10 Best Dividend Stocks to Buy for Consistent Growth and Income

In this article, we take a look at the 10 best dividend stocks to buy for consistent growth and income. You can skip our in-depth analysis of these dividend stocks outlook for 2021 and the benefits of investing in dividends and skip straight to the top 5 dividend stocks to buy for consistent growth and income.
Amid mounting financial volatility and job losses caused by the coronavirus crisis, millions of Americans feel the need for steady, risk-free incomes. Dividend investing is one of the best ways to diversify your sources of income if done smartly. Data compiled over several decades suggests that dividends make up a large part of profits in the stock markets. For example, Jeremy Siegel mentions an important data point in his book The Future for Investors to highlight the importance of dividend investing. According to Siegel, around 97% of total real accumulation in stocks comes from reinvesting dividends, while only 3% comes from capital gains. Similarly, the highest dividend-yielding quintile from 1958 to 2002 was over $ 460,000, compared to $ 130,000 for the S&P 500. Goldman Sachs mentions in its famous whitepaper, Why Dividend Growth Matters, that the annual Return for all dividend-paying stocks in a specific time period was 8.8% compared to 7.1% for the S&P 500 index.
Should you invest in dividend stocks when there is volatility and high inflation?
A report by Advantus states that dividends made up 40% of the returns on the S&P 500 index from 1926 to 2013. The S&P 500 Dividend Aristocrats Index outperformed the broader index by a whopping 182 percent since 1996. The report also mentions key data showing the importance of dividend stocks in protecting against inflation and volatility. The report shows that dividend-paying stocks, especially the S&P 500 Dividend Aristocrats, were less volatile than the broader S&P 500. The report cites data from Ned Davis Research, suggesting that stocks with high-growth dividends since 1972 have been the broader ones outperformed markets in periods of higher inflation.
Should You Buy High Yield Dividend Stocks?
Does this mean you should blindly buy high yield dividend stocks? Our answer is a resounding no. For income investing, look for a sweet spot between yield and dividend history. Always favor companies with dividend increases for several consecutive years over companies with staggering returns but a poor dividend history full of cuts, suspensions, and non-payments.
Not only does financial volatility affect the average American, it also affects the profits of the "experts". The entire hedge fund industry is feeling the repercussions of the changing financial landscape. Its reputation has been tarnished over the past decade, when its hedged returns have not kept up with the unhedged returns of market indices. On the flip side, Insider Monkeys Research was able to pre-identify a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 124 percentage points since March 2017. Between March 2017 and February 26, 2021, our monthly newsletter stock picks returned 197.2% versus 72.4% for the SPY. Our stock selection outperformed the market by more than 124 percentage points (see details here). We were also able to pre-identify a select group of hedge fund holdings that were significantly underperforming the market. We have been tracking and sharing the list of these stocks since February 2017, and they have lost 13% by November 16. For this reason, we believe hedge fund sentiment is an extremely useful indicator to look out for. You can subscribe to our free newsletter on our homepage to receive our articles in your inbox.
Best dividend stocks to buy for income and growth
Image by pasja1000 from Pixabay
In selecting the companies for our list of the best dividend stocks to buy for constant growth and earnings, we also considered future growth catalysts, fundamentals, analyst ratings, and earnings / sales growth.
Best dividend stocks for steady growth and stable income
10. Altria Group, Inc. (NYSE: MO)
Number of hedge fund holders: 37
With a dividend yield of 6%, 50 years of consistent dividend increases, and strong growth potential in its core business, Altria is one of the best dividend stocks to buy for growth and steady income. Jefferies recently switched MO stock to Buy and spearheaded the company's presence in the smoke-free space, which is expected to see strong growth. Jefferies raised his target price on the stock to $ 58.
At the end of the fourth quarter, 37 hedge funds in the Insider Monkey database had 887 funds in the Altria Group, compared with 47 funds in the third quarter. Renaissance Technologies is the company's largest stakeholder with 9.2 million shares valued at $ 377.8 million.
9. Lockheed Martin Corporation (NYSE: LMT)
Number of hedge fund holders: 53
Lockheed Martin is one of the top 10 dividend stocks to buy for constant growth and income. The defense giant has consistently increased its dividend over the past 18 years. The company continues to dominate the aerospace and military equipment markets, winning notable orders every month. Several contracts were recently signed, including a contract change for the Navy for $ 128.39 million, a contract for a missile defense agency for $ 610.47 million, and a contract change for the Army for $ 284.39 million. USD. The company is now entering the space industry. There are also plans to acquire the space company Aerojet Rocketdyne. The company also received a $ 4.9 billion contract from the Pentagon for geosynchronous orbiting spacecraft, which are part of the next generation of space-based missile warning systems for persistent infrared overhead systems.
As of the end of the fourth quarter of 2020, Arrowstreet Capital owns 1.5 million LMT shares valued at $ 544.7 million. LMT represents 0.76% of Arrowstreet's total portfolio.
In one of their investor letters, RiverPark Advisors, LLC highlighted several stocks, and Lockheed Martin Corp. (NYSE: LMT) is one of them. The fund said the following:
"Despite better-than-expected third-quarter results, LMT shares were weak for the quarter as defense spending is expected to remain unchanged for the coming year, with a record $ 150 billion holdings and nearly 30% of construction revenue of F-35 aircraft with deliveries expected to reach 180 per year in 4 to 5 years (3Q saw sales increase from the F-35) We believe LMT should grow faster than the growth of the Total defense budgets and expectations of Road Strategic Acquisitions (LMT acquired AJRD for $ 4 billion in late December), debt payments, a 3% dividend yield, and continued share buybacks of $ 6 billion a year in free cash flow should result in even higher returns for shareholders . "
8. Cisco Systems, Inc. (NASDAQ: CSCO)
Number of hedge fund holders: 60
Cisco has consistently increased its dividend over the past 10 years. The company offers a sweet spot between high growth, long-term profits and stable income. The company operates in a high-growth network device, software, and cloud computing market. The stock has gained 28% over the past 12 months. Goldman Sachs recently upgraded the stock to buy from hold and spearheaded a revival in network spending amid the anticipated reopening of offices around the world. CSCO ranks 8th on our list of the best dividend stocks.
With a $ 1.04 billion stake in Cisco Systems, Generation Investment Management held 23.3 million shares in the company as of the fourth quarter of 2020. Our database shows that at the end of the fourth quarter there were 60 hedge funds in CSCO. versus 59 funds in the third quarter.
In their Q3 2020 investor letter, Heartland Advisors highlighted a few stocks, and Cisco Systems Inc. (NASDAQ: CSCO) is one of them. Here's what Heartland Advisors said:
“A handful of information technology (IT) names have made the most headlines in the investment space lately. Overall, however, the sector has been a mixed bag from a performance standpoint. The Russel 3000® Value Index highlights the momentum in which the group is performing ended the period mostly flat, our holdings in this area performed slightly better, but included a major critic, Cisco Systems, Inc. (CSCO).
Cisco, the global leader in computer networking, declined over the period after its products and applications revenue slowed as IT postponed network spend in response to COVID-19. Security line sales rose around 14%, but the segment's strength wasn't big enough to make up for weakness elsewhere. The operating margin was impressive with a sales decline of 9%.
Wall Street's response to the poor results has been mixed. Some admitted the company performed well in the face of unprecedented macro pressure on its customers, while others cited the results as an indicator that Cisco is struggling to evolve from a predominantly hardware-centric business to one that generates revenue through software and recurring services .
The challenges Cisco is facing are a temporary setback for us as we continue to make progress in moving to a model that generates recurring revenue and is less tied to the IT spending cycle.
We believe that the positive progress made in the previous quarters will resume. With the most recent setback, stocks are trading at an attractive 12x profit while generating a dividend yield of nearly 4% and a free cash flow / corporate return of nearly 10%. "
7. Johnson & Johnson (NYSE: JNJ)
Number of hedge fund holders: 81
Johnson & Johnson has 58 consecutive years of dividend growth and a strong pipeline of growth catalysts. The company recently started vaccinating adolescents in a Phase 2a clinical trial for its COVID-19 vaccine candidate. In addition to the vaccines business, JNJ has several other growth catalysts. The company stands behind big brands like Band-Aid, Tylenol, Listerine and Neutrogena. The medical products business, which accounts for around 30% of total sales, is also growing. The company's pharmaceuticals business offers promising treatments for diseases related to immunology, oncology, neuroscience, infectious diseases, pulmonary hypertension, and heart.
A total of 81 hedge funds tracked by Insider Monkey were bullish at the end of the fourth quarter, compared to 82 funds in the previous quarter.
6. The Procter & Gamble Company (NYSE: PG)
Number of hedge fund holders: 83
Consumer goods giant Procter & Gamble has consistently increased its dividend over the past 64 years. The company also has several long-term growth catalysts. Recently, Morgan Stanley named the stock one of the top personal care picks. The company said it likes P&G because it sees the company's revenue and earnings growth above its peers, short-term visibility and reinvestments. PG ranks 6th on our list of the best dividend stocks to buy for growth and stable income.
Andy Brown's Cedar Rock Capital is one of 83 hedge funds that Insider Monkey has tracked that were involved in PG as of the end of the fourth quarter. The fund owns over 9.9 million shares in the company.
Click here to read on and see the 5 best dividend stocks to buy for constant growth and income.
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Disclosure: None. The 10 Best Dividend Stocks to Buy for Constant Growth and Income were originally published on Insider Monkey.
In this article:
S&P 500
+ 0.15%
Cisco Systems
Lockheed Martin
+ 0.32%
Johnson & Johnson
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