In this article, we discuss 14 best income stocks to invest in. You can skip our detailed analysis of income stocks and the performance of dividend stocks over the years, and go directly to read 5 Best Income Stocks To Invest In.
Income stocks are picking up steam this year because they offer a relatively stable and consistent source of income through dividends. One of the main reasons for considering dividend stocks is that these companies tend to perform well during market downturns. For instance, the companies in the S&P 500 paid out a record $565 billion in dividends last year despite stock market turbulence.
Dividends accounted for nearly 40% of the annualized total return of the broad market from January 1926 through March 2023, including both capital appreciation and dividends reinvested. Dividend-paying securities can be attractive to investors during recessionary periods and are seen as more stable and financially secure than companies that do not pay dividends. In our previous article titled 11 Best 5% Dividend Stocks To Buy According To Analysts, we reported that since 1926, dividends accounted for over 50% of the market’s total returns during decades with elevated interest rates and slowing growth. Some of the best dividend stocks for regular income include McDonald’s Corporation (NYSE:MCD), Roper Technologies, Inc. (NYSE:ROP), and Aflac Incorporated (NYSE:AFL).
Regular income is often a primary concern for retirees, as they no longer have the same level of steady income from employment that they had during their working years. But not only retirees, any investor who is seeking regular income from their investments may consider dividend stocks as part of their investment strategy. Moreover, concerns about high-interest rates and growing inflation have pushed investors into dividend-paying stocks this year. According to a report by Wall Street Journal, dividend-focused exchange-traded funds experienced inflows worth approximately $2.8 billion this year through April. The report also mentioned that there are now 180 US dividend ETFs with total assets of over $384 billion.
Dividends have also contributed to an individual’s personal income over the years. Dividends as a source of personal income stood at 8.5% in the fourth quarter of 2022, compared with 3.2% in the first quarter of 1980, as reported by S&P Dow Jones Indices and the Bureau of Economic Analysis. Readers can also check out 14 Best Passive Income Stocks To Buy Now to know more about income stocks.
Photo by lucas Favre on Unsplash
Our Methodology:
We scoured Insider Monkey’s database of 943 hedge funds as of the fourth quarter of 2022 and picked stocks that pay regular dividends to shareholders. From that list, we shortlisted companies with strong balance sheets and stable cash flow, which show the sustainability of their future dividends and make them reliable investments for generating stable income for shareholders. We ranked these companies in ascending order of the number of funds that have stakes in them as of Q4.
Best Income Stocks To Invest In
14. Realty Income Corporation (NYSE:O)
Number of Hedge Fund Holders: 24
Realty Income Corporation (NYSE:O) is an American real estate investment trust company. It is one of the best dividend stocks on our list as the company pays monthly dividends to shareholders. Moreover, the company has raised its payouts consistently for 29 years. It currently offers a monthly dividend of $0.255 per share and has a dividend yield of 4.93%, as of April 25.
In addition to some of the best dividend stocks such as McDonald’s Corporation (NYSE:MCD), Roper Technologies, Inc. (NYSE:ROP), and Aflac Incorporated (NYSE:AFL), Realty Income Corporation (NYSE:O) is also favored by investors due to its monthly payouts.
In the fourth quarter of 2022, Realty Income Corporation (NYSE:O) reported revenue of $888.7 million, which showed a 30% growth from the same period last year. In 2022, the company’s dividend payments represented 75.7% of its diluted AFFO per share.
In April, Scotiabank upgraded Realty Income Corporation (NYSE:O) to Outperform and also raised its price target on the stock to $69. The firm highlighted the company’s lower cost of capital and strong balance sheet.
As per Insider Monkey’s database for Q4 2022, 24 hedge funds owned stakes in Realty Income Corporation (NYSE:O), compared with 28 in the previous quarter. These stakes are valued at roughly $327 million collectively.
13. The Clorox Company (NYSE:CLX)
Number of Hedge Fund Holders: 34
The Clorox Company (NYSE:CLX) is an American manufacturing company, headquartered in California. The company specializes in consumer and professional products, including bleach and other cleaning supplies. Its cash position remained strong in its fiscal Q2 2023, as it reported an operating cash flow of $387 million, up from $222 million during the same period last year. At the end of December 2022, the company had over $168 million available in cash and cash equivalents.
The Clorox Company (NYSE:CLX) currently pays a quarterly dividend of $1.18 per share for a dividend yield of 2.86%, as of April 25. The company is one of the best dividend stocks for income on our list as it has raised its dividends for 20 years in a row.
At the end of Q4 2022, 34 hedge funds tracked by Insider Monkey owned stakes in The Clorox Company (NYSE:CLX), up from 27 in the previous quarter. These stakes have a consolidated value of over $764.3 million. Among these hedge funds, Viking Global was the company’s leading stakeholder in Q4.
12. Amgen Inc. (NASDAQ:AMGN)
Number of Hedge Fund Holders: 35
Amgen Inc. (NASDAQ:AMGN) is a California-based multinational biopharmaceutical company that develops and manufactures medicines for patients with serious illnesses. In the fourth quarter of 2022, the company posted revenue of $6.8 billion, which beat analysts’ estimates by $30 million. Its free cash flow for FY22 came in at $8.8 billion, up from $8.4 billion in 2021, which shows that its cash position is strong to generate regular income for shareholders.
Amgen Inc. (NASDAQ:AMGN), one of the best dividend stocks for income, has raised its payouts every year since 2011. Its current quarterly dividend stood at $2.13 per share for a dividend yield of 3.48%, as of April 25.
In March, Wells Fargo upgraded Amgen Inc. (NASDAQ:AMGN) to Overweight with a $265 price target, appreciating the company’s marketing strength in its recent acquisitions.
Amgen Inc. (NASDAQ:AMGN) was a popular stock among hedge funds in Q4 2022, as 60 funds in Insider Monkey’s database owned stakes in the company, up from 53 in the previous quarter. The collective value of these stakes is over $2.2 billion. With over 1.5 million shares, Two Sigma Advisors was the company’s leading stakeholder in Q4.
11. Skyworks Solutions, Inc. (NASDAQ:SWKS)
Number of Hedge Fund Holders: 43
An American semiconductor manufacturing company, Skyworks Solutions, Inc. (NASDAQ:SWKS) is next on our list of the best dividend stocks for income. Stifel initiated its coverage on the stock in April with a Buy rating and a $150 price target. The firm believes that the company will continue to diversify into broad-based markets.
Skyworks Solutions, Inc. (NASDAQ:SWKS) reported a solid cash position in its fiscal Q1 2023 earnings. The company’s operating cash flow for the quarter came in at $773.4 million, compared with $581.7 million during the same period last year. Moreover, it also returned $265.6 million to shareholders in dividends and share repurchases during the quarter.
Skyworks Solutions, Inc. (NASDAQ:SWKS) currently pays a quarterly dividend of $0.62 per share. The company maintains an eight-year streak of consistent dividend growth. The stock has a dividend yield of 2.44%, as of April 25.
According to Insider Monkey’s database for Q4 2022, 43 hedge funds reported having stakes in Skyworks Solutions, Inc. (NASDAQ:SWKS), up from 39 in the previous quarter. These stakes have a total value of over $871 million.
Heartland Advisors mentioned Skyworks Solutions, Inc. (NASDAQ:SWKS) in its Q3 2022 investor letter. Here is what the firm has to say:
“Before the risk-on rebound early in the quarter, we were searching for opportunities to shift from our defensive stance, looking for beaten-down, high-quality “early cycle” leaders. Existing holding, Skyworks Solutions, Inc. (NASDAQ:SWKS), represents one such opportunity that was added to one weakness.
Skyworks is one of two leading providers of radio frequency system components to smartphone makers and electronics manufacturers. With every step-up in product complexity, over the past two decades, the competitive landscape has shrunk while gross margins have increased significantly. 5G represents another such step-up, which is likely to increase how much Skyworks can make per smartphone. (Click here to view the full text)
10. International Business Machines Corporation (NYSE:IBM)
Number of Hedge Fund Holders: 43
International Business Machines Corporation (NYSE:IBM) is a multinational tech company, based in New York. The company specializes in the production of system hardware and software. On April 15, the company declared a 0.6% hike in its quarterly dividend to $1.66 per share. This marked the company’s 28th consecutive year of dividend growth, which makes it one of the best dividend stocks on our list. The stock’s dividend yield on April 25 came in at 5.24%.
In the first quarter of 2023, International Business Machines Corporation (NYSE:IBM) reported an operating cash flow of $3.8 billion and its free cash flow came in at $1.3 billion. The company returned $1.5 billion to shareholders in dividends during the quarter.
BMO Capital maintained a Market Perform rating on International Business Machines Corporation (NYSE:IBM) in April with a $145 price target. The firm mentioned that the company’s Q1 earnings were ‘reasonable’.
At the end of Q4 2022, 43 hedge funds tracked by Insider Monkey reported owning stakes in International Business Machines Corporation (NYSE:IBM), compared with 40 in the previous quarter. These stakes have a collective value of $1.23 billion.
Diamond Hill Capital mentioned International Business Machines Corporation (NYSE:IBM) in its Q4 2022 investor letter. Here is what the firm has to say:
“New positions initiated in Q4 included shorts International Business Machines Corporation (NYSE:IBM), Acushnet Holdings (GOLF) and elf Beauty (ELF). Since diversified information technology company IBM’s 2019 acquisition of Red Hat, the company has aggressively pursued a hybrid cloud strategy. Though IBM and its new management team have made solid progress on this pivot, we believe the company still meaningfully lags the cloud hyperscalers and other cloud-native companies. Management has also laid out aggressive long-term targets for revenue growth and free cash flow, both of which we believe the company will struggle to achieve as it faces intense competition in its hybrid cloud business and structural headwinds in the company’s legacy businesses.”
9. Waste Management, Inc. (NYSE:WM)
Number of Hedge Fund Holders: 43
Waste Management, Inc. (NYSE:WM) is a Texas-based environmental services company. The company offers a quarterly dividend of $0.70 per share, having raised it by 7.7% in February this year. It is one of the best dividend stocks on our list as it has been growing its dividends consistently for the past 20 years. The stock’s dividend yield came in at 1.69%, as of April 25.
Truist initiated its coverage on Waste Management, Inc. (NYSE:WM) in April with a Buy rating and a $190 price target, calling the company its favorite name in the group due to its aggressive sustainability investments.
At the end of Q4 2022, 44 hedge funds owned investments in Waste Management, Inc. (NYSE:WM), up from 41 in the previous quarter. These investments are worth over $6.3 billion collectively.
Diamond Hill Capital mentioned Waste Management, Inc. (NYSE:WM) in its Q1 2022 investor letter. Here is what the firm has to say:
“We also initiated a position in Waste Management (NYSE:WM), one of the largest providers of waste collection services in the US. We believe it is a high-quality business with ownership of key landfill assets that provide pricing power over the long term. Its stock was trading at a discount to our estimate of intrinsic value due to short-term market concerns over an increase in growth investments—we expect these investments to be value-creating over the long term.”
8. Verizon Communications Inc. (NYSE:VZ)
Number of Hedge Fund Holders: 56
Verizon Communications Inc. (NYSE:VZ) provides communications and entertainment products and services to its consumers. In Q1 2023, the company reported revenue of roughly $33 billion and its net income for the quarter came in at $5 billion. The company generated $8.3 billion in operating cash flow, up from $6.8 billion during the same period last year.
Verizon Communications Inc. (NYSE:VZ) has been rewarding shareholders with increased dividends for the past 16 years, which makes it one of the best dividend stocks on our list. The company pays a quarterly dividend of $0.6525 per share and has a dividend yield of 7%, as of April 25.
According to Insider Monkey’s Q4 2022 database, 56 hedge funds owned investments in Verizon Communications Inc. (NYSE:VZ) with a value of over $1.5 billion collectively.
Mawer Investment Management mentioned Verizon Communications Inc. (NYSE:VZ) in its Q3 2022 investor letter. Here is what the firm has to say:
“There are a few other segments of our portfolios that displayed weakness in the quarter. Cable and telecommunication companies have been an area that has lagged the broader market as their worlds are increasingly colliding. Companies such as Verizon (NYSE:VZ) has been impacted as wireless operator is spending heavily to attract internet subscribers with fixed wired access and the cable companies are trying to build wireless businesses.”
7. ConocoPhillips (NYSE:COP)
Number of Hedge Fund Holders: 67
ConocoPhillips (NYSE:COP) is an American multinational energy company that specializes in hydrocarbon exploration and production. The company recently announced its 10-year plan which is widely appreciated by Street analysts. In view of this, Raymond James raised its price target on the stock to $142 in April with a Buy rating on the shares.
One of the best dividend stocks for income, ConocoPhillips (NYSE:COP) has been making uninterrupted dividends to shareholders since 1993. It pays a quarterly dividend of $0.51 per share for a dividend yield of 5.23%, as of April 25.
At the end of December 2022, 67 hedge funds tracked by Insider Monkey held stakes in ConocoPhillips (NYSE:COP), up from 64 in the previous quarter. These stakes have a consolidated value of roughly $3 billion.
Oakmark Funds mentioned ConocoPhillips (NYSE:COP) in its Q1 2023 investor letter. Here is what the firm has to say:
“ConocoPhillips (NYSE:COP) is one of the largest and lowest cost U.S. exploration and production companies in the country, led by CEO Ryan Lance—in our view one of the best value creators in the industry. ConocoPhillips’s share prices fell in the first quarter as oil prices receded, which is not atypical. We were buying the company at prices where it could generate its entire market cap in free cash flow over the next decade while growing the production such that at the end of that time, the base of production would be one-third higher. This sort of reinvestment opportunity is unique to ConocoPhillips and clearly not reflected in the current share price.”
6. Bristol-Myers Squibb Company (NYSE:BMY)
Number of Hedge Fund Holders: 69
Bristol-Myers Squibb Company (NYSE:BMY) is a pharmaceutical industry company that offers innovative medical solutions to its consumers. The company has been raising its dividends consistently for the past 17 years and can be added to dividend portfolios alongside some of the best dividend stocks, such as McDonald’s Corporation (NYSE:MCD), Roper Technologies, Inc. (NYSE:ROP), and Aflac Incorporated (NYSE:AFL). It currently pays a quarterly dividend of $0.57 per share and has a dividend yield of 3.25%, as of April 25.
At the end of December 2022, 69 hedge funds in Insider Monkey’s database were long Bristol-Myers Squibb Company (NYSE:BMY), compared with 68 funds in the previous quarter. The stakes owned by these hedge funds have a collective value of over $1.75 billion.
Baron Funds mentioned Bristol-Myers Squibb Company (NYSE:BMY) in its Q2 2022 investor letter. Here is what the firm has to say:
“We established a position in Bristol-Myers Squibb Company, a global biopharmaceutical company focused on discovering, developing, and selling medicines for patients in the therapeutic areas of oncology, immunology, cardiovascular, and neurology. The stock trades at a low valuation relative to its current earnings because the company faces loss of exclusivity on several key drugs over the next eight years, including Revlimid, Eliquis, and Opdivo.
At the same time, Bristol-Myers has multiple new products in the early stages of launch (e.g., Opdualag, Camzyos, Breyanzi, and Reblozyl), a robust new product pipeline (e.g., Deucravacitinib, Milvexian, and CELMoD agents), and a strong balance sheet combined with strong free cash flow generation that the company can use for acquisitions. Management believes these growth drivers can more than offset the loss of exclusivity and drive revenue growth through the end of the decade. Given the company’s low valuation, if the company can execute, we think there is substantial upside in the stock.”
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Disclosure. None. 14 Best Income Stocks To Invest In is originally published on Insider Monkey.