10 Dividend Challengers for 2022

Published on April 25, 2022 at 10:29 am by Hamna Asim in Hedge Funds, News

In this article, we discuss 10 dividend challengers for 2022.

Dividend challengers are companies that offer five to nine years of consecutive dividend growth. While it may not seem like a significant period of increasing dividends, it identifies dividend growth stocks who have the potential for continuing rising payments to shareholders because of solid operations. These companies have strong underlying business fundamentals, but not the highest yields since these firms are still in the growth phase.

Dividend paying stocks are an important tool to protect money against inflation, which makes them appealing for investors, especially in the current macro environment. Inflation results in higher prices, which in turn increases the revenues, earnings, and dividends for most companies, especially when consumer income grows in-line with higher prices to negate the net impact.

While dividend challengers may not have a history of multiple years of dividend growth, they indicate a commitment of companies to increase shareholder returns. In a volatile market, investors protect their assets by diversifying their investment portfolios, and it is always an attractive idea to own stocks that pay you to hold them. The notable dividend aristocrats and dividend kings today all started out as dividend challengers at one point in time, which is why it is important for investors to closely note the operational and financial performance metrics of these companies.

Some of the most notable dividend stocks on the radar of institutional and retail investors alike include Johnson & Johnson (NYSE:JNJ), Altria Group, Inc. (NYSE:MO), and The Coca-Cola Company (NYSE:KO).

Source: PixaBay

Our Methodology

We selected companies that offer dividend growth of at least five years for the list of dividend challengers for 2022. Positive analyst ratings and strong hedge fund sentiment served as classifiers as well. Dividend yields as of April 22 are mentioned for each stock.

Dividend Challengers for 2022

10. Stifel Financial Corp. (NYSE:SF)

Number of Hedge Fund Holders: 23

Dividend Yield as of April 22: 1.86%

Number of Years of Consecutive Dividend Increases: 6

Stifel Financial Corp. (NYSE:SF) was founded in 1890 and is headquartered in St. Louis, Missouri. It operates as a financial services and bank holding company, offering asset management, financial services, investment banking, and investment management.

Stifel Financial Corp. (NYSE:SF) has consecutively increased its dividends for six years in a row, and the stock delivers a dividend yield of 1.86% as of April 22. The company announced on January 26 a $0.30 per share quarterly dividend, a 100% increase from its prior dividend of $0.15. The dividend was paid on March 15, t0 shareholders of record on March 1.

On March 30, Stifel Financial Corp. (NYSE:SF) announced that it will offer equity grants to about half of its employees, to eventually make all employees company shareholders. Approximately 4,200 current employees will receive one-time stocks worth $5,000 per person. All Stifel Financial Corp. (NYSE:SF) employees that qualify will eventually achieve equity ownership in the company with this program.

JMP Securities analyst Devin Ryan on January 27 maintained an Outperform rating on Stifel Financial Corp. (NYSE:SF) and raised the firm’s price target on the shares to $100 from $93. The analyst cited the company’s Q4 earnings beat, along with its comp ratio of 57.5% that came in above his 56.0% estimate.

According to Insider Monkey’s Q4 database, 23 hedge funds were bullish on Stifel Financial Corp. (NYSE:SF), compared to 20 funds in the earlier quarter. Israel Englander’s Millennium Management is the biggest stakeholder of the company, with 2.6 million shares worth $185.8 million.

In addition to Johnson & Johnson (NYSE:JNJ), Altria Group, Inc. (NYSE:MO), and The Coca-Cola Company (NYSE:KO), Stifel Financial Corp. (NYSE:SF) is a notable dividend stock to look out for.

9. Invitation Homes Inc. (NYSE:INVH)

Number of Hedge Fund Holders: 31

Dividend Yield as of April 22: 2.04%

Number of Years of Consecutive Dividend Increases: 5

Invitation Homes Inc. (NYSE:INVH) is a single-family home leasing company, based in Dallas, Texas. The company is one of the hottest names in the current housing market, and it has consistently increased its dividend payouts for the last five years. Invitation Homes Inc. (NYSE:INVH)’s dividend yield on April 22 stood at 2.04%.

Invitation Homes Inc. (NYSE:INVH) declared on April 22 a per share quarterly dividend of $0.22, in line with previous. The dividend is payable on May 27, to shareholders of the company at the close of business on May 10. The company’s cash and cash equivalents at the end of 2021 stood at $610.2 million, up from $213.4 million in the prior year. This indicates possible dividend increases in 2022, continuing the streak of rising dividends.

On April 20, Jefferies analyst Linda Tsai initiated coverage of Invitation Homes Inc. (NYSE:INVH) with a Buy rating and a $48 price target. The company has the potential for growth since it has amassed a notable share in a fragmented market, according to the analyst, who forecasts that Invitation Homes Inc. (NYSE:INVH) can increase core FFO per share at an average growth rate of 9.8% through FY24.

Among the hedge funds tracked by Insider Monkey, 31 funds held stakes in Invitation Homes Inc. (NYSE:INVH) at the end of the fourth quarter of 2021, worth $854.8 million, compared to 36 funds in the preceding quarter, holding stakes in the company valued at $824.5 million. Greg Poole’s Echo Street Capital Management is the biggest position holder in Invitation Homes Inc. (NYSE:INVH), with 4.3 million shares worth roughly $196 million.

Here is what Baron Real Estate Fund has to say about Invitation Homes Inc. (NYSE:INVH) in its Q1 2021 investor letter:

“The Fund also has investments in REITs that would benefit from this movement out of urban areas into suburban areas. We expect single-family rental REIT Invitation Homes, Inc. to benefit as more people opt for single-family home rentals rather than apartment rentals.”

8. Yum! Brands, Inc. (NYSE:YUM)

Number of Hedge Fund Holders: 36

Dividend Yield as of April 22: 1.86%

Number of Years of Consecutive Dividend Increases: 5

Yum! Brands, Inc. (NYSE:YUM) has a track record of increasing dividends for the last five years, which merits its inclusion in our list of 10 dividend challengers for 2022. Yum! Brands, Inc. (NYSE:YUM) franchises quick service restaurants globally, including brands like KFC, Pizza Hut, Taco Bell, and The Habit Burger Grill.

In 2021, Yum! Brands, Inc. (NYSE:YUM)’s revenue for the year came in at $6.5 billion, compared to $5.6 billion in the prior year. Yum! Brands, Inc. (NYSE:YUM)’s net income in 2021 stood at $1.5 billion, up from the 2020 net income of $904 million, reflecting an increase of 74.23%.

On February 7, Yum! Brands, Inc. (NYSE:YUM) declared a $0.57 per share quarterly dividend, a 14% increase from its prior dividend of $0.50. The dividend was distributed to shareholders on March 11. The company offers an attractive dividend payout ratio that lies between 40% to 45%.

Citi analyst Jon Tower initiated coverage of Yum! Brands, Inc. (NYSE:YUM) on April 12 with a Buy recommendation and a $156 price target. The analyst observed that the stock’s recent underperformance overstates the current risk to estimates given the company’s KFC Russia exposure.

According to Insider Monkey’s Q4 data, 36 hedge funds held long positions in Yum! Brands, Inc. (NYSE:YUM), collectively owning stakes worth $811.2 million, compared to 38 funds in the earlier quarter, holding stakes in Yum! Brands, Inc. (NYSE:YUM) amounting to $757.6 million. Alkeon Capital Management is the largest position holder in the company, with 2.30 million shares worth $320.75 million.

7. Sun Communities, Inc. (NYSE:SUI)

Number of Hedge Fund Holders: 37

Dividend Yield as of April 22: 1.88%

Number of Years of Consecutive Dividend Increases: 6

Sun Communities, Inc. (NYSE:SUI) is a US-based real estate investment trust that holds a portfolio of manufactured housing communities, recreational vehicle resorts, and marinas.

2022 marks the company’s sixth year of consecutive dividend growth. Sun Communities, Inc. (NYSE:SUI) declared on March 29 a $0.88 per share quarterly dividend, a 6% increase from its earlier dividend of $0.83. The dividend was distributed to shareholders on April 15.

On April 20, JMP Securities analyst Aaron Hecht initiated coverage of Sun Communities, Inc. (NYSE:SUI) with an Outperform rating and a $220 price target. The analyst expects Sun Communities, Inc. (NYSE:SUI)’s growth to generate “outsized value creation”. Based on market capitalization, it is the largest listed real estate investment trust in the United States that prioritizes leasing affordable living and recreational properties, the analyst told investors in a bullish thesis. He believes Sun Communities, Inc. (NYSE:SUI)’s asset classes are “ideally positioned to outperform in this environment”.

According to Insider Monkey’s Q4 data, 37 hedge funds placed long calls on Sun Communities, Inc. (NYSE:SUI), up from 33 funds in the preceding quarter. Jeffrey Furber’s AEW Capital Management is a significant stakeholder of the company, with 724,701 shares worth over $152 million.

Here is what ClearBridge Mid Cap Strategy has to say about Sun Communities, Inc. (NYSE:SUI) in its Q3 2021 investor letter:

“Our commitment to constantly improve the risk/reward of the portfolio kept us active during the third quarter in repositioning to capitalize on opportunities we have previously sourced and de-risked. We initiated a position in Sun Communities, a U.S. real estate investment trust (REIT) that specializes in investing in manufactured housing communities, recreational vehicle (RV) resorts and marinas. As the economy works through housing supply constraints, Sun’s manufactured housing communities are increasingly appealing to younger, lower income populations in prime growth locations through the Sun Belt. Additionally, Sun’s expanded RV park offerings have seen healthy demand from increasing numbers of retiring baby boomers purchasing RVs as well as greater numbers of road trips in the wake of COVID-19.”

6. Prologis, Inc. (NYSE:PLD)

Number of Hedge Fund Holders: 37

Dividend Yield as of April 22: 1.87%

Number of Years of Consecutive Dividend Increases: 9

Based in San Francisco, California, Prologis, Inc. (NYSE:PLD) is a real estate investment trust that primarily invests in industrial warehouses, serving customers across the business-to-business and retail/online fulfillment segments.

Prologis, Inc. (NYSE:PLD) has raised its dividends for 9 years in a row, making it a notable dividend challenger for 2022. On February 25, Prologis, Inc. (NYSE:PLD) announced a $0.79 per share quarterly dividend, a 25.4% increase from its prior dividend of $0.63. The dividend was paid to shareholders on March 31.

On April 19, the company posted its Q1 2022 results, reporting a FFO per share of $1.09, topping analysts’ consensus estimates by $0.02. The revenue of $1.22 billion climbed 6.1% year-over-year and exceeded Street forecasts by $130 million. Prologis, Inc. (NYSE:PLD) raised its 2022 guidance, announcing core per share FFO between $5.10 and $5.16, versus a consensus of $5.04. The stock gained 2.5% in pre-market trading after the results and positive 2022 outlook was published.

Deutsche Bank analyst Derek Johnston on April 22 lifted the firm’s price target on Prologis, Inc. (NYSE:PLD) to $184 from $179 and maintained a Buy rating on the shares. The analyst observed industry leading operating metrics across Prologis, Inc. (NYSE:PLD)’s Q1 results.

According to the fourth quarter database of Insider Monkey, 37 hedge funds held bullish positions in Prologis, Inc. (NYSE:PLD), compared to 32 funds in the earlier quarter. A significant shareholder of the company is Phill Gross and Robert Atchinson’s Adage Capital Management, with 818,419 shares worth $137.7 million.

One of the income stocks on the radar of elite investors is Prologis, Inc. (NYSE:PLD), just like Johnson & Johnson (NYSE:JNJ), Altria Group, Inc. (NYSE:MO), and The Coca-Cola Company (NYSE:KO).

Third Avenue Management mentioned Prologis, Inc. (NYSE:PLD) in one of its letters. Here is what they said about PLD in their Q1 2021 investor letter:

“Prologis, Inc. (a U.S.-based real estate investment trust that is the largest owner of modern logistic facilities with a platform that expands more than 950 million square feet of space in 19 countries globally) completing $2.0 billion USD of debt placements at a weighted average interest rate of 0.9% with an average term of more than 13 years. In the process, the company has further solidified one of the most compelling capital structures in the real estate industry with a prudent loan-to-value ratio of approximately 25% that primarily comprised fixed-rate debt at an average cost of 1.8% for a term that exceeds 10 years. As a result, the long-tenured management at Prologis (including one of the true leaders in the real estate space CEO Hamid Moghadam) have set up the company for what could be a very rewarding period ahead as incremental rental income and asset management fees seem likely to accrue disproportionately to shareholders on the “bottom-line” with its interest costs locked-in.”

5. DICK’S Sporting Goods, Inc. (NYSE:DKS)

Number of Hedge Fund Holders: 37

Dividend Yield as of April 22: 1.96%

Number of Years of Consecutive Dividend Increases: 8

DICK’S Sporting Goods, Inc. (NYSE:DKS) is a Pennsylvania-based sporting equipment retailer that caters to customers in the eastern United States. The company was incorporated in 1948 and operates more than 700 storefronts across the country.

On March 16, DICK’S Sporting Goods, Inc. (NYSE:DKS) declared a $0.4875 per share quarterly dividend, an 11.4% increase from its prior dividend of $0.4375. The dividend was paid to shareholders on March 25, and the company delivers a dividend yield of 1.96% as of April 22.

Barclays analyst Adrienne Yih on April 1 maintained an Overweight rating on DICK’S Sporting Goods, Inc. (NYSE:DKS) but lowered the firm’s price target on the shares to $134 from $147. He downgraded the retail sector to Neutral, citing cost inflation, uncertain demand and supply, and heightened operational risk. However, on April 13, Cleveland Research announced that its checks reflect store sales at DICK’S Sporting Goods, Inc. (NYSE:DKS) appear on track to surpass consensus estimates in Q1-to-date, due to solid trends in February. Margins also look strong because of resilient full-price demand, less markdowns, and promotions in the current quarter.

In the fourth quarter of 2021, 37 hedge funds reported owning stakes in DICK’S Sporting Goods, Inc. (NYSE:DKS) according to Insider Monkey’s records, collectively worth approximately $1.3 billion. Peter Rathjens, Bruce Clarke, and John Campbell’s Arrowstreet Capital held one of the prominent positions in the company, with 1.6 million shares valued at $191 million.

4. Kinder Morgan, Inc. (NYSE:KMI)

Number of Hedge Fund Holders: 39

Dividend Yield as of April 22: 5.80%

Number of Years of Consecutive Dividend Increases: 5

Kinder Morgan, Inc. (NYSE:KMI) is a Texas-based energy infrastructure company that functions via four segments – Natural Gas Pipelines, Products Pipelines, Terminals, and CO2. Kinder Morgan, Inc. (NYSE:KMI) is a significant dividend challenger to watch for 2022, with five years of consecutive dividend increases under its belt.

Reporting its financial results for the first quarter of 2022 on April 20, Kinder Morgan, Inc. (NYSE:KMI) announced earnings per share of $0.32, beating market consensus estimates by $0.04. Revenue for the period came in at $4.29 billion, exceeding analysts’ forecasts by $546.32 million.

On April 20, Kinder Morgan, Inc. (NYSE:KMI) declared a quarterly per share dividend of $0.2775, a 2.8% increase from its prior dividend of $0.27. The dividend is payable on May 16, to shareholders of the company at the close of business on May 2. Kinder Morgan, Inc. (NYSE:KMI)’s dividend yield as of April 22 stood at 5.80%.

Mizuho analyst Gabriel Moreen on April 21 maintained a Buy recommendation on Kinder Morgan, Inc. (NYSE:KMI) and raised the firm’s price target on the stock to $22 from $21. The company reported a strong quarter and announced its intention to pursue brownfield compression expansions on its two Permian natural gas takeaway pipelines, the analyst told investors in a research note.

Among the hedge funds tracked by Insider Monkey, 39 funds were bullish on Kinder Morgan, Inc. (NYSE:KMI) at the end of the fourth quarter of 2021, with combined stakes worth approximately $999 million. Bob Peck and Andy Raab’s FPR Partners held the leading position in the company, with 17.8 million shares valued at $282.7 million.

3. Mondelez International, Inc. (NASDAQ:MDLZ)

Number of Hedge Fund Holders: 40

Dividend Yield as of April 22: 2.15%

Number of Years of Consecutive Dividend Increases: 8

Mondelez International, Inc. (NASDAQ:MDLZ) is an American multinational company that markets and distributes confectionary products, beverages, and snack foods in Latin America, North America, Asia, the Middle East, Africa, and Europe. The company has consecutively increased its dividends for the last eight years.

In 2021, Mondelez International, Inc. (NASDAQ:MDLZ) reported a full-year revenue of $28.7 billion, compared to a revenue of $26.5 billion in the previous year. The $4.3 billion net income in 2021 grew about 21% from the $3.5 billion income in 2020.

On April 12, Credit Suisse analyst Robert Moskow reinstated coverage of Mondelez International, Inc. (NASDAQ:MDLZ) with an Outperform rating and a $70 price target. The analyst noted that roughly 40% of Mondelez International, Inc. (NASDAQ:MDLZ)’s sales are generated from developing markets, and it is the best-positioned company to benefit from global GDP growth. He expects profit pressure in Q1 to prove transitory and believes Mondelez International, Inc. (NASDAQ:MDLZ)’s Investor Day on May 10 will offer a positive catalyst.

Mondelez International, Inc. (NASDAQ:MDLZ) declared on February 3 a $0.35 per share quarterly dividend, in line with previous. The dividend was paid on April 14, to shareholders of the company on March 31. Mondelez International, Inc. (NASDAQ:MDLZ) delivers a dividend yield of 2.15% as of April 22.

A total of 40 hedge funds were bullish on Mondelez International, Inc. (NASDAQ:MDLZ) at the end of the fourth quarter of 2021, compared to 46 funds in the prior quarter. Ric Dillon’s Diamond Hill Capital is the biggest position holder in the company, with 9.2 million shares worth $611 million.

2. Dollar General Corporation (NYSE:DG)

Number of Hedge Fund Holders: 44

Dividend Yield as of April 22: 0.88%

Number of Years of Consecutive Dividend Increases: 8

Dollar General Corporation (NYSE:DG) is an American discount retailer that sells clothing, cleaning supplies, home decor, health and beauty aids, pet supplies, toys, seasonal items, and groceries. Dollar General Corporation (NYSE:DG) has a history of consistently raising its dividends for eight years.

On March 17, Dollar General Corporation (NYSE:DG) declared a $0.55 per share quarterly dividend, a 31% increase from its prior dividend of $0.42. The dividend was paid on April 19, to shareholders of the company as of April 5.

Deutsche Bank analyst Krisztina Katai on March 18 reiterated a Buy recommendation on Dollar General Corporation (NYSE:DG) and raised the firm’s price target on the shares to $242 from $230. The analyst noted that while the company’s Q4 results “were a bit softer”, with same-store sales and gross margin detracting, she is positive about the “constructive” 2022 outlook.

According to Insider Monkey’s Q4 data, 44 hedge funds held long positions in Dollar General Corporation (NYSE:DG), with collective stakes valued at $2.20 billion. Tim Hurd and Ed Magnus’ BlueSpruce Investments is the largest position holder in the company, with 2.70 million shares worth approximately $637 million.

Here is what LRT Capital Management has to say about Dollar General Corporation (NYSE:DG) in its Q3 2021 investor letter:

“Executive Summary

At LRT Capital Management we are continuously searching the market for great investment opportunities. Our favorite finds are companies with moats and growth opportunities that justify a higher price than what the stock is trading for. One of our holdings (approximately 1.5% of our long exposure) is Dollar General (DG), so today, we wanted to tell you a bit about this great company.

Company Overview

Dollar General is a discount retailer with the largest brick-and-mortar presence in the United States by store count. The company’s largest concentration of stores can be found in the southern, southwestern, midwestern, and eastern parts of the United States.10 Dollar General was founded in 1939 by J.L. Turner, who originally named the company “J.L. Turner and Son, Wholesale”. As the name suggests, the company began its life as a wholesaler, but quickly turned to a retailer of general store goods. By the early 1950s, the company had annual sales of $2 million per year,12 which is the equivalent of $22.95 million in 2021 dollars when adjusted for inflation.

The first Dollar General store opened on June 1st, 1955 in Springfield Kentucky. The simple concept was that no item in the store would cost more than one dollar. The company changed its name to Dollar General Corporation in 1968 when Dollar General became publicly traded. At the time of its initial public offering, the business generated more than $40 million in annual sales. The company’s common stock was publicly traded from 1968 until July 2007, when it was taken private by KKR. The company went public again in November 2009, under the ticker DG.

Today, Dollar General is an evolved, and phenomenal business with more room for growth. Annual sales reached a record $33.7 billion in fiscal year 2021 after consecutively growing the top line for many years. The company’s main products are every-day necessities and consumables purchased by lower income consumers on tight budgets…”

1. Thermo Fisher Scientific Inc. (NYSE:TMO)

Number of Hedge Fund Holders: 95

Dividend Yield as of April 22: 0.21%

Number of Years of Consecutive Dividend Increases: 5

Thermo Fisher Scientific Inc. (NYSE:TMO) is a Massachusetts-based company that provides life sciences solutions, analytical instruments, specialty diagnostics, and laboratory products and services worldwide. Thermo Fisher Scientific Inc. (NYSE:TMO) made it to our list of dividend challengers for 2022, with a history of increasing dividends consecutively for five years.

On February 23, Thermo Fisher Scientific Inc. (NYSE:TMO) declared a $0.30 per share quarterly dividend, a 15% increase from its earlier dividend of $0.26. The dividend was paid to shareholders of the company for April 14.

Thermo Fisher Scientific Inc. (NYSE:TMO) posted its Q4 2021 results on February 2, announcing earnings per share of $6.54, beating market consensus by $1.27. The $10.70 billion revenue outperformed analysts’ predictions by $1.45 billion.

On April 20, the company inaugurated its new high-tech production facility in Utah, to develop vaccines and targeted therapies. The $44 million facility is part of Thermo Fisher Scientific Inc. (NYSE:TMO)’s $650 million multi-year investment announced last year, to promote flexible, scalable, and dependable production of new and existing biologics and vaccines, including for COVID-19.

According to the fourth quarter database of Insider Monkey, 95 hedge funds were bullish on Thermo Fisher Scientific Inc. (NYSE:TMO), compared to 94 funds in the prior quarter. The total stakes held in Q4 amounted to $9.4 billion, up from $8.2 billion. Ken Fisher’s Fisher Asset Management is the biggest shareholder of the company, with a position worth $1.4 billion.

Here is what ClearBridge Investments Sustainability Leaders Strategy has to say about Thermo Fisher Scientific Inc. (NYSE:TMO) in its Q4 2021 investor letter:

“Improving health remains a key impact theme for the portfolio, and over the past year or so we have increased our exposure to the health care sector, through the addition of Thermo Fisher Scientific, a leading health care tools company, a leading provider of fertility benefit management services to self-insured employers that offers a rare win-win-win for employers, employees, health systems, and doctors, with clear savings and quality improvements.”

You can also take a look at 10 Blue Chip Stocks with Dividends and 10 Dividend Stocks Better Than Cryptocurrencies.

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10 Dividend Challengers for 2022

Published on April 25, 2022 at 10:29 am by Hamna Asim in Hedge Funds, News