10 Best Stocks to Increase Your Dividend Income

In this article, we discuss the 10 best stocks to increase your dividend income. If you want to read about some more dividend stocks, go directly to 5 Best Stocks to Increase Your Dividend Income

Investors have long discussed whether a healthy business that pays a reliable dividend payout will also generate the highest capital returns over the long term. Value investors generally concur with this point of view while growth investors argue in favor of the opposite. According to a study of dividend paying stocks published by Hartford Funds, companies that grew or initiated a dividend have experienced the highest returns relative to other stocks since 1973. They have also experienced significantly less volatility. 

Companies that pay dividends usually return the profit they have made to shareholders while those that do not pay dividends reinvest that profit for growth in the business. Stocks like Amazon.com, Inc. (NASDAQ:AMZN) Alphabet Inc. (NASDAQ:GOOG), and Microsoft Corporation (NASDAQ:MSFT) usually lie in the latter category. Even though these firms have been popular on Wall Street in the past few years, the Hartford Study claims that 84% of the total return of the S&P 500 Index since 1960 can be attributed to reinvested dividends. 

A Brief History of Dividend Versus Growth Stocks

The study has outlined how dividend players performed over each decade going back to before the Great War. In the 1940s, 1950s, and 1960s, the dividend payouts of companies played a large role in their total returns. The average total return through these decades was around 10%. However, as the average total returns jumped from the 1960s onwards, the role of dividends started to diminish. During the 1990s, dividends were largely marginalized as companies preferred growth rather than focusing on returns to shareholders. 

However, at the turn of the millennium, the dotcom bubble burst, forcing investors away from growth firms towards reliable dividend players. The benchmark index posted negative returns in the first decades of the new millennium. Per the study, between 1960 and 2021, the median dividend yield for the market was around 2.90%. The yield peaked in the 1980s and bottomed in the 2000s. After the 2010s, growth stocks once again became popular as the social media and ecommerce age dawned. 

As inflation climbs and the Fed prepares a further rise in interest rates, investors at the stock market have once again shifted their focus towards dividend stocks to weather the upcoming storm. 

Our Methodology

The companies that have a solid track record of dividend payouts were selected for the list. The business fundamentals and analyst ratings of these firms are also discussed to provide further context. Hedge fund sentiment was included as a classifier as well. Data from around 920 elite hedge funds tracked by Insider Monkey was used to quantify the hedge fund sentiment around each stock. 

10 Best Stocks to Make $500 Per Month in Dividends
10 Best Stocks to Make $500 Per Month in Dividends

10. The Procter & Gamble Company (NYSE:PG)

Number of Hedge Fund Holders: 69

Dividend Yield: 2.59%  

The Procter & Gamble Company (NYSE:PG) markets consumer packaged goods. The company has an impressive dividend history stretching back over six decades. These payouts have also been growing for the past sixty-five years. In an industry where the median in this regard is just six years, the payouts attest to the earnings strength of the company.

In October, Bank of America gave bullish comments on Procter & Gamble (NYSE:PG) despite the company’s weak EPS guidance. BofA expects strong profit growth for the company in the second and third quarters of fiscal 2023.

On April 22, Barclays analyst Lauren Lieberman maintained an Overweight rating on The Procter & Gamble Company (NYSE:PG) stock and raised the price target to $176 from $167, backing the firm to deliver earnings that will set an extremely high bar for the industry. 

As of the end of the third quarter, Ray Dalio's hedge fund Bridgewater Associates is the biggest stakeholder of the company with an $835 million stake.

9. Johnson & Johnson (NYSE:JNJ)

Number of Hedge Fund Holders: 85

Dividend Yield: 2.58%  

Johnson & Johnson (NYSE:JNJ) makes and sells healthcare products. Johnson & Johnson has consistently increased its dividend for 60 years. It's one of the best dividend kings in the market with long-term growth potential.

On April 20, Credit Suisse analyst Matt Miksic kept an Outperform rating on Johnson & Johnson (NYSE:JNJ) stock and raised the price target to $205 from $200, noting that the med supplies and devices business of the firm was delivering better-than-expected growth. 

At the end of the third quarter of 2022, 85 hedge funds in the database of Insider Monkey held stakes worth $7.3 billion in Johnson & Johnson (NYSE:JNJ).

8. Bristol-Myers Squibb Company (NYSE:BMY)

Number of Hedge Fund Holders: 68   

Dividend Yield: 2.8%  

Bristol-Myers Squibb Company (NYSE:BMY) develops and sells biopharmaceutical products. It's one of the best blue chip dividend stocks as the company has upped its dividend consistently for over a decade now.

On April 5, the company announced that it had obtained approval from the European authorities for Opdivo, a drug used to treat a type of bladder cancer and a form of esophageal cancer. The EU approved the use for the drug for adults. The company has underlined that the drug is the “first adjuvant immunotherapy option approved for patients in the EU in this setting”. The approval is backed by results from a Phase-3 trail of the drug. 

At the end of the third quarter of 2022, 68 hedge funds in the database of Insider Monkey held stakes in the company.

In its Q4 2021 investor letter, Saturna Capital, an asset management firm, highlighted a few stocks and Bristol-Myers Squibb Company (NYSE:BMY) was one of them. Here is what the fund said:

“Given the likelihood of rising inflation and interest rates ahead, we anticipate adjustments to the portfolio to reduce exposure to highly valued stocks dependent on low interest rates to support terminal year valuations, while seeking investments in companies more correlated with a return to economic normalcy. We sold our positions in Bristol-Myers Squibb Company (NYSE:BMY). We believe there are better opportunities than Bristol-Myers Squibb Company (NYSE:BMY) in pharmaceuticals.”

7. Iron Mountain Incorporated (NYSE:IRM)

Number of Hedge Fund Holders: 23

Dividend Yield: 4.8%   

Iron Mountain Incorporated (NYSE:IRM) is a real estate investment trust that focuses on storage and information management services.

Earlier this month, Iron Mountain (NYSE:IRM) reaffirmed its full-year guidance even after its third-quarter revenue missed estimates.

For the past eleven years, the company has consistently paid a dividend to shareholders. On February 24, it declared a quarterly dividend of $0.6185 per share, in line with previous. It also beat market estimates on revenue for the fourth quarter of 2021 by $10 million. The guidance for 2022 was also strong with revenues expected to be around $5.275 billion against estimates of $5 billion. 

On April 12, Stifel analyst Shlomo Rosenbaum kept a Buy rating on Iron Mountain Incorporated (NYSE:IRM) stock and raised the price target to $62 from $52, noting that there was “increased optionality” around mergers and acquisitions to increase the revenue growth trajectory. 

6. Arbor Realty Trust, Inc. (NYSE:ABR)

Number of Hedge Fund Holders: 13

Dividend Yield:11.23%      

Arbor Realty Trust, Inc. (NYSE:ABR) is a New York-based real estate investment trust. It distributes at least 90% of taxable income to shareholders.

Earlier in November, the stock jumped after the company raised its quarterly dividend by a penny to $0.40 per share following strong third quarter results. The company’s EPS in the quarter came in at $0.56, crushing the estimates of $0.36 consensus.

In mid-February, the firm declared a quarterly dividend of $0.37 per share, an increase of close to 3% from the previous dividend of $0.36. The two business segments that the firm operates in include structured loan origination and agency loan origination. The shareholder return of the company is one of the best in the real estate market over the past five years. 

On April 25, Piper Sandler analyst Crispin Love initiated coverage of Arbor Realty Trust, Inc. (NYSE:ABR) stock with an Overweight rating and a price target of $20, highlighting the diversified revenue model, industry tailwinds in the multifamily bridge space, and an attractive valuation as some of the catalysts for the shares. 

At the end of the third quarter of 2022, 13 hedge funds in the database of Insider Monkey held stakes worth $99 million in Arbor Realty Trust, Inc. (NYSE:ABR), the same as in the previous quarter worth $68 million.

In addition to Amazon.com, Inc. (NASDAQ:AMZN), Alphabet Inc. (NASDAQ:GOOG), and Microsoft Corporation (NASDAQ:MSFT), Arbor Realty Trust, Inc. (NYSE:ABR) is one of the stocks that hedge funds are buying amid rising market uncertainty. 

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Disclosure. None. 10 Best Stocks to To Increase Your Dividend Income is originally published on Insider Monkey.