In this article, we discuss 10 best innovative stocks that pay dividends. You can skip our detailed analysis of innovative stocks and their need in today's world, and go directly to read 5 Best Innovative Stocks that Pay Dividends.
Innovative stocks refer to companies that are at the forefront of technological advancements and disruptive innovations in their respective industries. These companies often introduce new products, services, or business models that have the potential to significantly impact the market and drive growth. According to a report by McKinsey & Company, companies that effectively utilize innovation as a core component of their business strategy gain a significant competitive advantage compared to their counterparts. Research has shown that these companies not only outperform others but also generate economic profits that are 2.4 times higher. In other words, by mastering the art of innovation, companies can achieve greater financial success and outshine their competitors.
In a rapidly evolving global landscape, countries and economies need to stay at the forefront of innovation to remain competitive. Through the development of new products, services, and technologies, innovative companies create jobs, stimulate investment, and contribute to overall economic progress. The US is widely recognized for its remarkable ability to innovate and its entrepreneurial spirit. This commitment to innovation has been a key driver of America's economic dominance. Economists estimate that roughly half of the annual GDP growth in the United States can be attributed to advancements and increases in innovation, as reported by the US Chamber of Commerce Foundation.
As mentioned above, successful innovation drives significant growth in a business. One of the main aspects of innovation is research & development (R&D), which involves systematic and scientific exploration to develop new products, technologies, or processes. By investing in R&D, companies can enhance their capabilities, explore new ideas, and uncover innovative solutions to meet customer needs. Over the years, global R&D investments have grown across different sectors. McKinsey reported that in various industries, such as high-tech, automotive, and consumer goods, companies are allocating more than 20 percent of their earnings before interest, taxes, depreciation, and amortization (EBITDA) towards research focused on innovation.
Research from National Center for Science and Engineering Statistics (NCSES) showed that R&D activities conducted in the US amounted to a total of $717 billion in 2020. The report further mentioned that the growth of total R&D in the US, when adjusted for inflation, averaged 4.1% per year from 2010 to 2020. In contrast, during the previous decade, the average annual growth of U.S. total R&D was lower at 2.1%. Major companies like Apple Inc. (NASDAQ:AAPL), Microsoft Corporation (NASDAQ:MSFT), and Alphabet Inc. (NASDAQ:GOOG) have allocated significant funds toward innovation activities to maintain their competitive edge.
In view of this, we have compiled a list of some of the best innovative stocks that pay dividends.
10 Best Innovative Stocks that Pay Dividends
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Our Methodology:
For this article, we scanned Insider Monkey’s database of 943 hedge funds as of Q1 2023 and picked companies that actively prioritize and promote the development of new and groundbreaking ideas, products, services, or business processes. From that list, we picked 10 stocks with the highest number of hedge fund investors and ranked them in ascending order of hedge funds’ sentiment towards them. These companies belong to different sectors, including healthcare, technology, aerospace, and defense.
Hewlett Packard Enterprise Company (NYSE:HPE) is a California-based computer hardware company. It is one of the most prominent three companies that invented inkjet printers, which revolutionized printing technology. The company also introduced the world's first programmable pocket calculator. In addition to this, the company invented the atomic clock, which possesses the incredible ability to synchronize international time to an accuracy of one millionth of a second.
On June 13, Hewlett Packard Enterprise Company (NYSE:HPE) declared a quarterly dividend of $0.12 per share, which was in line with its previous dividend. The stock has a dividend yield of 2.80%, as of July 14.
In fiscal Q2 2023, Hewlett Packard Enterprise Company (NYSE:HPE) reported revenue of $7 billion, which showed a 4% growth from the same period last year. The company's cash position also remained strong during the quarter with an operating cash flow of $890 million and a free cash flow of $288 million. It also returned $261 million to shareholders in dividends and share repurchases, which makes it one of the best innovative stocks that pay dividends.
Apple Inc. (NASDAQ:AAPL), Microsoft Corporation (NASDAQ:MSFT), and Alphabet Inc. (NASDAQ:GOOG) are other innovative stocks grabbing investors' attention.
At the end of Q1 2023, 37 hedge funds tracked by Insider Monkey reported having stakes in Hewlett Packard Enterprise Company (NYSE:HPE), the same as in the previous quarter. These stakes have a total value of roughly $1.2 billion.
9. International Business Machines Corporation (NYSE:IBM)
Number of Hedge Fund Holders: 49
International Business Machines Corporation (NYSE:IBM) is a New York-based multinational technology company. Also known as Big Blue, the company was known for its punch card machines and seamlessly transitioned to digital computers as they became the new technological standard. Over the years, it made significant advancements in software, computer memory, databases, personal computers, and, more recently, cognitive computing. These foundational innovations paved the way for the creation of billion-dollar businesses.
International Business Machines Corporation (NYSE:IBM) currently pays a quarterly dividend of $1.66 per share and has a dividend yield of 4.94%, as of July 12. The company has been raising its dividends consistently for the past 28 years.
International Business Machines Corporation (NYSE:IBM) experienced a positive hedge fund sentiment in Q1 2023. As per Insider Monkey’s database, 49 elite funds held stakes in the company in Q1, compared with 43 in the preceding quarter. The consolidated value of these stakes is over $1.47 billion.
3M Company (NYSE:MMM), a multinational conglomerate, has invented notable products throughout its history. The company introduced the iconic Post-it Notes, which have become ubiquitous in offices, schools, and households worldwide. It is also known for inventing scotch tape in 1930. This transparent adhesive tape, initially designed for sealing cellophane food packaging, quickly gained popularity for its versatility in various applications, from wrapping gifts to everyday household use.
3M Company (NYSE:MMM), one of the best innovative stocks, currently pays a quarterly dividend of $1.50 per share. The company is a Dividend King with 65 years of dividend growth track record. The stock's dividend yield on July 14 came in at 5.89%.
As of the close of Q1 2023, 51 hedge funds in Insider Monkey’s database reported having stakes in 3M Company (NYSE:MMM), compared with 52 in the previous quarter. The collective worth of these stakes is over $697.3 million.
Caterpillar Inc. (NYSE:CAT) is a Texas-based construction equipment company. In the early 20th century, Caterpillar introduced the first practical track-type tractor, also known as a crawler. This design revolutionized earthmoving and construction equipment, providing better traction and maneuverability in challenging terrains.
In the first quarter of 2023, Caterpillar Inc. (NYSE:CAT) generated roughly $16 billion in revenues, up 17% from the prior-year period. The company's operating cash flow for the quarter amounted to $1.6 billion, compared with just $313 million during the same period last year.
Caterpillar Inc. (NYSE:CAT) is one of the best innovative stocks that pay dividends to shareholders, as it maintains a 29-year streak of consistent dividend growth. The company offers a quarterly dividend of $1.30 per share and has a dividend yield of 2.05%, as of July 14.
Caterpillar Inc. (NYSE:CAT) was a part of 52 hedge fund portfolios in the first quarter of 2023, up from 50 in the preceding quarter, as per Insider Monkey’s data. The stakes owned by these funds have a consolidated value of over $2.88 billion.
Texas Instruments Incorporated (NASDAQ:TXN) ranks sixth on our list of the best innovative stocks that pay dividends. The company currently pays a quarterly dividend of $1.24 per share and its dividend yield on July 14 came in at 2.74%. It has been rewarding shareholders with growing dividends for the past 19 years.
Texas Instruments Incorporated (NASDAQ:TXN) designs and manufactures semiconductors. The company is credited with developing the first commercial silicon transistor in 1954, which revolutionized the field of electronics. They were one of the pioneers in the development of integrated circuits, commonly known as chips or microchips. TI's ICs played a crucial role in miniaturizing electronic components and enabling the growth of modern computing and communication devices. The company also introduced the first handheld electronic calculator, the TI-2500, in 1967.
For the trailing 12 months, Texas Instruments Incorporated (NASDAQ:TXN) generated $7.7 billion in operating cash flow and its free cash flow for the same period was $4.4 billion. The FCF represented 23% of the company's revenue.
In addition to TXN, Apple Inc. (NASDAQ:AAPL), Microsoft Corporation (NASDAQ:MSFT), and Alphabet Inc. (NASDAQ:GOOG) are some other innovative stocks grabbing investors' attention.
As of the close of Q1 2023, 52 hedge funds tracked by Insider Monkey owned stakes in Texas Instruments Incorporated (NASDAQ:TXN), worth collectively $3 billion roughly.
