We recently compiled a list of the Dividend Kings List: Top 15. In this article, we are going to take a look at where Black Hills Corporation (NYSE:BKH) stands against the other dividend kings you should know about.
Dividend Kings are a distinguished group of companies that have achieved at least 50 consecutive years of dividend increases. While some of these companies are part of the S&P index, the two categories are not entirely overlapping. The appeal of Dividend Kings became especially clear after the disruptions caused by the COVID-19 pandemic in 2020. During this time, numerous companies either reduced or suspended their dividends, leaving income-focused investors disappointed. Many had assumed that dividend-paying stocks were inherently lower risk, only to face steep share price drops alongside payout cuts. However, Dividend Kings stand out for their remarkable consistency, boasting 50 years of uninterrupted dividend increases. This long history of reliable payouts provides a sense of stability, even in volatile market conditions.
Investors often gravitate toward firms with a track record of consistent dividend growth, as such companies tend to perform well in declining or stagnant markets. Even during periods of strong market performance, dividend growers have captured a significant share of the gains. Following a long-term dividend growth strategy can aid in compounding returns for investors. A T. Rowe Price report highlighted that, between 1985 and 2022, companies in the Russell index that consistently increased dividends outperformed the broader benchmark. Furthermore, these companies exhibited lower price volatility compared to the overall market.
Earning income through dividend stocks is a gradual process that requires patience and a commitment to long-term investing. These stocks are particularly suited for investors with a long-term horizon, as they have consistently outpaced inflation over time. According to data from Morningstar and Yale University’s Robert Shiller, since 1871, the market’s dividends per share have grown at an annualized rate 1.6 percentage points higher than inflation. Moreover, the gap between dividend growth and inflation has widened in recent years. Over the past 50 years, dividends have outpaced inflation by 2.5 percentage points annually, and in the last 20 years, the margin has grown to 4.6 percentage points per year.
During market rallies, dividend-growing stocks may underperform as investor enthusiasm and momentum often take precedence over fundamentals such as valuation and business quality. This trend has been especially noticeable in the recent past, with dividend stocks lagging behind the broader market. Nonetheless, maintaining a long-term strategy centered on dividend growth can be advantageous, as the benefits accumulate over time with each increase in payouts. Companies with solid fundamentals and robust financial stability are typically well-positioned to sustain and grow their dividends. In contrast, smaller or emerging businesses often prioritize reinvesting earnings into their operations to fuel growth. Given this, we will take a look at some of the best dividend kings with the highest yields.
Our Methodology:
To create this list, we examined a set of over 50 dividend king companies, recognized for consistently increasing dividends for 50 years or more. From this group, we selected companies with the highest dividend yields as of December 3 and organized them in ascending order based on their yield, from lowest to highest. We also measured hedge fund sentiment around each stock according to Insider Monkey’s database of 900 as of Q3 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 line of wind turbines against a clear sky, reflecting the companies clean energy efforts.
Black Hills Corporation (NYSE:BKH)
Dividend Yield as of December 3: 4.14%
Black Hills Corporation (NYSE:BKH) is a South Dakota-based natural gas distribution company. It has benefitted a lot recently as the areas where the company operates are experiencing population growth at a rate roughly three times higher than the national average in the United States. This influx of customers brings a dual advantage, contributing to increased revenue while also justifying the need for higher capital expenditures. Currently, the company has outlined a five-year investment plan valued at $4.3 billion, a significant figure compared to its market capitalization of $4.5 billion. The stock is up by more than 14% since the start of 2024.
In the third quarter of 2024, Black Hills Corporation (NYSE:BKH) reported revenue of $401.6 million, which, though, fell by 1.4% from the same period last year, surpassed analysts’ consensus by $7.92 million. The company’s 260-mile Ready Wyoming transmission project is progressing as planned, aiming to enhance system capacity and improve power market access. Additionally, efforts continue to secure new renewable energy resources in Colorado and establish dispatchable, baseload generation in South Dakota. For over a decade, its innovative service model has effectively met the demands of data centers. Looking ahead, the company is preparing to support Meta’s upcoming AI data center in Cheyenne, Wyoming, scheduled for completion by 2026.
Black Hills Corporation (NYSE:BKH) is one of the best dividend kings on our list with 54 consecutive years of dividend growth. The company pays a quarterly dividend of $0.65 per share for an attractive dividend yield of 4.14%.
According to Insider Monkey’s database of Q3 2024, 25 hedge funds owned stakes in Black Hills Corporation (NYSE:BKH), growing from 22 in the previous quarter. The consolidated value of these stakes is nearly $217 million. With nearly 1.6 million shares, Zimmer Partners was the company’s leading stakeholder in Q3.
Overall BKH ranks 4th on our list of the dividend kings you should know about. While we acknowledge the potential of BKH as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than BKH but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.