In this comprehensive guide, we will explore 10 exceptional long-term dividend stocks that are prime candidates for investment right now. If you’re looking to bypass our extensive analysis of these stocks and the principles of dividend investing, feel free to jump straight to our article This Is the Best Time to Buy These 5 Long-Term Dividend Stocks.
For investors focused on long-term growth and passive income, implementing strategic investment policies can yield significant benefits. Portfolios that include stable dividend stocks can provide robust returns over time, even during periods when the broader market struggles. Moreover, companies that consistently pay and increase their dividends typically exhibit stronger financial health and profitability compared to those that do not distribute dividends, making them more appealing to discerning investors.
As a result, well-established dividend stocks like Exxon Mobil Corporation (NYSE:XOM), Chevron Corporation (NYSE:CVX), and AbbVie Inc. (NYSE:ABBV) remain perennial favorites among investors. This is primarily due to the fact that dividends contribute to over 40% of a company’s total return, a trend that has held steady for more than 90 years, as highlighted in a Morgan Stanley report on dividend investing. Historical data shows that dividend-paying stocks outperformed their non-dividend counterparts from 1991 to 2015, with an average annual return of 9.7% versus 4.18% for non-dividend payers. Additionally, stocks that regularly increase their dividend payouts have consistently outperformed the S&P 500 benchmark.
In a recent report from the BlackRock Equity Dividend Fund, it was noted that in 2022, the dividend stocks within this fund outshone the overall S&P 500 over a 12-month period concluding on April 30. Furthermore, a Barron’s article from May revealed that dividend stocks with higher payout ratios yielded an annual return of 10.9% between 1999 and 2019, compared to just 6.6% for those with lower ratios.
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We have identified a selection of strong dividend stocks with significant long-term growth potential. These companies are considered defensive investments, strategically positioned to thrive during the challenging economic landscape anticipated for 2023 and beyond. Analysts currently believe that this is an opportune moment for investors to consider adding these stocks to their portfolios.
Explore the Best Long-Term Dividend Stocks to Invest In Today
10. Invest in McDonald’s Corporation (NYSE:MCD) for Steady Returns
Number of Hedge Fund Holders: 58
Dividend Yield as of November 1: 2.23%
McDonald’s Corporation (NYSE:MCD) is a leading player in the consumer discretionary sector, renowned for its global restaurant operations and franchising model. Headquartered in Chicago, Illinois, McDonald’s has built an iconic brand that resonates with customers worldwide.
On October 20, Jeffrey Bernstein from Barclays reaffirmed an Overweight rating on McDonald’s shares, setting a price target of $270. The company’s impressive performance in the third quarter, where it exceeded market expectations, has driven positive sentiment among analysts and investors alike.
In October, McDonald’s reported a remarkable 9.5% increase in global comparable sales, significantly outpacing the 5.8% consensus estimate. In the U.S., comparable sales rose by 6.1%. Valuentum analysts project a compound annual revenue growth rate of 6.2% for McDonald’s over the next five years, markedly higher than the historical three-year growth rate of 3.4%. Additionally, the company’s objective to achieve 95% franchising in the long term will bolster its resilience against inflation and operational challenges.
Bridgewater Associates emerged as the largest shareholder of McDonald’s in the second quarter, with a substantial stake of 2.1 million shares valued at approximately $511.4 million. Overall, 58 funds maintained long positions in McDonald’s, collectively holding shares valued at around $2.7 billion.
McDonald’s Corporation (NYSE:MCD) consistently positions itself among the most reliable dividend stocks available, drawing parallels with industry giants like Exxon Mobil Corporation (NYSE:XOM), Chevron Corporation (NYSE:CVX), and AbbVie Inc. (NYSE:ABBV).
9. Invest in PepsiCo, Inc. (NASDAQ:PEP) for Strong Dividend Growth
Number of Hedge Fund Holders: 62
Dividend Yield as of November 1: 2.53%
PepsiCo, Inc. (NASDAQ:PEP) stands as a major player in the consumer staples sector, specializing in the manufacturing and distribution of beverages and convenient foods globally. Based in Purchase, New York, PepsiCo’s extensive product lineup includes popular snacks, dips, and soft drinks under well-known brands such as Pepsi and Quaker Foods.
On October 14, analyst Lauren Lieberman at Barclays reiterated an Overweight rating on PepsiCo shares, raising the price target from $183 to $185, further solidifying investor confidence in the company’s long-term outlook.
PepsiCo has a remarkable track record of increasing its dividend for 50 consecutive years, boasting a five-year dividend growth rate of 7.39%. In October, the company announced upward revisions to its EPS and revenue forecasts for the year, raising both by 2%. Additionally, the forecast for organic revenue growth has been increased to 12% from a previous estimate of 10%. Analysts project an annualized EPS growth rate of 7.3% for PepsiCo over the next three to five years, reflecting the company’s impressive stability in earnings growth.
In the second quarter, 62 hedge funds held long positions in PepsiCo, with total stake values of $4.9 billion, up from $4.6 billion in the previous quarter, indicating growing institutional interest.
8. Consider Colgate-Palmolive Company (NYSE:CL) for a Stable Investment
Number of Hedge Fund Holders: 50
Dividend Yield as of November 1: 2.55%
Colgate-Palmolive Company (NYSE:CL) is a well-established consumer staples company operating through various segments, including Oral, Personal and Home Care, and Pet Nutrition. The company offers a wide range of products, including toothpaste, mouthwash, and hand soaps, and is headquartered in New York, USA.
As of October 17, Steve Powers at Deutsche Bank maintains a Buy rating on Colgate-Palmolive shares, assigning an $85 price target that reflects confidence in the company’s growth prospects.
Colgate-Palmolive has consistently raised its dividend for an impressive 59 years, showcasing its commitment to returning value to shareholders. This October, the company enhanced its organic sales growth forecast for 2022 from 5%-7% to 6%-7%. Notably, Third Point Investors initiated a significant position in Colgate-Palmolive in October, emphasizing its defensive nature and strong pricing power in inflationary environments. The company’s Hill’s Pet Nutrition business, in particular, has demonstrated robust profitability, achieving organic sales growth of 11%-12% in recent years.
Ayrshire Capital Management was the largest stakeholder in Colgate-Palmolive in the second quarter, holding 48,328 shares valued at $3.4 million. Overall, 50 hedge funds were long the stock, with a total stake value of $2.6 billion.
Third Point, a New York-based investment advisor, recently included Colgate-Palmolive in its third-quarter 2022 investor letter, outlining several favorable attributes of the investment, including its defensive posture and pricing power amidst inflationary pressures.
“Third Point recently acquired a significant position in Colgate-Palmolive Company (NYSE:CL). The investment fits several important criteria in the current investment environment. First, the business is defensive and has significant pricing power in inflationary conditions. Second, there is meaningful hidden value in the company’s Hill’s Pet Nutrition business, which we believe would command a premium multiple if separated from Colgate’s consumer assets. Third, there is a favorable industry backdrop in consumer health, with new entrants via spin-offs and potential for consolidation. Finally, the current valuation is attractive both because earnings growth is poised to inflect higher, and because shareholders are paying very little for the optionality around Hill’s or Colgate’s ability to participate in further consolidation in the consumer health sector.
Colgate has a strong portfolio of brands and operates across four categories that should perform well across most economic conditions: oral care, home care, personal care, and pet nutrition. Although Colgate has delivered organic sales growth of 5-6% over the past few years, earnings growth has been disappointing, and the stock has become a perennial underperformer. Foreign exchange headwinds have pressured reported results. Business reinvestment, supply chain disruption, and inflationary pressures have weighed heavily on margins; those headwinds are now reversing. Stepped up investments in demand generation, product innovation, and digital capabilities are starting to pay off. Global supply chain bottlenecks are easing and product availability on the shelf is improving. And, most importantly, raw material, transportation, and wage pressures are stabilizing, and even reversing in some areas, at the same time additional pricing takes effect. Taken together, the stage is set for Colgate to deliver several years of outsized earnings growth, as sales continue to increase, foreign exchange movements are annualized, and margins finally recover…” (Click here to view the full text)
7. The Home Depot, Inc. (NYSE:HD): A Strong Buy for Home Improvement Investments
Number of Hedge Fund Holders: 75
Dividend Yield as of November 1: 2.57%
The Home Depot, Inc. (NYSE:HD) is a leading consumer discretionary company specializing in home improvement products. The firm sells a variety of items, including building materials, lawn and garden supplies, and more, through its extensive retail network across the United States. Based in Atlanta, Georgia, Home Depot has positioned itself as a go-to destination for homeowners and contractors alike.
As of October 31, Citi analyst Steven Zaccone holds a Buy rating on The Home Depot shares, with a price target set at $340, indicating a strong outlook for the stock.
The Home Depot has a remarkable history of increasing its dividend for 12 consecutive years, establishing itself as a reliable option for income-seeking investors. The management team has adeptly navigated the current market environment, reporting a revenue of $82.7 billion in the first half of 2022, reflecting a 5.2% increase compared to the same period in 2021. Additionally, the company experienced a 4.1% rise in comparable sales during this timeframe.
In the second quarter, 75 hedge funds held long positions in The Home Depot, an increase from 68 hedge funds in the previous quarter. The total stake values for these funds were $5.6 billion and $6.1 billion, respectively, demonstrating growing institutional confidence in the company.
Diamond Hill Capital, an investment advisor, highlighted The Home Depot in their second-quarter 2022 investor letter, showcasing the company’s robust operational capabilities and its strategic positioning in the home improvement industry.
“The Home Depot, Inc. (NYSE:HD) is a high-quality operator in the home improvement industry. Macroeconomic concerns, particularly the rise in mortgage rates, caused the share price to pull back and trade at a greater discount to our estimate of intrinsic value. We believe Home Depot is well positioned to continue gaining share due to its premium real estate locations, strong operations, and recent investments in its supply chain. We like Home Depot’s exposure to the professional customer and believe in its ability to take market share in this segment as we believe home improvement spending has the potential to remain resilient in upcoming years.”
6. Merck & Co., Inc. (NYSE:MRK): A Leading Healthcare Investment Choice
Number of Hedge Fund Holders: 84
Dividend Yield as of November 1: 2.73%
Merck & Co., Inc. (NYSE:MRK) is a prominent global healthcare and pharmaceutical company that specializes in both human and animal health products. Based in Kenilworth, New Jersey, Merck has built a robust reputation in the industry with its innovative therapies and commitment to improving health outcomes.
On October 28, Terrence Flynn from Morgan Stanley reiterated an Equal Weight rating on Merck’s shares, raising the price target from $91 to $100, indicating a positive outlook for the stock.
Merck has a consistent track record of increasing its dividend for 11 consecutive years, boasting a five-year dividend growth rate of 9.01%. At the beginning of 2022, the company provided strong guidance, expecting sales of $56.8 billion and earnings of $7.2 per share. Currently, Merck anticipates full-year sales in the range of $58.5 to $59 billion, highlighting its growth trajectory.
According to hedge fund data, 84 funds held long positions in Merck during the second quarter, with a total stake value of $5.9 billion. Beech Hill Partners was the largest shareholder, holding 73,363 shares valued at $6.3 million.
Merck & Co., Inc. (NYSE:MRK) shares remain on the radar of both hedge funds and individual investors, similar to other stalwart dividend stocks like Exxon Mobil Corporation (NYSE:XOM), Chevron Corporation (NYSE:CVX), and AbbVie Inc. (NYSE:ABBV).
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Disclosure: None. This Is the Best Time to Buy These 10 Long-Term Dividend Stocks is originally published on Insider Monkey.
