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10 Best Dividend Leaders to Buy According to Analysts

In this article, we discuss 10 best dividend leaders to buy according to analysts. You can skip our detailed analysis of dividend stocks and their performance over the years, and go directly to read 5 Best Dividend Leaders to Buy According to Analysts

Income generation has always been a primary goal for investors when making investment decisions. Therefore, it is no surprise that investors often favor dividend stocks, which are mainly known for providing steady streams of income. They particularly gravitate toward quality dividend stocks that not only offer consistent payouts but also demonstrate a history of increasing dividends over time and maintaining stable yields. According to a report by Hartford Funds, dividend income has accounted for 34% of the market’s overall return on average from 1940 to 2023.

In addition to their significant contribution to the market’s overall returns, investing in dividend stocks offers investors a means to reduce risks associated with fluctuating market conditions. DWS Group reported that in the last 20 years, the monthly volatility of dividend returns stands at 0.10% as compared to 3.75% observed for price returns. The report also mentioned that despite market fluctuations, the overall return during this period has remained positive for investors. While the riskier elements contributed significantly to this return, it is the dividend stream that emerged as a reliable, comparatively safer option amid the stock market’s uncertainties.

Dividend stocks fell behind the curve in 2023 thanks to the boom in tech stocks. However, this did not shatter investors’ confidence as they held on steadily to their dividend investments. One of the main reasons for this advocacy was that dividends paid by the S&P 500 companies have increased consistently over the years, as we reported in one of our articles. Moreover, analysts have given a positive stance on dividend payments for 2024 as well. Janus Henderson’s head of global equity income, Ben Lofthouse, mentioned in a report that pessimism regarding the global economy in 2023 had been proven baseless. He added that despite the certain outlook for the economy, dividends appeared to be well supported. Lofthouse further said that the resilience of the global economy would probably result in another year of dividend growth in 2024, projecting global payouts to increase to $1.72 trillion.

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While dividend stocks did not have a rosy 2023, many sectors captivated investors’ interest by announcing increases in their dividends. According to a report by Janus Henderson, eight out of ten sectors of the economy experienced growth in their dividend payouts in 2023. Among these industries, consumer discretionary companies led the pack with a notable year-over-year increase of 26.1%. In addition to this, banks, which are known for their dividend payments, played a crucial role in driving half of the overall dividend payout growth, marking a significant rebound from 2022.

The Procter & Gamble Company (NYSE:PG), Colgate-Palmolive Company (NYSE:CL), and PepsiCo, Inc. (NASDAQ:PEP) are some of the best dividend leaders in the market as these companies have been offering growing dividends for decades now. Moreover, their strong balance sheets and solid cash generation indicate the likelihood of potential dividend growth in the coming years. In this article, we will take a look at some of the best dividend leaders according to analysts.

10 Best Dividend Leaders to Buy According to Analysts
10 Best Dividend Leaders to Buy According to Analysts

Photo by nick chong on Unsplash

Our Methodology:

For this list, we scanned holdings of First Trust Morningstar Dividend Leaders Index Fund (FDL), which tracks the performance of the 100 highest-yielding stocks with consistent growth in dividends and can maintain their dividends in the future. From this list, we further refined our selection criteria by identifying stocks with a projected upside potential of over 10% based on analyst price targets, as of April 4. The stocks are ranked according to their upside potential. We also measured hedge fund sentiment around each stock according to Insider Monkey’s database of 933 funds as of Q4 2023. Hedge funds’ top 10 consensus stock picks outperformed the S&P 500 Index by more than 140 percentage points over the last 10 years (see the details here). That’s why we pay very close attention to this often-ignored indicator.

Note: Financial stocks are popular among analysts because of their reasonable valuations, strong asset quality, and consistent loan growth. So, most of the stocks in our list belong to the financial sector.

10. First Horizon Corporation (NYSE:FHN)

Number of Hedge Fund Holders: 50

Upside Potential as of April 4: 10.62%

First Horizon Corporation (NYSE:FHN) is a Tennessee-based bank holding and financial services company that offers various related services to its consumers. Currently, the company's quarterly dividend stands at $0.15 per share for a dividend yield of 4.07%, as of April 4. It is one of the best dividend leaders to buy according to analysts.

As per Insider Monkey's database of Q4 2023, 50 hedge funds in Insider Monkey's database held stakes in First Horizon Corporation (NYSE:FHN), up from 48 in the previous quarter. These stakes are collectively valued at over $1.36 billion.

9. U.S. Bancorp (NYSE:USB)

Number of Hedge Fund Holders: 36

Upside Potential as of April 4: 11.4%

U.S. Bancorp (NYSE:USB) is a diversified bank holding company that offers a wide range of banking, mortgage, investment, and related services. On March 12, the company announced a quarterly dividend of $0.49 per share, which fell in line with its previous dividend. Overall, it maintains a 13-year streak of consistent dividend growth, which makes USB one of the dividend leaders on our list. As of April 4, the stock offers a dividend yield of 4.57%.

U.S. Bancorp (NYSE:USB) was a part of 36 hedge fund portfolios at the end of Q4 2023, growing from 29 in the previous quarter, as per Insider Monkey's database. The stakes owned by these hedge funds have a total value of over $1.08 billion. With nearly 10 million shares, Viking Global was the company's largest stakeholder in Q4.

Artisan Partners mentioned U.S. Bancorp (NYSE:USB) in its Q4 2023 investor letter. Here is what the firm has to say:

“Banks were well represented among our top Q4 performers as the Treasury market rally drove big gains in the bank stocks. U.S. Bancorp (NYSE:USB), PNC Financial Services (PNC) and Bank of America—the three banks we hold in the portfolio—were each among our top five contributors to return. When bank stocks sold off in Q1 due to fears of contagion following Silicon Valley Bank’s failure, we took advantage of the market dislocation by purchasing top-10 US banks USB and PNC at what were, in our view, cheap prices. USB and PNC are banks we have known for years. They are well managed and well capitalized. As large banks, they were less impacted by the turmoil that affected smaller institutions as depositors sought the safest places to store their money. The recent rebound is an example of how our approach of investing in out-of-favor businesses can lead to alpha. USB and PNC are not immune from industry-wide headwinds from higher deposit costs, pressured net interest margins and fleeing deposits. However, we did not see these banks having a similar level of risk, with respect to uninsured deposits and unrealized losses, which contributed in varying degrees to the collapses of other banks in March 2023. As investors, we cannot avoid risk. However, we are willing to take risk if we are being compensated appropriately.”

8. Comerica Incorporated (NYSE:CMA)

Number of Hedge Fund Holders: 39

Upside Potential as of April 4: 12.46%

Comerica Incorporated (NYSE:CMA) is a Texas-based financial services company that offers a wide range of financial products and related services to its consumers. On February 27, the company announced a quarterly dividend of $0.71 per share, which was consistent with its previous dividend. Though the company does not hold any dividend growth track record, it has an over 30-year run of paying regular dividends to shareholders. The stock's dividend yield on April 4 came in at 5.38%.

As of the end of the December quarter of 2023, 39 hedge funds tracked by Insider Monkey held stakes in Comerica Incorporated (NYSE:CMA), compared with 42 in the previous quarter. The consolidated value of these stakes is more than $755 million.

7. M&T Bank Corporation (NYSE:MTB)

Number of Hedge Fund Holders: 34

Upside Potential as of April 4: 13.13%

M&T Bank Corporation (NYSE:MTB) is an American bank holding company, headquartered in New York. The bank mainly offers services in commercial banking consumer banking, institutional banking, and wealth management. The company's current quarterly dividend comes in at $1.30 per share and has a dividend yield of 3.77%, as recorded on April 4. With an upside potential of over 13%, MTB is one of the best dividend leaders to buy according to analysts.

In the fourth quarter of 2023, M&T Bank Corporation (NYSE:MTB) reported revenue of $2.31 billion, which though fell by 8% from the same period last year, beat analysts' estimates by $20 million. The company's cash generation remained strong during the quarter, as it returned $217 million to shareholders through its dividends on common stock.

As of the close of Q4 2023, 34 hedge funds tracked by Insider Monkey owned stakes in M&T Bank Corporation (NYSE:MTB), up from 32 in the previous quarter. The consolidated value of these stakes is nearly $431 million. Among these hedge funds, Marshall Wace LLP was the company's leading stakeholder in Q4.

6. East West Bancorp, Inc. (NASDAQ:EWBC)

Number of Hedge Fund Holders: 38

Upside Potential as of April 4: 14.72%

East West Bancorp, Inc. (NASDAQ:EWBC) ranks sixth on our list of the best dividend leaders to buy according to analysts. On January 24, the company increased its quarterly dividend by 14.6% to $0.55 per share. The company started paying dividends in 2016 and has raised its payouts every year since then. The stock's dividend yield on April 4 came in at 2.93%.

According to Insider Monkey's database of Q4 2023, 38 hedge funds held stakes in East West Bancorp, Inc. (NASDAQ:EWBC), up from 32 in the previous quarter. The collective value of these stakes is over $534.5 million. Ken Griffin's Citadel Investment Group was the largest stakeholder of the company in Q4, owning over 2.2 million shares.

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Disclosure. None. 10 Best Dividend Leaders to Buy According to Analysts is originally published on Insider Monkey.