In this article, we will take a look at some of the best dividend stocks of 2024.
Macroeconomic factors have weighed on US stocks in the final days of the year, with the broader market declining by over 1% in the past week. Despite this post-Christmas slowdown, US financial markets are on the verge of closing out another exceptional year. The broader market index is projected to post a roughly 25% gain for 2024, marking the first back-to-back annual increases of more than 20% since 1997-1998. This strong performance has been supported by positive economic indicators, including resilient consumer spending and a robust labor market. Inflation, though still elevated, has shown consistent signs of moderation.
Improved economic data and easing inflation have also influenced the Federal Reserve’s policy shift this year. Anticipation of rate cuts contributed to market growth, with the central bank implementing its third rate reduction in 2024.
Dividend stocks have had a relatively weak performance this year, with the Dividend Aristocrats Index achieving a modest return of about 4%, widening the gap between its performance and that of the broader market. The index tracks the performance of companies that have raised their payouts for at least 25 consecutive years. However, investors shouldn’t lose confidence in these results, as the value of dividend stocks becomes more apparent over the long term. A report by Franklin Templeton highlighted that, since 1926, dividends have accounted for nearly one-third of the total equity returns of US stocks. Additionally, from 1980 to 2019—a period marked by a sharp decline in interest rates—dividends contributed 75% to the market’s overall returns.
Investors are often drawn to dividend growth stocks because dividend payments are generally viewed as a sign of long-term commitment. Maintaining these payments demands profitability, strong returns, and consistent cash flow generation, making them a valuable indicator of a company’s quality. Businesses that regularly raise their dividends showcase their ability to consistently generate profits, which can also signal greater resilience during economic or market downturns. According to research, companies within the broader market that pay dividends have historically been more profitable compared to those that do not.
Reflecting investors’ preference for dividend stocks, many US companies are increasing their payouts and implementing dividend policies. As of September 30, 2024, around 80% of companies in the Index paid dividends, a figure consistent with a decade ago. Notably, 24% of these dividend-paying companies now belong to the technology sector, a significant rise from 13% ten years earlier, as reported by Franklin Templeton. Other innovative industries, such as healthcare and industrials, have also seen growth in dividend payers.
This broader adoption of dividends has expanded the range of options for equity income investors, offering greater access to dynamic and high-growth companies. For instance, major tech companies that are market leaders have recently introduced dividends. Meanwhile, established tech giants demonstrate that dividend payments can coexist with innovation and reinvestment, proving that companies can excel at both.
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Our Methodology:
For this list, we reviewed a selection of dividend stocks and identified those that have provided positive returns in 2024. From this group, we focused on companies offering yields above 2% as of December 30. We then narrowed down the list by selecting companies with the most hedge fund investments, based on Insider Monkey’s Q3 2024 database. The stocks are arranged in ascending order of hedge funds having stakes in them.
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).
20. Main Street Capital Corporation (NYSE:MAIN)
Number of Hedge Fund Holders: 7
Main Street Capital Corporation (NYSE:MAIN) is a Texas-based business development company that provides customized debt and equity financing to lower-middle-market companies and debt capital to middle-market companies. In the third quarter of 2024, the company reported $136.8 million in total investment income, reflecting an 11% increase compared to the same period in the previous year. The company completed $51.6 million in investments within its lower middle market (LMM) portfolio, including an $11.2 million investment in a newly added LMM portfolio company. Its financial position remained robust, with cash and cash equivalents rising to $84.4 million by the end of the quarter, up from $60 million at the close of December 2023.
Main Street Capital Corporation (NYSE:MAIN) demonstrates exceptional cost efficiency, maintaining an Operating Expenses to Assets Ratio of 1.3% on an annualized basis. This figure, which measures non-interest operating expenses as a percentage of the average total assets for the quarter, remained steady for both the latest quarter and the twelve-month period ending September 30, 2024. In the past 12 months, the stock has surged by nearly 34%.
On November 2, Main Street Capital Corporation (NYSE:MAIN) declared a 2% hike in its monthly dividend to $0.25 per share. In addition, the company also announced a supplemental dividend of $0.30 per share. This marked the company’s 13th consecutive quarter of paying supplemental dividends to shareholders, which makes it one of the best dividend stocks. The stock has a dividend yield of 5.16%, as of December 30.
At the end of Q3 2024, 7 hedge funds tracked by Insider Monkey held stakes in Main Street Capital Corporation (NYSE:MAIN), compared with 8 in the previous quarter. These stakes have a collective value of over $21 million. Among these hedge funds, Balyasny Asset Management was the company’s leading stakeholder in Q3.
19. Enterprise Products Partners L.P. (NYSE:EPD)
Number of Hedge Fund Holders: 25
Enterprise Products Partners L.P. (NYSE:EPD) is an American midstream natural gas and crude oil pipeline company that offers petrochemicals and related products. The company reported strong earnings in the third quarter of 2024. It posted revenue of $13.78 billion, representing a growth of nearly 15% compared to the same period the previous year. However, this figure missed analysts’ projections by over $97 million. Operating income came in at $1.78 billion, while net income rose to $1.43 billion, showing an increase from last year’s figures of $1.7 billion and $1.3 billion, respectively.
In addition, Enterprise Products Partners L.P. (NYSE:EPD) has attracted investor interest due to its strong cash position. In the latest quarter, it reported $2.1 billion in operating cash flow, a 4% increase year-over-year. Distributable cash flow rose to $2 billion, reflecting a 5% growth compared to the same period last year. Over the twelve months ending September 30, 2024, the company allocated 56% of its Adjusted Cash Flow from Operations (CFFO) to distributions for common unitholders and share repurchases of partnership common units.
This robust cash flow has enabled Enterprise Products Partners L.P. (NYSE:EPD) to increase its dividend for 26 consecutive years. On October 2, the company announced a quarterly dividend of $0.525 per share, maintaining the level of its previous payout. The stock has a dividend yield of 6.73%, as of December 30.
Enterprise Products Partners L.P. (NYSE:EPD) benefits from a stable foundation rooted in its predominantly fee-based business model, which minimizes its vulnerability to risks associated with commodity prices and market spreads. Nearly 90% of its contracts include provisions to adjust for inflation. Moreover, the company adopts a prudent approach to leverage, ensures solid distribution coverage, and manages growth capital expenditures with care. The stock has surged by over 17% in the past year, which makes EPD one of the best dividend stocks of 2024.
As of the close of Q3 2024, 25 hedge funds in Insider Monkey’s database owned stakes in Enterprise Products Partners L.P. (NYSE:EPD), up from 23 in the previous quarter. These stakes have a consolidated value of nearly $316 million. Among these hedge funds, Fairholme (FAIRX) was the company’s leading stakeholder in Q3.
18. Enbridge Inc. (NYSE:ENB)
Number of Hedge Fund Holders: 26
Enbridge Inc. (NYSE:ENB) is a Canadian multinational pipeline and energy company. It has achieved consistent growth by broadening its energy infrastructure and focusing more on cleaner energy sources such as natural gas and renewables. Rising industrial activity and increasing electricity demand across the US and Canada are expected to drive further demand for natural gas. Notably, data centers are significantly contributing to the surge in electricity consumption, fueled by the growing need for AI applications. Many data center operators prefer powering their facilities with cleaner energy options, including renewable energy and natural gas. In the past 12 months, the stock has surged by nearly 25%.
In the third quarter of 2024, Enbridge Inc. (NYSE:ENB) successfully completed the acquisition of three U.S. natural gas utilities, a deal first announced in September 2023. These assets align well with Enbridge’s established low-risk business model, providing stable cash flow and offering potential for rapid growth opportunities. The company reported revenue of $10.66 billion, up significantly by over 48% from the same period last year. The revenue beat analysts’ estimates by $5.77 billion.
Enbridge Inc. (NYSE:ENB)’s cash position also came in strong during the quarter. The company generated nearly $3 billion in operating cash flow and its distributable cash flow came in at $2.6 billion. On December 3, it declared a 3% increase in its quarterly dividend to C$0.9425 per share. Through this increase, the company stretched its dividend growth streak to 30 years, which makes ENB one of the best dividend stocks of 2024. The stock’s dividend yield on December 30 came in at 6.25%.
Enbridge Inc. (NYSE:ENB) was included in 26 hedge fund portfolios at the end of Q3 2024, compared with 32 in the previous quarter, as per Insider Monkey’s database. The stakes held by these funds are worth $3.2 billion in total. Among these hedge funds, GQG Partners was the company’s leading stakeholder in Q3.