We recently compiled a list of the 10 Best Dividend Stocks of All Time. In this article, we are going to take a look at where The Procter & Gamble Company (NYSE:PG) stands against the other dividend stocks.
Dividend stocks aren’t a quick fix for investing; they offer lasting rewards over time. Unfortunately, many investors miss the boat on this and expect to strike it rich overnight. When that doesn’t pan out, they chase the latest stock market trends, ignoring the steady gains that dividend stocks can provide. This trend has been evident over the past year, with AI stocks taking the spotlight and leaving income stocks in the dust. However, there’s a silver lining: many tech companies have begun offering dividends this year, highlighting their long-term potential.
The current yields of these tech stocks might be small, which leads many income investors to overlook their impressive growth records. This is unfortunate because dividend growth can significantly boost both long-term income and capital gains. Analysts believe that dividend growth and sustainability are more crucial than just the yield. For instance, Microsoft’s roughly 864% return over a decade far outpaces the returns from non-tech stocks like AT&T and Chevron, despite their higher yields. The tech giant currently pays $0.75 per quarter and offers a dividend yield of 0.7%. However, you need to keep in mind that its quarterly dividend was $0.28 a decade ago and its dividend yield was 2.5%. Despite the nearly tripling its quarterly dividend, the stock’s yield went down to 0.7% and that was a great thing for its dividend investors.
Dividend stocks are often compared not just with high-yield stocks but also with those that don’t pay dividends to provide investors with a comprehensive view. According to data from Hartford Funds, from 1973 to 2023, dividend-paying companies offered an average annual return of 9.17%, while stocks without dividends only returned 4.27%. The report also noted that companies with stable dividends had an average return of 6.74%, which lagged behind the performance of companies that increased their dividends.
While regularly increasing dividends is challenging, maintaining consistent payouts year after year is also no easy feat for companies. Analysts warn against yield traps—stocks with high yields but unstable dividend policies. Brian Bollinger, president of Simply Safe Dividends, shared his views on dividend investing in a CNBC interview. He recommended focusing on top-quality companies, which often provide dividend yields of around 3% to 4%. These firms usually show steady growth in their dividend payments, boosting the annual income stream and helping to counteract inflation. He also pointed out that stocks with lower yields tend to be safer investments with more reliable payout structures.
In this article, we will take a look at some of the best dividend stocks of all time that have consistent records of paying dividends to shareholders.
Our Methodology:
For this article, we scanned the list of companies that have paid dividends to shareholders for at least 75 years. From that list, we picked companies with dividend yields of above 2%, as of July 23. We analyzed these companies through their balance sheets and overall financial health to determine their dividend stability. Additionally, we assessed the sentiment of hedge funds for each stock using Insider Monkey’s Q1 2024 database. The stocks are arranged in ascending order based on the number of hedge funds that hold stakes in these companies. 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).
A happy couple viewing the products of this household and personal product company in a mass merchandiser store.
The Procter & Gamble Company (NYSE:PG)
Number of Hedge Fund Holders: 69
Dividend Yield as of July 23: 2.40%
The Procter & Gamble Company (NYSE:PG) is an American multinational consumer goods company that specializes in consumer goods. The company is a strong dividend payer, with a dividend growth streak spanning over 68 years. In addition, it has regularly distributed dividends to shareholders for 134 years straight. The company has a strong cash position, indicating its ability to maintain its dividend policy while meeting its targets. In the latest quarter, it generated over $4 billion in operating cash flow, with adjusted free cash flow reaching $3.3 billion and a free cash flow productivity of 87%. The company expects adjusted free cash flow productivity to reach 90% and plans to distribute over $9 billion in dividends in 2024. As of July 23, the company has a dividend yield of 2.40%.
In July of this year, The Procter & Gamble Company (NYSE:PG) hit a new all-time high of $169 per share, exceeding its previous peak of about $168, which it achieved in June. This milestone is largely attributed to the company’s strong execution. The company has consistently performed well, especially during inflationary periods, where it effectively implemented significant price hikes. For example, in fiscal 2023, the company achieved organic sales growth in every quarter.
According to Insider Monkey’s database of Q1 2024, 69 hedge funds owned stakes in The Procter & Gamble Company (NYSE:PG), down slightly from 71 in the previous quarter. These stakes have a total value of over $7.2 billion.
Overall PG ranks 1st on our list of the best dividend stocks to buy. You can visit 10 Best Dividend Stocks of All Time to see the other dividend stocks that are on hedge funds’ radar. While we acknowledge the potential of PG as an investment, our conviction lies in the belief that some deeply undervalued dividend stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for a deeply undervalued dividend stock that is more promising than PG but that trades at less than 7 times its earnings and yields nearly 10%, check out our report about the dirt cheap dividend stock.
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Disclosure: None. This article is originally published at Insider Monkey.