In this article, we discuss 10 dividend stocks that analysts are recommending.
Dividends are considered to be a comfortable stream of income or a cushion against financial distress by many investors. Dividends are extremely important to the stock market’s total return, representing roughly 40% of the total returns since 1930.
Dividends not only stabilize the performance of stocks and reduce overall volatility, but companies with consistent dividend payments have been known to outperform the overall market during periods of high inflation.
Due to the COVID-19 pandemic, dividend stocks took a dive, and companies slashed or lowered their dividend payments as a result of losses, reduced margins, and highly impacted revenues. However, 2021 saw an increase in dividend payouts, with analysts forecasting the total dividends paid in 2021 reaching $1.4 trillion, closer to pre-pandemic levels.
Some notable dividend stocks currently recommended by analysts include PepsiCo, Inc. (NASDAQ:PEP), The Coca-Cola Company (NYSE:KO), and Chevron Corporation (NYSE:CVX).
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Our Methodology
We selected dividend stocks that recently received positive ratings from market analysts. For each stock we have mentioned these ratings, along with hedge fund sentiment and other important metrics to gauge the strength of these stocks.
Analysts Are Recommending These Dividend Stocks
10. Air Products and Chemicals, Inc. (NYSE:APD)
Dividend Yield as of January 14: 2.06%
Number of Hedge Fund Holders: 32
Air Products and Chemicals, Inc. (NYSE:APD) is an American company headquartered in Pennsylvania, supplying natural gasses and chemicals for multiple industrial applications. Air Products and Chemicals, Inc. offers a 2.06% yield as of January 14, with 39 successive years of dividend growth.
On November 18, Air Products and Chemicals, Inc. declared a quarterly per share dividend of $1.50, in line with previous. The dividend will be paid on February 14 to shareholders of record on January 3. The company increased the quarterly dividend by 12% to $1.50 per share in 2021.
Air Products and Chemicals, Inc. announced on November 18 that it has signed a $15 billion deal with the Indonesian government to develop a coal gasification industry in the country. Air Products and Chemicals, Inc. has signed this agreement for the long-term, and will convert coal into highly valued chemical products.
Kevin McCarthy, an analyst from the investment advisory named Vertical Research, upgraded Air Products and Chemicals, Inc. to Buy from Hold with a $335 price target on January 4.
Among the hedge funds tracked by Insider Monkey, 32 funds reported owning stakes totaling $528.7 million in Air Products and Chemicals, Inc. in the third quarter of 2021, as compared to 40 funds holding stakes worth $456.4 million in Air Products and Chemicals, Inc. in the prior quarter. Adage Capital Management is the leading stakeholder of the company as of Q3 2021, with 351,940 shares worth $90.1 million.
In addition to PepsiCo, Inc., The Coca-Cola Company, and Chevron Corporation, analysts are recommending Air Products and Chemicals, Inc..
9. PepsiCo, Inc. (NASDAQ:PEP)
Dividend Yield as of January 14: 2.45%
Number of Hedge Fund Holders: 61
PepsiCo, Inc. is an American multinational food, snack, and beverage corporation that has been consistently delivering dividend growth for 49 years. As of January 14, PepsiCo, Inc. offers a dividend yield of 2.45%.
Argus analyst John Staszak raised the price target on PepsiCo, Inc. to $195 from $180 and kept a Buy rating on the shares on January 4, stating that PepsiCo, Inc. is a well-managed company with a strong brand portfolio, and continues to display growth potential in the company years.
PepsiCo, Inc. declared a $1.075 dividend per share on November 18, which was paid January 7 to shareholders of record on December 3. As of September 2021, PepsiCo, Inc. distributes approximately 68.8% of its net income to shareholders.
A total of 61 hedge funds monitored by Insider Monkey were bullish on PepsiCo, Inc. in the third quarter, with stakes equaling $4.4 billion. This is compared to 66 funds holding stakes worth $5.1 billion in PepsiCo, Inc. in the preceding quarter.
In an effort to reduce its carbon footprint, PepsiCo, Inc. announced on November 8 that it is replacing its fleet with Tesla, Inc. (NASDAQ:TSLA) trucks as of the third quarter of 2021.
Terry Smith’s Fundsmith LLP is the leading PepsiCo, Inc. stakeholder, holding more than 10 million shares of the company, worth $1.5 billion.
8. The Coca-Cola Company (NYSE:KO)
Dividend Yield as of January 14: 2.74%
Number of Hedge Fund Holders: 61
The Coca-Cola Company is an American multinational beverage corporation, with a portfolio of non-alcoholic and alcoholic drinks. The Coca-Cola Company offers a dividend yield of 2.74% as of January 14, and has been increasing dividends for 59 years.
Guggenheim analyst Laurent Grandet on January 4 upgraded The Coca-Cola Company to Buy from Neutral with a price target of $66, up from $61. The company is exiting the fiscal 2021 transition year “stronger”, the valuation is “compelling” at current share levels, and the analyst sees 12% annual earnings growth through fiscal 2023.
Among the hedge funds tracked by Insider Monkey in Q3 2021, Berkshire Hathaway is the leading stakeholder of The Coca-Cola Company, with 400 million shares worth approximately $21 billion. Overall, 61 hedge funds were long The Coca-Cola Company in the third quarter of 2021.
7. Merck & Co., Inc. (NYSE:MRK)
Dividend Yield as of January 14: 3.39%
Number of Hedge Fund Holders: 77
Merck & Co., Inc. is a multinational American pharmaceutical company that manufactures drugs, holds clinical trials, and conducts extensive research for therapeutic focus areas including oncology, infectious diseases, and cardio-metabolic disorders.
Like PepsiCo, Inc., The Coca-Cola Company and Chevron Corporation, Merck has a strong dividend history.
Goldman Sachs analyst Chris Shibutani on December 17 initiated coverage of Merck & Co., Inc. with a Buy rating and a $93 price target, adding the stock to the firm’s Conviction List, with the price target implying 22% upside from current levels. The analyst noted that the market is undervaluing the outlook for several of Merck & Co., Inc.’s assets.
Merck & Co., Inc.’s COVID-19 pill received FDA approval for emergency use, and the company reported on December 23 that it has entered into supply agreements with the governments of over 30 countries, including Australia, Canada, Korea, Japan, Thailand, the United Kingdom, and the United States, pending regulatory authorizations, and is currently in contact with additional governments. This announcement also attracted a Buy rating for Merck & Co., Inc. on December 23 by Mizuho analyst Mara Goldstein, who kept a $100 price target on the shares.
In the third quarter of 2021, 77 hedge funds were long Merck & Co., Inc., with stakes totaling $4.55 billion. Billionaire Ken Fisher’s Fisher Asset Management is the largest Merck & Co., Inc. stakeholder, with 10.6 million shares worth $798.6 million.
Here is what Miller Howard Investments has to say about Merck & Co., Inc. in its Q3 2021 investor letter:
“While optimistic about a recovery, we continue to balance our cyclical holdings with dividend-payers in stable, less economically-sensitive industries. We hold three pharmaceutical companies, (which includes) Merck (MRK). All three have strong cash flows and balance sheets, making their high dividends reasonably safe. The investment controversy surrounding these pharma companies is whether they can develop or acquire new products to replace their current blockbuster drugs. The low valuations on these stocks reflects what we believe to be undue pessimism by investors on the prospects for new drugs.”
6. Amcor plc (NYSE:AMCR)
Dividend Yield as of January 14: 3.88%
Number of Hedge Fund Holders: 19
Amcor plc (NYSE:AMCR) is a Zurich-based global packaging company that manufactures specialty cartons, containers, and flexible packaging, among other packaging solutions for food, beverage, pharmaceutical, and healthcare products.
BofA analyst George Staphos double upgraded Amcor plc (NYSE:AMCR) to Buy from Underperform with a $13.20 price target on December 15. Dividend stocks are well positioned for a market in which the yield curve is flattening, and Amcor plc (NYSE:AMCR) should benefit from lower resin costs and “slow and steady growth”, according to the analyst.
A total of 19 hedge funds were long Amcor plc (NYSE:AMCR) in the third quarter of 2021, up from 16 funds in the preceding quarter. Bernard Horn’s Polaris Capital Management is the largest Amcor plc (NYSE:AMCR) stakeholder, with 13.2 million shares worth $153.9 million.
Amcor plc (NYSE:AMCR) is a buy-rated dividend stock according to analysts, just like PepsiCo, Inc., The Coca-Cola Company, and Chevron Corporation.
5. Chevron Corporation (NYSE:CVX)
Dividend Yield as of January 14: 4.16%
Number of Hedge Fund Holders: 51
Chevron Corporation is an American multinational energy company, distributing gasoline, natural gas, and petrochemicals worldwide. Chevron Corporation is a popular stock among the smart money. The Q3 database of Insider Monkey suggested that 51 hedge funds held stakes in Chevron Corporation, worth $4.4 billion.
On January 14, Truist analyst Neal Dingmann raised the price target on Chevron Corporation to $167 from $150 and kept a Buy rating on the shares as part of a broader research note on the exploration and production group. The analyst stated that companies dealing primarily in oil have been assigned higher price targets as he increases his 2022 oil price estimates by roughly 10% and his 2023 deck by about 8%.
Chevron Corporation declared on October 18 a quarterly dividend of $1.34 per share, which was paid on December 10 to shareholders of record on November 18. The company offers a solid dividend payout ratio of 62.40%, and has been successively increasing its dividend yield for 34 years.
Consistent with its track record of returning excess cash to shareholders, Chevron Corporation on December 1 announced that it is raising its share buyback guidance range to $3 billion-$5 billion per year, as compared to the prior guidance of $2 billion-$3 billion per year.
Ric Dillon’s Diamond Hill Capital is the biggest Chevron Corporation stakeholder, with the hedge fund holding 5.1 million shares of the company, worth $523.8 million.
Here is what Goehring & Rozencwajg Associates has to say about Chevron Corporation in its Q3 2021 investor letter:
“After successfully replacing 25% of Exxon’s board of directors despite owning just 0.02% of the outstanding equity, Engine No. 1, the climate-focused activist hedge fund, met with Chevron’s management late last summer. In discussions that were later described as “cordial,” Chevron executives shared their plan to reduce carbon emissions. Subsequently, Chevron announced new plans to further reduce carbon output, along with their intention to appoint a new director with “environmental expertise.” Although it remains unclear exactly what Engine No. 1 is planning, rumors suggest the fund has contacted other investors, strongly suggesting they intend to launch a second campaign in the not-too-distant future.
What should Chevron expect?
It was recently reported by The Wall Street Journal that Exxon was considering abandoning two massive natural gas projects: the 75 trillion cubic foot (tcf ) Rovuma LNG project (capital cost $30 bn) and the 5 tcf Ca Voi Xanh offshore-Vietnam gas project (capital cost $10 bn). Exxon board members (most likely including the three supported by Engine No. 1) have publicly expressed concerns about both projects. According to internal reports, these projects are among the highest CO2 producers in Exxon’s pipeline; it is no surprise these projects have been called into question. However, we find the plight of both fields to be perplexing since production would almost certainly be used to displace coal in electricity generation, cutting CO2 emissions by nearly 50%. This fact seems to be lost on the new Exxon board members.”
4. Simon Property Group, Inc. (NYSE:SPG)
Dividend Yield as of January 14: 4.24%
Number of Hedge Fund Holders: 38
Simon Property Group, Inc. (NYSE:SPG) is an Indiana-based real estate investment trust with a portfolio of assets including shopping malls and community centers. Simon Property Group, Inc. maintains properties across North America and Asia, and is the largest owner of shopping malls in the United States. The company exceeded market consensus estimates for FFO, GAAP EPS, and revenue in the third quarter.
Truist analyst Ki Bin Kim on December 1 raised the price target on Simon Property Group, Inc. to $160 from $136 and kept a Buy rating on the shares.
In the third quarter of 2021, 38 hedge funds in the database of elite funds tracked by Insider Monkey were bullish on Simon Property Group, Inc., with stakes totaling $726.4 million. Jack Woodruff’s Candlestick Capital Management is one of the leading stakeholders of the company, holding 750,000 shares worth $97.4 million.
On November 1, Simon Property Group, Inc. declared a quarterly per share dividend equaling $1.65, reflecting a 10% increase from the prior dividend of $1.50, and a 26.9% increase year-over-year. The dividend was paid on December 31, to shareholders of record on December 10.
Simon Property Group, Inc. disclosed on January 4 that it will sell $500 million of its floating rate notes due 2024 and $700 million of its 2.650% notes due 2032. The proceeds will be utilized to pay off outstanding debt under its $3.5 billion supplemental senior unsecured revolving credit facility and for relevant corporate purposes.
3. Pinnacle West Capital Corporation (NYSE:PNW)
Dividend Yield as of January 14: 4.70%
Number of Hedge Fund Holders: 21
Pinnacle West Capital Corporation (NYSE:PNW) is a utility company that owns and operates Arizona Public Service and Bright Canyon Energy, providing energy and electricity primarily to Arizona residents. As of January 14, Pinnacle West Capital Corporation provides a dividend yield of 4.70%.
Pinnacle West Capital Corporation declared a $0.85 per share quarterly dividend on December 16, in line with previous. The dividend is payable on March 1, to shareholders of record on February 1. The company has been providing a steady dividend growth for 10 years, with a payout ratio of approximately 65%.
Argus analyst Gary Hovis raised the price target on Pinnacle West Capital Corporation to $80 from $72 and kept a Buy rating on the shares on January 6. Demand for the company’s services has been on the rise as the climate warmed in Arizona, though a recent regulatory decision may hinder Pinnacle West Capital Corporation from growing earnings and dividends in the near term, the analyst tells investors in a research note. Shares are also inexpensive as compared to Pinnacle West Capital Corporation’s peer group with a projected 2022 price to earnings multiple of 16-times.
Among the hedge funds tracked by Insider Monkey in the third quarter of 2021, 21 funds reported owning stakes in Pinnacle West Capital Corporation, worth $175 million, up from 18 funds in the preceding quarter holding stakes amounting to $143.6 million in Pinnacle West Capital Corporation.
Renaissance Technologies, the largest Pinnacle West Capital Corporation stakeholder, elevated its position in the company by 58% in the third quarter, with 688,202 shares valued at roughly $50 million.
2. AT&T Inc. (NYSE:T)
Dividend Yield as of January 14: 7.65%
Number of Hedge Fund Holders: 66
AT&T Inc. is a Texas-based multinational conglomerate holding company which is the largest American provider of telecommunications and mobile telephone services.
Citi analyst Michael Rollins on January 11 added AT&T Inc. to the firm’s “positive catalyst watch list” while keeping a Buy rating on the shares with a $29 price target. The analyst observes the potential for consensus expectations to rise for postpaid phone net adds and progress towards closing the deal with Discovery could potentially reduce the valuation gap between AT&T Inc. and Verizon Communications Inc. (NYSE:VZ).
AT&T Inc. is also a leading provider of 5G services in the United States. On January 4, AT&T Inc. paired with NVIDIA Corporation (NASDAQ:NVDA) on a cloud gaming cross-promotion, where the former’s 5G users will get subscriptions to NVIDIA Corporation (NASDAQ:NVDA)’s GeForce NOW, a popular cloud gaming service.
In addition to that, AT&T Inc. on January 14 was a winning bidder at the 5G spectrum auction of flexible-use licenses from The Federal Communications Commission, with the company spending $9.1 billion to secure rights to use the airwaves.
Among the hedge funds monitored by Insider Monkey in the third quarter, 66 funds were bullish on AT&T Inc., holding stakes worth $3.2 billion. Billionaire Ken Griffin’s Citadel Investment Group is the largest AT&T Inc. stakeholder, with 34.7 million shares amounting to $939.5 million.
On December 16, AT&T Inc. declared a quarterly dividend per share of $0.52, in line with previous. The dividend is payable on February 1, to shareholders of record on January 10.
1. Ready Capital Corporation (NYSE:RC)
Dividend Yield as of January 14: 10.84%
Number of Hedge Fund Holders: 13
Ready Capital Corporation (NYSE:RC) is a real estate finance company that secures small to medium sized commercial loans valued up to $45 million, in the form of bridge loans and fixed rate financings for stable assets. Ready Capital Corporation is one of the top dividend stocks that analysts are recommending, offering a yield of 10.84% as of January 14.
Riley analyst Matt Howlett raised the price target on Ready Capital Corporation to $18 from $17 and reiterated a Buy rating on the shares on December 3. According to the analyst, the company is ideally positioned for rising interest rates with 70% of its loans offering a floating rate, combined with remaining fixed-rate products match funded. There is also marginal upside to estimates if Ready Capital Corporation can lower its cost of capital.
On December 14, Ready Capital Corporation declared a quarterly $0.42 per share dividend, in line with previous, which is payable on January 31. The company distributes 81.78% of its earnings after taxation to shareholders.
To make strategic investments in target assets and for general corporate expenditure, Ready Capital Corporation on January 12 priced a public offering of 7 million common shares amounting to $108.9 million. The closing date of the deal was January 14, 2022.
Thomas Steyer’s Farallon Capital, the largest Ready Capital Corporation stakeholder, owns 1.25 million shares of the company, worth roughly $18 million. Overall, 13 hedge funds in the Q3 database of Insider Monkey were bullish on the stock.
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This article is originally published at Insider Monkey.
