who use internet platforms like Reddit to exchange investment ideas.
However, this popularity can often be a double-edged sword. Trading of Tootsie Roll Industries, Inc. (NYSE:TR) stock was temporarily halted earlier this year due to volatility. The firm has navigated these challenges well, not letting them affect earnings.
At the end of the second quarter of 2021, 12 hedge funds in the database of Insider Monkey held stakes worth $29 million in Tootsie Roll Industries, Inc. (NYSE:TR), down from 14 in the preceding quarter worth $34 million.
Altria Group, Inc. (NYSE:MO), Johnson & Johnson (NYSE:JNJ), The Procter & Gamble Company (NYSE:PG), The Coca-Cola Company (NYSE:KO), and Stanley Black & Decker, Inc. (NYSE:SWK) are some of the top dividend stocks for growth, just like Tootsie Roll Industries, Inc. (NYSE:TR).
6. Stepan Company (NYSE:SCL)
Number of Hedge Fund Holders: 14
Consecutive Years of Dividend Growth: 53
Forward Dividend Yield: 1.02%
Stepan Company (NYSE:SCL) is another specialty chemical company that features on our list of dividend stocks for steady growth. In July, the firm declared a quarterly dividend of $0.305 per share, in line with previous. The earnings results of the company also make for good reading. The firm reported a revenue of more than $595 million for the second quarter, up close to 30% from the revenue over the same period last year.
Stepan Company (NYSE:SCL) had announced in July that it would be raising $100 million through a notes offering, expected to be finished by September. The proceeds from the offering would be used to fund general corporate purposes.
At the end of the second quarter of 2021, 14 hedge funds in the database of Insider Monkey held stakes worth $23 million in Stepan Company (NYSE:SCL), up from 10 in the preceding quarter worth $28 million.
Altria Group, Inc. (NYSE:MO), Johnson & Johnson (NYSE:JNJ), The Procter & Gamble Company (NYSE:PG), The Coca-Cola Company (NYSE:KO), and Stanley Black & Decker, Inc. (NYSE:SWK) are some of the elite dividend stocks for growth, in addition to Stepan Company (NYSE:SCL).
In its Q2 2021 investor letter, LRT Capital Management, an asset management firm, highlighted a few stocks and Stepan Company (NYSE:SCL) was one of them. Here is what the fund said:
“Stepan is an under-the-radar company with a market capitalization of approximately $3.0b.48 The company is engaged in the manufacturing of specialty chemicals, primarily for the cleaning industry. The company’s products are the principal ingredients in consumer and industrial cleaning products such as washing detergents, as well as shampoos, body washes, and fabric softeners. The company’s specialty products include emulsifiers, food stabilizers, flavorings, and nutritional supplements.
Don’t let the dullness of the company’s products fool you. While Stepan operates in a commoditized industry, the company has been an efficient operator and has been able to expand margins over time. What looks on the surface like a cyclical, commoditized business is in fact a very resilient provider of key inputs to daily necessities such as body and household cleaning products. Due to its resilience through different economic cycles, Stepan has been able to increase its annual dividend for 54 years in a row. What’s more, payouts to shareholders did not come at the expense of reinvesting in the business. The company has grown earnings-per-share by a factor of 5x over the last two decades while maintaining returns on invested capital in the mid-teens.
Shares are -0.67% year-to-date and +9.68% over the past twelve months.”
5. Black Hills Corporation (NYSE:BKH)
Number of Hedge Fund Holders: 14
Consecutive Years of Dividend Growth: 51
Forward Dividend Yield: 3.50%
Mizuho analyst Paul Fremont recently raised the price target on Black Hills Corporation (NYSE:BKH) stock to $67 from $60 and reiterated a Neutral rating, noting that “constructive outcomes” were expected from the general rates cases the firm was involved in. In late August, the company had priced a $600 million debt offering to repay outstanding loans and fund general corporate purposes.
Black Hills Corporation (NYSE:BKH) had earlier beat market expectations on earnings per share by $0.01 in the second quarter results, reporting $372 million in revenue over the period, up more than 14% year-on-year.
At the end of the second quarter of 2021, 14 hedge funds in the database of Insider Monkey held stakes worth $62 million in Black Hills Corporation (NYSE:BKH), down from 18 the preceding quarter worth $89 million.
4. Federal Realty Investment Trust (NYSE:FRT)
Number of Hedge Fund Holders: 16
Consecutive Years of Dividend Growth: 54
Forward Dividend Yield: 3.46%
Last month, Federal Realty Investment Trust (NYSE:FRT) purchased Fairfax, a shopping center in Virginia, for $34 million in cash. The firm said it expected to increase the value of the property over time by remerchandising and capital investments. The company pays a regular and healthy dividend. In early August, it declared a quarterly dividend of $1.07 per share, an increase of close to 1% from the previous dividend of $1.06 per share.
Deutsche Bank analyst Derek Johnston had raised the price target on Federal Realty Investment Trust (NYSE:FRT) stock to $140 from $129 earlier this month, reiterating a Buy rating on the shares.
Among the hedge funds being tracked by Insider Monkey, Boston-based investment firm AEW Capital Management is a leading shareholder in Federal Realty Investment Trust (NYSE:FRT) with 374,347 shares worth more than $43 million.
3. Sysco Corporation (NYSE:SYY)
Number of Hedge Fund Holders: 40
Consecutive Years of Dividend Growth: 51
Forward Dividend Yield: 2.31%
Sysco Corporation (NYSE:SYY) is a food distributor with solid fundamentals. It beat market predictions on earnings per share and revenue in the fourth fiscal quarter results. The share price of the firm has soared since the results were announced since the company has positioned itself well for inflation fears, striking a positive tone on the subject that has buoyed investor interest in the stock.
On July 29, investment advisory UBS initiated coverage of Sysco Corporation (NYSE:SYY) stock with a Buy rating and a price target of $89. Analyst Mark Carden touted the balance sheet strength and the strategic initiatives of the firm as some of the reasons behind the bullish view.
Among the hedge funds being tracked by Insider Monkey, New York-based investment firm Trian Partners is a leading shareholder in Sysco Corporation (NYSE:SYY) with 17.8 million shares worth more than $1.3 billion.
2. Stanley Black & Decker, Inc. (NYSE:SWK)
Number of Hedge Fund Holders: 44
Consecutive Years of Dividend Growth: 54
Forward Dividend Yield: 1.74%
Stanley Black & Decker, Inc. (NYSE:SWK) is one of the most popular industrial stocks in the United States and has fundamentals that match the name it has built for itself over the years. The company beat market expectations on earnings per share and revenue in the second quarter by $0.19 and $70 million respectively. It also declared a quarterly dividend of $0.79 per share in July, an increase of close to 13% from the previous dividend of $0.70 per share.
Wells Fargo analyst Joseph O’Dea initiated coverage of Stanley Black & Decker, Inc. (NYSE:SWK) stock with an Overweight rating and a price target of $227 earlier this month, noting the stock had “compelling value”.
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 $211 million.
1. Altria Group, Inc. (NYSE:MO)
Number of Hedge Fund Holders: 47
Consecutive Years of Dividend Growth: 51
Forward Dividend Yield: 7.48%
Jefferies analyst Owen Bennett kept a Buy rating on Altria Group, Inc. (NYSE:MO) stock on October 19 with a price target of $55 ahead of the expected third quarter earnings report of the firm. According to a forecast by Bank of America, the company will beat market expectations on earnings. In late August, the firm had declared a quarterly dividend of $0.90 per share, up 5% from the previous dividend of $0.86 per share.
Altria Group, Inc. (NYSE:MO) was founded in 1822 and markets tobacco products. It has over 7,000 employees and is headquartered in Virginia. The firm has a market cap of over $89 billion and posted more than $20 billion in revenue last year.
At the end of the second quarter of 2021, 47 hedge funds in the database of Insider Monkey held stakes worth $948 million in Altria Group, Inc. (NYSE:MO), up from 38 in the previous quarter worth $1.1 billion.
In its Q2 2021 investor letter, Broyhill Asset Management, an asset management firm, highlighted a few stocks and Altria Group, Inc. (NYSE:MO) was one of them. Here is what the fund said:
“Altria (MO) shook off the prospects of a ban on menthol and a potential cap on nicotine and gained 20%. We shared our thoughts on these regulations during the quarter, which are available here.
MO Valuation. MO is up ~ 18% YTD (even accounting for the recent sell-off). We expect MO to generate close to $5 in annual FCF per share over the next few years, putting the stock at ~ 10x, which is less than half the market’s multiple today. Over the last decade, shares have traded at an average multiple of 15x and within a range of ~ 10x – 20x (+/-1 standard deviation). The stock yields 7.2% at the current price, close to a 6% premium to treasuries. Historically, shares have traded closer to a 3% premium to the 10Y, which would imply a ~ $75 share price.”
You can also take a peek at Forget Tesla (TSLA): 10 Cheap EV Stocks to Buy Now and 15 Best Consumer Discretionary Stocks to Buy Now.
Follow Insider Monkey on Twitter
Suggested Articles:
- 10 Utilities Stocks with Over 3% Dividend Yield
- 10 Communication Services Stocks that Pay Dividends
- 10 Best Stocks to Invest In According to Philip Timon’s Owls Nest Partners
Disclosure. None. 10 Best Dividend Stocks For Steady Growth is originally published on Insider Monkey.
