We recently compiled a list of the 10 Best Dividend Aristocrats with Over 3% Yield. In this article, we are going to take a look at where Hormel Foods Corporation (NYSE:HRL) stands against the other dividend stocks with over 3% yield.
When it comes to investing in stocks, high-growth companies often steal the spotlight. However, during uncertain times, dividend stocks—companies that regularly pay out quarterly dividends to shareholders—can serve as safe havens, helping to build wealth regardless of market conditions. Historically, dividends have played a significant role in stock market gains. Since 1930, dividends have contributed about 40% of the S&P 500’s total returns. When it comes to dividend stocks, companies that consistently increase their dividends hold special importance for investors. These companies provide shareholders with a steadily growing income.
One popular dividend strategy to invest in dividend growth stocks is dividend aristocrats, which are the companies that have raised their payouts for 25 consecutive years. Though the dividend aristocrats index is lagging this year, delivering a little over 5% return year-to-date, it has performed well in the long run, especially during market downturns. Phillip Brzenk, S&P’s global head of multi-asset indexes, studied the performance of dividend growth strategies, focusing on times when the market performed negatively. He discovered that since the end of 1989, there have been six years when the broader market experienced negative returns. In each of those years, the Dividend Aristocrats index outperformed the benchmark by an average of 13.28%. Notably, the Dividend Aristocrats even achieved a positive total return in three of those years.
Given the strong returns of dividend growth stocks, numerous companies are keen to enhance their dividends. In the second quarter of 2024, there were 539 dividend increases, a 17.2% rise from the 460 increases in the same quarter of 2023. The total dividend hikes amounted to $20.4 billion for the quarter, significantly up from $9.8 billion in Q2 2023, according to a report by S&P Dow Jones Indices. These dividend increases aren’t just a quick fix to attract investors; it’s supported by strong corporate balance sheets and increased cash flows. According to Janus Henderson, corporate cash flow remained solid across most sectors in 2023, providing ample resources for dividends and share buybacks. Consequently, global dividend growth increased by 5% for the year, following the long-term trend. The firm also gave an optimistic outlook for dividends in 2024, predicting $1.72 trillion in dividends for the year, marking a 3.9% increase on a headline basis, equivalent to a 5% growth rate.
Dividend aristocrat stocks are renowned for their growing income, but that doesn’t mean they lack solid yields. Many dividend aristocrats provide above-average yields along with decades of consistent dividend growth. This combination is particularly advantageous for income investors, as it offers the best of both worlds: robust yields and steady growth. Let’s now take a look at some of the best dividend aristocrat stocks with over 3% yield.
Our Methodology:
For this list, we looked at a group of 67 dividend aristocrat companies, which are known for raising dividends for 25 years or more. From this list, we chose 10 stocks with dividend yields above 3%, as of July 17, and arranged them in order from lowest to highest yield. We’ve also mentioned the hedge fund sentiment for each stock, which was sourced from Insider Monkey’s database of 920 funds as of Q1 2024.
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 close-up of a hand cutting fresh turkeys, revealing the perishable products of the company.
Hormel Foods Corporation (NYSE:HRL)
Dividend Yield as of July 17: 3.51%
Hormel Foods Corporation (NYSE:HRL) is a Minnesota-based food processing company that specializes in marketing and production of a wide range of consumer-branded food and meat products. On May 20, the company declared a quarterly dividend of $0.2825 per share, which was in line with its previous dividend. The company has been rewarding shareholders with growing dividends for the past 58 years. With a dividend yield of 3.5% as of July 17, HRL is one of the best dividend aristocrat stocks on our list.
Hormel Foods Corporation (NYSE:HRL) is currently facing challenges in passing rising costs to customers, unlike its competitors. Its turkey operations have been hit hard by avian flu outbreaks. In the first quarter of 2024, the company posted revenue of $2.9 billion, down 3% from the same period last year. Its operating income also fell to $252 million, from $296 million in the prior-year period. Despite these challenges, the company reported stable volumes across various segments. Notably, its food service volumes increased by 2.9% compared to the same period last year. The company had a strong first half, with consecutive quarters of earnings exceeding expectations and a substantial increase in operating cash flows. It also made progress on strategic initiatives and is on track to meet its goals to improve business performance and drive long-term growth and returns for shareholders. Year-to-date, the company generated over $640 million in operating cash flow, marking a 55% increase from the same period last year.
Despite these current business headwinds, analysts are positive about Hormel Foods Corporation (NYSE:HRL) because the company has a strong history of successfully managing the consumer staples market. As a Dividend King, it has endured tough economic times over the past 50 years while consistently rewarding its investors.
At the end of Q1 2024, 27 hedge funds tracked by Insider Monkey reported having stakes in Hormel Foods Corporation (NYSE:HRL), up from 25 in the previous quarter. These stakes have a collective value of over $604.3 million. With over 2.6 million shares, Millennium Management was the company’s leading stakeholder in Q1.
Overall HRL ranks 10th on our list of the best dividend aristocrats to buy. You can visit 10 Best Dividend Aristocrats with Over 3% Yield to see the other dividend aristocrats that are on hedge funds’ radar. While we acknowledge the potential of HRL 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 HRL 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.