We recently compiled a list of the 12 most reliable dividend stocks to buy, according to hedge funds. In this article, we’ll take a look at how QUALCOMM Incorporated (NASDAQ:QCOM) stands compared to other dividend stocks.
2024 was a good year for dividends, even though the Dividend Aristocrats Index lagged the broader market. Throughout the year, U.S. companies consistently increased or maintained their dividends. Additionally, several large tech companies have begun offering dividends, showing investors that companies can focus on both growth and shareholder returns. By September 30, 2024, approximately 80% of S&P index companies paid dividends, a number that has remained fairly stable over the past decade. Notably, nearly 24% of these dividend-paying companies are in the technology sector, up significantly from 13% a decade ago. Sectors such as healthcare and industrials also saw a notable increase in the number of companies offering dividends. This broad distribution of dividends expands the range of investment opportunities, giving investors with equity income access to high-growth, dynamic and innovative companies. Given these developments, analysts remain optimistic about the company’s performance heading into 2025.
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Top 10 Canadian Dividend Stocks for Income Investors to Buy
Analysts note that from a broader perspective, earnings growth has traditionally been the main driver of dividends. Profits grew significantly last year, and we expect even better performance in 2025. Goldman expects earnings per share to rise 11% this year, up from an estimated 8% in 2024. This is expected to result in an increase of 7%. Dividends increased compared to last year’s 6% increase. Ohsung Kwon, U.S. equity strategist at BofA Securities, has a more optimistic outlook, predicting a 12% increase in dividends this year on the back of faster earnings growth.
Dividends historically accounted for 40% of the market’s total returns from 1936 to 2012, but have contributed just 16% over the past decade, according to a research note published late last year by BofA Securities. Going forward, Kwon expects dividends to have an even greater impact on total profits than they have over the past decade.
Dividends are particularly important, especially as the market as a whole has experienced consecutive returns of over 20%. This is a scenario not seen since the late 1990s. Additionally, the current low payout ratio of 29% compared to the historical average of 50% suggests there is greater potential for the company to increase its dividend. Kwon noted that another key factor supporting dividend investing is the growing number of retired baby boomers seeking income. The cash product has a yield of about 4%, and dividends are in high demand as investors seek immediate cash returns and demand that companies increase their payouts.
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This optimism about dividend stocks is primarily rooted in their past performance, as they help reduce overall portfolio volatility and can help cushion losses when stock prices decline. There is. Research shows that dividend-paying stocks often outperform non-dividend-paying stocks during bear markets, such as the bursting of the tech bubble in the early 2000s and the global financial crisis. This may be because companies that pay dividends are typically larger, more established, more profitable, and more resilient than the broader market.
Although October 2019 to September 2024 was a period of significant fluctuation in overall market performance, equity income funds experienced lower volatility compared to the overall market, reducing downside risk. With this in mind, let’s discuss the most reliable dividend stocks to invest in.
Our methodology:
For this list, we used a stock screening tool to identify companies with a history of increasing dividends over 10 years. From this group, we selected companies that offered a dividend yield of at least 1% as of January 12th. From that selection, we identified the 10 stocks most favored by hedge funds in the third quarter of 2024, based on data from Insider Monkey’s database. Stocks are ranked in ascending order of hedge funds that own the stock.
Why are we interested in stocks that hedge funds invest in? The reason is simple. Our research shows that by mimicking the top stock picks of the best hedge funds, you can outperform the market. Our quarterly newsletter strategy selects 14 small- and large-cap stocks each quarter and has returned 275% since May 2014, outperforming the benchmark by 150 points. (Click here for details).
Qualcomm (QCOM) partners with Sony Honda to power AFEELA vehicles with AI and connectivity
Technicians testing the latest 5G devices. Demonstrates the company’s commitment to innovation.
Number of hedge fund holders: 74 people
Qualcomm, Inc. (NASDAQ:QCOM) is an American semiconductor company headquartered in California. The company offers a wide range of wireless technology services. The company posted strong earnings in the fourth quarter of fiscal 2024, with sales increasing 18% year over year to $10.24 billion. Net income increased 33% year over year to $3.5 billion. Additionally, the company posted annual earnings per share growth of over 30% in FY24.
Qualcomm Inc. (NASDAQ:QCOM) has a strong foothold in the smartphone chip space and is poised to benefit from the burgeoning generative AI smartphone market. IDC projects this market to grow at an annual rate of 78% through 2028, reaching 912 million units shipped annually by the end of the forecast period. Additionally, the company is the second-largest player in the smartphone application processor market, with a 31% market share, according to a report by Counterpoint Research. The stock price has increased nearly 12% in the past 12 months.
Madison Investments highlighted QCOM in its Q3 2024 investor letter. The company’s comments are as follows:
“Alphabet Inc., Eli Lilly and Company, QUALCOMM Incorporated (NASDAQ:QCOM), Microsoft Corporation, and Apple Inc. were the biggest detractors. In response to the CFO’s comments at a conference, Qualcomm returned a portion of its profits for the first half of the year. We continue to see it well-positioned for growth from new opportunities in the automotive industry, but we also look at future growth from our entry into the PC market.”
Qualcomm Incorporated (NASDAQ:QCOM) has a solid cash position that supports its dividend distribution. At the end of the quarter, the company had cash and cash equivalents of $8 billion. Operating cash flow increased to $12.2 billion from $11.3 billion in the prior-year period. During the quarter, Qualcomm returned $2.2 billion to shareholders through dividends and stock repurchases. The company offers a quarterly dividend of $0.85 per share as of January 12, for a dividend yield of 2.17%. The company has rewarded shareholders with increased dividends over the past 20 years, making it one of the best dividend stocks on our list. .
At the end of Q3 2024, 74 hedge funds tracked by Insider Monkey held shares in Qualcomm Incorporated (NASDAQ:QCOM), with a combined value of more than $3.2 billion. Two Sigma Advisors was the company’s major shareholder in the third quarter with over 2 million shares.
QCOM ranks 11th overall on the list of the most reliable dividend stocks to buy, according to hedge funds. While we acknowledge QCOM’s potential as an investment, we believe that some AI stocks are more likely to deliver higher returns and do so in a shorter time frame. If you’re looking for AI stocks with more promise than QCOM, but trading at less than 5x earnings, check out our report on the cheapest AI stocks.
Read next: The 8 Best Widemot Stocks to Buy Right Now and the 30 Most Important AI Stocks, according to BlackRock.
Disclosure: None. This article was originally published on Insider Monkey.
Adnan is a passionate doctor from Pakistan with a keen interest in exploring the world of politics, sports, and international affairs. As an avid reader and lifelong learner, he is deeply committed to sharing insights, perspectives, and thought-provoking ideas. His journey combines a love for knowledge with an analytical approach to current events, aiming to inspire meaningful conversations and broaden understanding across a wide range of topics.
