In this article, we take a look at 13 best long term dividend stocks to buy now. If you want to see more best long term dividend stocks to buy now, go directly to 5 Best Long Term Dividend Stocks to Buy Now.
The best ideal dividend stock would have strong free cash flow that more than covers its dividend.
The ideal dividend stock would also not have that much debt, which could hinder it if demand for the company's products and services decreases.
The best ideal dividend stock would also have growth potential so that its free cash flows increase over time to allow management to increase the dividend as well. They would also ideally have substantial competitive advantages that give them a higher probability of increasing their revenues and potentially earnings. For those of you interested, check out 10 Best Blue Chip Stocks to Buy According to Hedge Funds.
Dividend stocks have faced headwinds in the past given the rise in interest rates which have led to higher Treasury yields. With higher Treasury yields, capital has moved from the broader equity market into the U.S. Treasury market and the valuations of many leading dividend stocks are arguably lower than what they would have been as a result.
In terms of interest rates, the Federal Reserve on March 22 raised interest rates by 25 basis points to bring the benchmark funds rate to a range of 4.75% to 5%.
After the interest rate raise, Federal Reserve Chairman Jerome Powell said, "We believe, however, that events in the banking system over the past two weeks are likely to result in tighter credit conditions for households and businesses, which would in turn affect economic outcomes. It is too soon to determine the extent of these effects, and therefore too soon to tell it how monetary policy should respond. As a result, we no longer state that we anticipate that ongoing rate increases will be appropriate to quell inflation. Instead, we now anticipate that some additional policy firming may be appropriate."
With the Federal Reserve Chairman's comments, the broader markets declined on March 22 as the market didn't like Powell's commentary on credit conditions. Recently, Deutsche Bank stock has declined on March 24 as its credit default swaps have increased. Given Deutsche Bank is a huge bank, any substantial financial difficulties Deutsche Bank faces could affect the global economy if regulators don't do enough to contain the situation.
Given the economic outcomes could be negative, an economic slowdown could also negatively affect leading dividend stocks. As a result, it could be a good idea for long term investors to own a well diversified portfolio of leading stocks across many different sectors.
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Methodology
For our list of 13 Best Long Term Dividend Stocks to Buy Now, we chose 13 stocks that have competitive advantages and growth potential in the long term that also pay a dividend.
We ranked each stock based on the number of hedge funds in our database of 943 funds that held shares in the same stock at the end of Q4.
SYSCO Corporation (NYSE:SYY) is one of the leading wholesale food distributors in the United States that also has operations internationally including in Canada, the United Kingdom, and France. Given the growth in demand for food, SYSCO Corporation (NYSE:SYY)'s earnings and dividend has grown in the long term. In terms of its dividend, SYSCO Corporation (NYSE:SYY) has raised its annual dividend for 54 straight years and has a dividend yield of 2.65% as of 3/22. For fiscal year 2023, management in January has guided for full year EPS of $4 to $4.15, which more than covers the company's annual dividend of $1.96 per share.
Automatic Data Processing (NASDAQ:ADP) is one of the leading payroll companies in the United States that has raised its annual dividend for 48 straight years. Despite the higher inflation, Automatic Data Processing (NASDAQ:ADP)'s sales rose 9% year over year to $4.4 billion and its adjusted net earnings rose 17% year over year to $815 million for the second quarter of fiscal 2023, which is the three months ended December 31, 2022. For the future, analysts are expecting annual EPS growth of 13.43% on average over the next 5 years, meaning Automatic Data Processing (NASDAQ:ADP) will likely have more resources to increase its dividend further in the coming years.
Of the 943 hedge funds in our database, 49 owned shares of Automatic Data Processing (NASDAQ:ADP) at the end of Q4, ranking the stock #12 on our list of 13 Best Long Term Dividend Stocks to Buy Now.
ASML Holding N.V. (NASDAQ:ASML) is a high quality semiconductor equipment producing stock that leads its part of the industry by at least several years. Given the expected growth in semiconductor demand in the long term with increasing AI processing adoption, ASML Holding N.V. (NASDAQ:ASML)'s earnings are expected to increase fairly substantially in the long term. With more earnings, ASML Holding N.V. (NASDAQ:ASML) could also pay more of a dividend as well. As of 3/22, the company has a dividend yield of 1.55%.
NextEra Energy, Inc. (NYSE:NEE) is a leading utility with a dividend yield of 2.52% that has raised its annual dividend for 30 straight years. In terms of the future, NextEra Energy, Inc. (NYSE:NEE) management said during a Q4 2022 earnings call that they expect to increase the dividend per share at around 10% per year through at least 2024 off the 2022 base, meaning the company will likely continue its dividend increase history in the near term.
ClearBridge Investments commented on NextEra Energy, Inc. (NYSE:NEE) in a Q3 2022 investor letter,
"NextEra Energy, Inc. (NYSE:NEE) is an integrated utility business with a regulated utility operating in Florida and the largest wind business in the U.S. NextEra’s regulated business includes Florida Power & Light, which serves nine million people in Florida. NextEra’s share price rose along with the passage of the U.S. Inflation Reduction Act, which considerably expands support for renewable energy."
The Home Depot, Inc. (NYSE:HD) is America's largest home improvement retailer that has benefited from increases in the average home price over the years as that can lead to more buying power for the company's products. Although the home improvement market is expected to be relatively sluggish this year given inflation headwinds, The Home Depot, Inc. (NYSE:HD) management nevertheless expects long term growth. The Home Depot, Inc. (NYSE:HD) has increased its annual dividend for 14 straight years and has a dividend yield of 2.96% as of 3/22.
Oracle Corporation (NYSE:ORCL) is a leading enterprise software company that has a dividend yield of 1.82% and a forward P/E ratio of 15.76 as of March 22. In the past, Oracle Corporation (NYSE:ORCL) has grown through M&A and the company could potentially have an opportunity at M&A again if TikTok is forced to sell to an American company. Oracle Corporation (NYSE:ORCL) previously discussed buying a minority stake in TikTok in 2020 and the 100% of TikTok's US user traffic is routed to Oracle Cloud Infrastructure. If TikTok is banned however, Oracle Corporation (NYSE:ORCL)'s cloud business might not be as strong.
Walmart Inc. (NYSE:WMT) is a leading retailer that has increased its annual dividend for 51 consecutive years. Given its substantial scale with over $611 billion in annual revenues, Walmart Inc. (NYSE:WMT) can offer its customers very competitive prices and still earn an overall profit. As a result, the company has a competitive advantage that could help it grow in the future. Furthermore, Walmart Inc. (NYSE:WMT)'s e-commerce business is growing and accounted for 13% of global sales for the last fiscal year. If the company continues to grow profitably, its dividend could continue to rise. 66 hedge funds in our database owned shares of Walmart Inc. (NYSE:WMT) at the end of Q4, ranking the stock #7 on our list of 13 Best Long Term Dividend Stocks to Buy Now.
Lowe's Companies, Inc. (NYSE:LOW) is another leading home improvement retailer that is facing near term headwinds given high inflation. If credit contracts as a result of the recent bank failures, the home improvement market could also be negatively affected although by how much remains to be seen. In the long term, however, Lowe's Companies, Inc. (NYSE:LOW) benefits from the rise in the value of the average home and the increase in the number of aging homes that might need renovation. As of 3/22, Lowe's Companies, Inc. (NYSE:LOW) has a dividend yield of 2.19%.