We recently compiled a list of the 10 Dividend Knights that Beat The Market Last 3 Years. In this article, we are going to take a look at where Oracle Corporation (NYSE:ORCL) stands against the other dividend stocks that beat the market in the last 3 years.
The broader market has been performing strongly this year, rising by nearly 30% since the beginning of 2024. According to Morningstar Direct, the S&P 500’s return has exceeded this level in only 17 of the past 74 years. For instance, in 1954, the index saw a gain of over 52%, and in 1989, it increased by about 31%. However, analysts caution investors to manage their expectations, as years with such exceptional returns are uncommon. Cathy Curtis, a certified financial planner and the founder and CEO of Curtis Financial Planning made the following comment about the market’s performance this year in one of her recent interviews with CNBC:
“Investors should know that the stock market has an average annualized return of over 10% for decades. The past year has seen growth way over this amount and it would be highly unusual for that to continue for a multi-year timeframe.”
Regardless of where the market ends up, dividend stocks have strong potential, as demonstrated over the years. During past periods of inflation, dividend stocks performed better compared to other asset classes. Since the 1940s, dividends have accounted for 40% of the market, with this share increasing during times of higher inflation, according to Hartford Funds. The report also highlighted the performance of dividend stocks in the 1970s, when they made up 73% of the market’s returns. Additional studies, including one from Fidelity International, showed that dividends typically grow faster than inflation. Fidelity’s research indicated that since 1900, the 10-year annual average growth of dividends in the market has outpaced CPI growth nearly 73% of the time.
In addition to their considerable impact on overall market returns, dividend stocks provide investors with a way to mitigate risks linked to market volatility. According to DWS Group, over the past 20 years, the monthly volatility of dividend returns was just 0.10%, compared to 3.75% for price returns. The report also noted that despite market fluctuations, investors have seen positive overall returns during this period. While riskier factors played a significant role in these returns, it was the dividend stream that proved to be a more stable and safer option amid the uncertainties of the stock market.
Also read: 10 Best Consistent Dividend Stocks To Invest In Right Now
Although dividend stocks have recently lagged behind the broader market, they remain a popular investment choice due to their strong long-term returns. The Dividend Aristocrats Index has grown by just nearly 11% this year, but the outlook for dividend growth among US companies is promising. According to Howard Silverblatt, Senior Index Analyst at S&P Dow Jones Indices, large-cap stocks outperformed many others in the first three quarters of 2024, driven by record earnings and an anticipated record dividend payout for the year. He further added that the market’s large caps are expected to see a 6% increase in dividend payments for 2024, compared with 5.1% in 2023 and 10.8% in 2022.
When it comes to dividend investing, investors often prefer companies with a strong track record of dividend growth and solid returns as they help prepare for challenging market conditions. Additionally, investors focus on a company’s ability to generate cash flow and maintain a strong balance sheet, as these factors support the sustainability of future dividend payouts. In view of this, we will take a look at some of the best dividend knights that have outperformed the market in the last three years.
Our Methodology:
For this list, we used a stock screener and selected dividend companies that have outperformed the market in the past three years. These companies also have strong dividend growth track records under their belt. We also considered hedge fund sentiment around each stock using Insider Monkey’s data for Q3 2024. The stocks are ranked in ascending order of their three-year returns.
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).
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Oracle Corporation (NYSE:ORCL)
3-Year Share Price Gains as of December 4: 111.7%
Oracle Corporation (NYSE:ORCL) ranks third on our list of the best dividend knights. The computer software company is renowned for its high-quality data center infrastructure, which is essential for AI development, and demand for its services is far exceeding supply. Known for its cost-efficient operations, the company has become a preferred choice for leading AI start-ups like OpenAI, Cohere, and Elon Musk’s xAI. Despite its efforts, it struggles to meet demand, with 162 data centers currently operational or under construction as of the first quarter of fiscal 2025. Oracle aims to significantly expand this number to between 1,000 and 2,000 in the future. In the past three years, ORCL has significantly outperformed the market, returning nearly 112%.
Oracle Corporation (NYSE:ORCL) is preparing to release its fiscal Q2 2025 earnings. Ahead of that, it’s worth revisiting the company’s strong performance in Q1, where it delivered impressive results. In Q1, the company reported revenue of $13.3 billion, which grew by 6.86% from the same period last year. Its Cloud revenue saw a huge increase of 21% on a YoY basis at $5.6 billion. The highlight of the quarter was Oracle’s announcement of a MultiCloud agreement with AWS. This partnership includes the company’s advanced Exadata hardware and the latest Version 23ai of its database software, integrated directly into AWS cloud data centers. Once the service launches in December, AWS customers will have seamless access to the Oracle database.
Mar Vista Investment Partners, LLC also highlighted Oracle Corporation (NYSE:ORCL)’s could business in its Q3 2024 investor letter. Here is what the firm said:
“Oracle Corporation (NYSE:ORCL) is seeing revenue acceleration as it benefits from several years of investing in cloud-based solutions, which are now driving demand. The company is seeing broad-based demand for multiple of its cloud offerings, including its Fusion ERP Suite, its NetSuite offering and the Oracle Database. In addition to those anchor products, Oracle is also gaining traction with its OCI Gen 2 platform-as-a-service offering, which is winning mindshare from leading cloud customers, including Open AI, due to its favorable performance and cost metrics. This OCI Gen 2 solution is well-positioned to become a viable hyper scaler offering, furthered by Oracle’s recently announced partnerships with Microsoft Azure, Google Compute Platform, and Amazon’s AWS, which have all agreed to host Oracle’s flagship database in their respective hyper-scaler cloud environments. We believe this could support a third leg of growth for Oracle as its large installed base of database customers shift from on-premises to cloud deployments. As database customers migrate to a Cloud subscription model, Oracle could increase database software support revenues by 3-to-5 times. We continue to believe Oracle is well-positioned to grow intrinsic value strong double-digits over our investment horizon.”
Oracle Corporation (NYSE:ORCL) has a strong history of paying dividends to shareholders. The company has been making regular dividend payments to shareholders since 2009. Its consistent dividend payouts are supported by a robust cash position. In FY23, the company generated $19.1 billion in operating cash flow and its free cash flow came in at $11.3 billion. It currently offers a quarterly dividend of $0.40 per share and has a dividend yield of 0.83%, as of December 5.
As of the end of Q3 2024, 91 hedge funds tracked by Insider Monkey held stakes in Oracle Corporation (NYSE:ORCL), compared with 93 in the previous quarter. The total value of these stakes is more than $7 billion.
Overall ORCL ranks 3rd on our list of the best dividend knights that beat the market in the last 3 years. While we acknowledge the potential for ORCL 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 ORCL 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.