In this article, we discuss 16 best income stocks to buy according to analysts. You can skip our detailed analysis of income-generating stocks and their performance over the years, and go directly to read 5 Best Income Stocks To Buy According to Analysts.
Dividends have played a significant role in the overall returns of the S&P 500 since 1930, contributing approximately 40% of the total return. However, during periods of high inflation, such as the 1940s, 1970s, and 1980s, when inflation rates averaged 5% or more, dividends accounted for an even larger portion, around 54% of the total return. This insight came from Naveed Rahman, who serves as a co-manager of the Fidelity Equity-Income Strategy. The Fidelity report further elaborated on the performance of dividend stocks during inflationary periods, highlighting that during the 1930s and 2000s when the stock prices of the S&P 500 declined, dividends nearly offset those losses. Moreover, in the 1940s and 1970s, characterized by significant inflation spikes, dividends contributed substantially to the S&P 500's return, accounting for 65% and 71% respectively.
Dividend-paying stocks have become a cornerstone of many individual investor portfolios due to their ability to generate substantial income over time. This income component is essential as it can significantly contribute to the overall return on investment, helping investors achieve the necessary portfolio growth to meet their financial goals. A study conducted by Eagle Investment Management sheds light on the income potential of dividend-paying stocks. The study compared the income generated by a theoretical $1,000,000 investment made on December 31, 2012, in the S&P 500 Dividend Aristocrats Index, consisting of companies that have consistently increased their dividends for 25 years, with the broader S&P 500 Index, assuming reinvestment of dividends. According to the report, the initial investment of $1,000,000 in 2012 in the dividend aristocrats would have generated an income of $93,212 by 2022. In contrast, the income from the same investment in the S&P 500 during the same period would have been $55,726. This stark difference highlights the significant income potential offered by dividend aristocrats compared to the broader market index. Although historical, this example serves to demonstrate the importance of not just prioritizing dividends but also considering the growth of dividends. This dual focus is crucial for enhancing a portfolio's income stream gradually over time.
Throughout the years, stocks belonging to companies that begin and consistently increase their dividend payouts have shown superior performance compared to the overall market. Conversely, stocks of companies that reduce or fail to pay dividends have notably underperformed. According to findings from a report by RMB Capital, from 1972 to 2018, dividend-growing companies and those initiating dividends delivered an average annual return of 9.62%, while stocks of companies cutting dividends experienced a negative return of 0.79%. During this period, non-dividend companies returned 2.40%, significantly underperforming dividend growers.
The Procter & Gamble Company (NYSE:PG), Colgate-Palmolive Company (NYSE:CL), and PepsiCo, Inc. (NASDAQ:PEP) are considered some of the best dividend stocks for regular income as these companies hold strong dividend growth track records. In this article, we will further discuss some other income-generating stocks according to analysts.
16 Best Income Stocks To Buy According to Analysts
To compile this article, we first scanned Insider Monkey’s database of Q4 2023 and picked stocks known for their consistent dividend track records and sustained shareholder payouts over an extended period. This group reflects stability and long-term performance in dividend payouts. From this list, we further refined our selection criteria by identifying stocks with a projected upside potential of over 15% based on analyst price targets. The stocks are ranked according to their upside potential, as of February 17. Hedge funds’ top 10 consensus stock picks outperformed the S&P 500 Index by more than 140 percentage points over the last 10 years (see the details here). That’s why we pay very close attention to this often-ignored indicator.
Starbucks Corporation (NASDAQ:SBUX) is a global coffeehouse chain that offers a wide range of hot and cold beverages, including various coffee drinks, teas, hot chocolates, and other specialty beverages. The company offers a quarterly dividend of $0.57 per share, having raised it by 7.5% in September 2023. This marked the company's 13th consecutive year of dividend growth, which makes SBUX one of the best dividend stocks on our list. The stock has a dividend yield of 2.45%, as of February 17.
At the end of Q4 2023, 59 hedge funds tracked by Insider Monkey reported having stakes in Starbucks Corporation (NASDAQ:SBUX), compared with 60 in the previous quarter. The collective value of these stakes is nearly $3.3 billion. With over 11.3 million shares, Fisher Asset Management was the company's leading stakeholder in Q4.
With an upside potential of 15.9%, Bristol-Myers Squibb Company (NYSE:BMY) is next on our list of the best dividend stocks for income investors. The global pharmaceutical company has been rewarding shareholders with growing dividends for the past 18 consecutive years. It currently offers a quarterly dividend of $0.60 per share and has a dividend yield of 4.81%, as of February 17.
Bristol-Myers Squibb Company (NYSE:BMY) was a part of 60 hedge fund portfolios at the end of Q4 2023, down slightly from 65 in the preceding quarter, as per Insider Monkey's database. The stakes owned by these hedge funds have a collective value of over $2.07 billion.
Mondelez International, Inc. (NASDAQ:MDLZ) is a multinational food and beverage company that focuses on manufacturing and marketing snacks, confectionery, and beverage products. The company ended the fourth quarter with 51 hedge fund positions, which remained unchanged from the previous quarter, according to Insider Monkey's database. The stakes held by these hedge funds have a collective value of more than $1.14 billion.
On February 2, Mondelez International, Inc. (NASDAQ:MDLZ) declared a quarterly dividend of $0.425 per share, which was in line with its previous dividend. Overall, the company has been growing its dividends for the past 10 years, which makes it one of the best dividend stocks on our list. The stock's dividend yield on February 17 came in at 2.36%.
An American multinational tech company, Microsoft Corporation (NASDAQ:MSFT) has raised its payouts for 11 consecutive years. Currently, it offers a quarterly dividend of $0.75 per share and has a dividend yield of 0.74%, as recorded on February 17. With an upside potential of 16.18%, MSFT is one of the best dividend stocks for income investors according to analysts.
As of the close of Q4 2023, 302 hedge funds tracked by Insider Monkey reported having stakes in Microsoft Corporation (NASDAQ:MSFT), down slightly from 306 in the preceding quarter. Among these hedge funds, Bill & Melinda Gates Foundation Trust was the company's leading stakeholder in Q4.
3M Company (NYSE:MMM) is a multinational conglomerate that produces a wide range of medical and healthcare products, including medical tapes, wound dressings, sterilization products, dental materials, and infection prevention solutions. The company recently raised its quarterly dividend by 0.7% to $1.51 per share. Through this hike, the company achieved its 66th annual dividend growth, which makes MMM one of the best dividend stocks on our list. The stock offers a dividend yield of 6.62%, as recorded on February 17.
The number of hedge funds tracked by Insider Monkey owning stakes in 3M Company (NYSE:MMM) grew to 62 in Q4 2023, from 54 in the previous quarter. The collective value of these stakes is more than $1.75 billion.
S&P Global Inc. (NYSE:SPGI) is a leading provider of financial information and analytics, as well as data and research services for businesses, investors, and governments worldwide. On January 24, the company declared a 1.1% hike in its quarterly dividend to $0.91 per share. This was the company's 51st consecutive year of dividend growth. As of February 17, the stock has a dividend yield of 0.86%. It is among the best dividend stocks on our list with an upside potential of 16.5%.
Insider Monkey's database of Q4 2023 indicated that 82 hedge funds owned stakes in S&P Global Inc. (NYSE:SPGI), growing from 78 in the previous quarter. The consolidated value of these investments is over $8.8 billion. Among these hedge funds, TCI Fund Management was the company's leading stakeholder in Q4.
Honeywell International Inc. (NASDAQ:HON) is a diversified technology and manufacturing company that operates across multiple sectors. The company pays a quarterly dividend of $1.08 per share and has a dividend yield of 2.19%, as of February 17. It has raised its dividends 14 times over the past 13 consecutive years, which makes HON one of the best dividend stocks for income investors.
According to Insider Monkey's database of Q4 2023, 55 hedge funds owned stakes in Honeywell International Inc. (NASDAQ:HON), compared with 60 in the previous quarter. Adage Capital Management owned the largest stake in the company at the end of Q4.
Philip Morris International Inc. (NYSE:PM) primarily manufactures and sells cigarettes and other tobacco products under various brands. In recent years, the company has been focusing on developing and commercializing reduced-risk alternatives to traditional cigarettes. Its dividend growth streak currently spans over 14 years and it offers a quarterly dividend of $1.30 per share. As of February 17, the stock has a dividend yield of 5.80% and its upside potential comes in at 16.8%.
Philip Morris International Inc. (NYSE:PM) ended Q4 2023 with 68 hedge fund positions, up from 62 in the previous quarter, according to Insider Monkey's database. The stakes owned by these hedge funds have a consolidated value of more than $5.5 billion.
Archer-Daniels-Midland Company (NYSE:ADM) is a global food processing and commodities trading corporation. The company produces a wide range of nutritional products for human and animal consumption, including specialty ingredients, functional food ingredients, dietary supplements, and animal feed products. In January this year, the company achieved its 51st consecutive annual dividend growth. Currently, it offers a quarterly dividend of $0.50 per share and has a dividend yield of 3.73%, as of February 17. With an upside potential of 17.4%, ADM is one of the best dividend stocks for income investors.
As per Insider Monkey's database of Q4 2023, 34 hedge funds reported having stakes in Archer-Daniels-Midland Company (NYSE:ADM), compared with 37 in the preceding quarter. The collective value of these stakes is nearly $820 million. With roughly 2.2 million shares, AQR Capital Management was the company's leading stakeholder in Q4.
A global medical technology company, Becton, Dickinson and Company (NYSE:BDX) is next on our list of the best dividend stocks for income investors. On January 23, the company declared a quarterly dividend of $0.95 per share, which was in line with its previous dividend. It has raised its dividends for 52 consecutive years. The stock has a dividend yield of 1.58%, as of February 17.
Of the 933 hedge funds tracked by Insider Monkey at the end of Q4 2023, 60 funds owned stakes in Becton, Dickinson and Company (NYSE:BDX), up from 57 in the preceding quarter. These stakes have a total value of over $2.42 billion.
NIKE, Inc. (NYSE:NKE) is a multinational corporation that designs, develops, markets, and sells athletic footwear, apparel, equipment, accessories, and services worldwide. The company has been raising its dividends for the past 22 years and currently offers a quarterly dividend of $0.37 per share. With a dividend yield of 1.43%, as of February 17, NKE is one of the best dividend stocks on our list.
At the end of December 2023, 69 hedge funds in Insider Monkey's database reported having stakes in NIKE, Inc. (NYSE:NKE), which remained unchanged from the previous quarter. These stakes are collectively worth over $3.53 billion. Among these hedge funds, Fisher Asset Management was the company's leading stakeholder in Q4.