We recently analyzed the best dividend stocks of 2024.
Though Micron Technology, Inc. (NYSE:MU) ranks third on our list of the 10 Best Dividend Stocks of 2024, we have analyzed the stock in detail.
We are nearly halfway through the year, and the stock market is showing consistent signs of improvement. Even though the Dow Jones Industrial Average (DJIA) rose only 3.7% so far this year, its broader partner has surged by 11.1% this year so far, with its 12-month return coming in at nearly 26%, as of the close of May 23. However, dividend stocks are still not keeping up with the broader market, with the Dividend Aristocrats Index returning just 3.85% since the start of 2024. Last year also didn’t go well for these equities as tech stocks rose to fame. That said, the tech stocks that drove the market rally, have decided to enhance their shareholder return by initiating dividend policies this year. This could have an impact on the performance of dividend stocks and the overall market. David Harrell, an editor of the Morningstar Dividend Investor newsletter, made the following comment in this regard:
“The inclusion of the big names [Meta, Alphabet] in any sort of dividend indexes or dividend growth indexes is very likely to increase their correlation with the broad market.”
While dividend stocks lagged behind the market last year, their long-term performance suggests otherwise. Dividend equities represented an average of 34% of the market’s overall return from 1940 to 2023. Not only this, these stocks showed resilience and demonstrated strong performance in comparison to other asset classes during periods of high inflation. In our article titled 25 Things Every Dividend Investor Should Know, we cited data from Hartford Funds and mentioned that during eight inflationary periods between 1970 and 2022, dividend stocks outperformed their non-dividend counterparts. Specifically, during the 1970s, a decade marked by high inflation, dividends accounted for nearly 73% of the S&P 500’s total return.
In addition to this, the dividend growth rate has also surpassed inflation over the years. According to data from Yale University’s Robert Shiller, dividends per share have grown 1.6 percentage points faster annually than inflation since 1871. This growth advantage has increased in recent decades as over the past 50 years, dividends have surpassed inflation by 2.5 percentage points annually, and in the last two decades, by 4.6 annualized percentage points. This ability of dividends to outpace inflation makes them a more attractive investment for long-term investors. Therefore, analysts suggest that investors should not be concerned about dividend stocks underperforming the broader market in the short term.
Another factor attracting investors to dividend stocks is the increasing amount of dividends US companies have paid over the years. According to recent data, the S&P 500 companies paid $151.6 billion in dividends in the first quarter of 2024, up from $146.8 billion during the same period last year. The report also mentioned that 796 companies announced dividend hikes during the quarter, amounting to $22.7 billion, growing from $19.7 billion in the prior-year period. This indicates that dividend payments are on the right track this year. Analysts have also given a positive outlook for dividend stocks in 2024.
Veteran dividend investor Warren Buffett’s portfolio can be a good start for our readers to understand dividend investing. Read Warren Buffett’s 8 Best Dividend Stock Picks.
Micron Technology, Inc. (NYSE:MU)
Year-to-Date Returns as of May 20: 56.6%
Micron Technology, Inc. (NYSE:MU) started paying dividends in 2021 and has paid regular dividends to shareholders since then. The semiconductor manufacturing company currently offers a quarterly dividend of $0.115 per share and has a dividend yield of 0.36%, as of May 21. It is one of the best dividend stocks on our list as the stock returned 56.6% to shareholders this year so far. Micron shares have benefitting from a skyrocketing investment from mega tech companies on AI infrastructure. Stocks like NVDA, DELL, and MU are among the clear winners of the AI revolution. Also, Micron’s forward PE ratio currently stands at 17 which is on the cheap side for AI stocks. If you are looking for an AI stock that is more promising than Micron but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
In fiscal Q2 2024, Micron Technology, Inc. (NYSE:MU) reported revenue of $5.8 billion, which showed a significant growth of 57.7% from the same period last year. During the quarter, the company’s operating cash flow came in at $1.22, up from $343 million in the prior-year period.
As of the end of the December quarter of 2023, 92 hedge funds held stakes in Micron Technology, Inc. (NYSE:MU), up from 90 in the previous quarter. These stakes are worth over $6 billion in total.
Micron Technology, Inc. (NYSE:MU) ranks third on our list of the best dividend stocks. Click to see the 10 Best Dividend Stocks of 2024.
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Disclosure: None. This article is originally published at Insider Monkey.