We recently compiled a list of the 10 Best January Dividend Stocks To Buy. In this article, we are going to take a look at where Mastercard Incorporated (NYSE:MA) stands against the other January dividend stocks.

In 2024, dividend stocks fell short of investor expectations, largely due to the continuing AI boom and a heightened interest in technology stocks. The Dividend Aristocrats index lagged behind the broader market during the year. However, analysts remain optimistic about the future of dividend equities. This positive sentiment is driven by the fact that many US companies have ample cash reserves to sustain their dividend payments. The Wells Fargo Investment Institute reported that large-cap US companies have amassed over $2.4 trillion in cash, which could be used to either start or enhance dividend payouts.

Also read: 10 Best Performing Dividend ETFs In 2024

Despite the lack of enthusiasm for dividend stocks, analysts believe they still offer attractive entry points for investors. Capital Group suggested seeking opportunities in dividend-paying companies that the market has overlooked. This includes pharmaceutical firms that have been neglected due to the current focus on weight loss treatments, as well as utilities and certain banks. Within the dividend space, investors are increasingly drawn toward dividend growth stocks that offer consistent yields. Stocks that pay dividends and boast solid balance sheets with attractive yields can provide reliable income, protect against market declines, and support healthy investment growth. A report by ProShares highlighted that since its inception, the Dividend Aristocrats Index has outperformed the broader market with less volatility. For instance, a $10,000 investment in May 2005 could have grown to over $61,000 by March 2023.

The report also mentioned that the index has demonstrated strong performance in both up and down markets, with an upside capture of 91% and a downside capture of 80%. It has shown notable resilience during market downturns, outperforming the wider market by more than 12% in 2022. In addition, the Dividend Aristocrats Index has outpaced the market in eight of the 10 worst quarterly declines since 2005.

Since the start of 2025, the broader market has only seen a modest increase of 0.66%. In this environment, UBS has identified stocks that are considered high quality compared to their peers and are unlikely to reduce their current dividend payouts. The firm estimates a 22.9% chance of dividend cuts across various regions and sectors, noting that the US remains the most secure region for dividends, with only a 6.2% likelihood of cuts. Moreover, most sectors in the US appear relatively stable. Japan stands out as the most favorable region for dividend growth, with a projected growth rate of 9.9%.

That said, investing in dividend stocks can be more complex than it seems, requiring thorough analysis. Although dividends are often linked to long-term returns, some investors employ a short-term strategy known as dividend capture. This approach involves purchasing shares just before a company pays its dividend and selling them soon after the dividend is received. The objective is to collect the dividend income while possibly benefiting from a rise in the stock’s price leading up to the dividend announcement. In this article, we will take a look at some of the best dividend stocks to buy in January.

Our Methodology:

The following list provides details on the dividend capture strategy, focusing on the selection of prominent dividend-paying stocks set to go ex-dividend in January 2025. The ex-dividend date marks the final day to buy a stock and qualify for its upcoming dividend. The list is ranked chronologically, with earlier dates appearing first and later dates following in order. We also considered hedge fund sentiment around each stock using Insider Monkey’s data for Q3 2024.

Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points. (see more details here).

Mastercard Incorporated (NYSE:MA)

Ex-Dividend Date: January 9

Mastercard Incorporated (NYSE:MA) is an American credit card company that offers a wide range of payment processing and related services to its consumers. In the past 12 months, the stock has surged by over 24%. The payment processing giant has impressed investors with its strong growth, significant competitive advantage, and resilience against economic challenges. The company primarily earns revenue through swipe fees, averaging just over 2% for each transaction processed from co-branded cards. This straightforward business model is consistently reliable, thriving during economic upturns and protecting the company from credit risks during downturns.

In the third quarter of 2024, Mastercard Incorporated (NYSE:MA) reported revenue of $7.37 billion, which saw a 13% growth from the same period last year. The results reflect strong consumer spending and sustained demand for the company’s value-added services and solutions. The company’s cash position also remained very strong. It ended the quarter with over $11 billion available in cash and cash equivalents, up from $8.6 billion at the end of December 2023. In addition, the company’s operating cash flow came in at nearly $10 billion, growing from $7.8 billion in the prior-year period.

Montaka Global Investments made the following comment about MA in its Q3 2024 investor letter:

“Montaka owns several duopolists in the financial services industry, including Visa and Mastercard Incorporated (NYSE:MA) in payments; and S&P Global in credit ratings and financial data services. These businesses have competitively protected and reliably growing core businesses. But they also have newer, high-probability adjacent opportunities. The market, however, is underappreciating this powerful combination, in our view.

For Visa and Mastercard, their core businesses in global payment processing are being complemented by significant growth in two areas: New processing opportunities in peer-to-peer, business-to-business, business-to-consumer, and government-to-consumer payments; and Value-added services, including risk, fraud-detection, issuance, acceptance, and open banking.”

On December 17, Mastercard Incorporated (NYSE:MA) declared a 15% hike in its quarterly dividend to $0.76 per share. This marked the company’s 13th consecutive year of dividend growth. As of January 5, the stock has a dividend yield of 0.58%.

As of the close of Q3 2024, 131 hedge funds held investments in Mastercard Incorporated (NYSE:MA), down from 142 in the previous quarter, as per Insider Monkey’s database. The stakes owned by these hedge funds have a total value of more than $17 billion. With over 4.1 million shares, Fisher Asset Management was the company’s leading stakeholder in Q3.

Overall MA ranks 9th on our list of the best January dividend stocks to buy. While we acknowledge the potential of MA as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than MA but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock. 

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Disclosure: None. This article is originally published at Insider Monkey.