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 Amcor plc (NYSE:AMCR) 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).
An automated assembly line producing a variety of packaging products.
Amcor plc (NYSE:AMCR)
Dividend Yield as of July 17: 4.84%
Amcor plc (NYSE:AMCR) is a global multinational packaging company that offers a wide range of related products for different industries. The company’s revenue declined by 7% YoY in fiscal Q3 2024 at $3.41 billion. The decrease in revenue includes a 1% favorable impact from foreign exchange rate movements, but this was offset by a 2% unfavorable impact due to lower raw material costs, which amounted to approximately $60 million being passed through. Year-to-date, its net income of $710 million also declined by 12% year-over-year. Though these results are not encouraging for investors, these challenges are temporary.
Amcor plc (NYSE:AMCR) has showcased its resilience on a global scale over the years. The company was originally founded in the 1860s as Australian Paper Manufacturers. Over time, it has undergone significant transformations. In 2000, it divested its paper goods operations, marking a strategic shift. Subsequently, through a series of strategic acquisitions, including the $7 billion purchase of Bemis in 2019, the company solidified its position as a global leader in packaging.
Amcor plc (NYSE:AMCR) has been reassuring income investors with strong free cash flow generation. In the first nine months of FY24, it reported an adjusted free cash flow of $115 million, a significant increase from $14 million during the same period last year. This improvement aligns with the company’s expectations and is mainly due to better working capital management. Management still expects adjusted free cash flow to range between $850 million to $950 million for the fiscal year.
On May 1, Amcor plc (NYSE:AMCR) declared a quarterly dividend of $0.125 per share, which was in line with its previous quarter. In the first nine months of the year, the company returned $570 million to shareholders in dividends and share repurchases. It is one of the best dividend aristocrat stocks on our list as the company has been growing its dividends consistently for the past 40 consecutive years. The stock has a dividend yield of 4.84%, as of July 17.
Of the 920 hedge funds tracked by Insider Monkey at the end of Q1 2024, 17 funds owned stakes in Amcor plc (NYSE:AMCR), down from 21 in the previous quarter. These stakes are collectively valued at over $65.6 million. Among these hedge funds, Ken Griffin’s Citadel Investment Group was the company’s leading stakeholder in Q1.
Overall AMCR ranks 4th 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 AMCR 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 AMCR but that trades at less than 7 times its earnings and yields nearly 10%, check out our report about the dirt cheap dividend stock.
READ NEXT: Analyst Sees a New $25 Billion “Opportunity” for NVIDIA and 10 Best of Breed Stocks to Buy For The Third Quarter of 2024 According to Bank of America.
Disclosure: None. This article is originally published at Insider Monkey.