In this article, we discuss 12 best dividend stocks for passive income. You can skip our detailed analysis of passive income ideas and dividend stocks, and go directly to read 5 Best Dividend Stocks For Passive Income.
Passive income is becoming increasingly popular among people from diverse backgrounds. It's an appealing idea, especially with the current economic uncertainty, and it's capturing the attention of investors more than ever. According to a survey by LendingClub Corp. and Pymnts.com conducted in March this year, nearly half of working people have a side job or another source of extra income, like selling handmade items. Surprisingly, it's not just those with lower income; even people making $100,000 a year often seek additional income to cover their expenses. The report also mentioned that consumers could be collecting over $50 billion in total every month from their extra earnings, and a significant part of this money might not be reported to tax authorities.
Passive income often arises from investments, assets, or activities that need very little ongoing work after they are established. Passive exchange-traded funds, that aim to replicate the performance of a specific market index or asset class, are important in this regard. In one of our articles, we referred to James Seyffart’s statement from Bloomberg Intelligence, who mentioned that passive investing is steadily on the rise in the US. Currently, passive mutual funds and ETFs own around 19% of the average publicly traded U.S. stock, which is three times higher than it was in 2013.
Investing in dividend stocks is also one of the most reliable ways to generate passive income. Dividend-paying stocks help investors receive regular dividend payments, typically on a quarterly basis, without having to actively work or make ongoing investments. This income can provide a steady cash flow, making it a reliable source of passive income. In addition to this, dividend stocks have significantly contributed to the market’s overall returns. Between 2013 and 2022, dividends accounted for 17% of the overall returns in the S&P 500 Index. But if we consider a much longer period, going back to the 1930s, dividends contributed to 37% of the returns.
The Procter & Gamble Company (NYSE:PG), Colgate-Palmolive Company (NYSE:CL), and PepsiCo, Inc. (NASDAQ:PEP) are some of the best dividend stocks as these companies have been raising their payouts year after year. To create passive income, it's vital that dividends consistently increase over time. In this article, we will further discuss dividend stocks to earn passive income.
For this list, we scanned Insider Monkey's database of Q2 2023 and picked companies that have raised their dividends for at least 10 consecutive years or more. From that list, we narrowed down our options to companies with strong financial positions and steady cash flow, indicating reliable future dividends for generating passive income. We then sorted these companies in ascending order based on the number of funds that hold stakes in them as of the second quarter of 2023.
Comcast Corporation (NASDAQ:CMCSA) is an American multinational telecommunications and media conglomerate. The company is also one of the largest cable television and broadband internet service providers in the country.
In the second quarter of 2023, Comcast Corporation (NASDAQ:CMCSA) reported revenue of $30.5 billion, which showed a 1.6% growth from the same period last year. The company's operating cash flow for the quarter came in at roughly $7.3 billion and its free cash flow amounted to $3.4 billion. It also returned $1.2 billion to shareholders through dividends during the quarter, which makes it one of the best dividend stocks for passive income.
The Procter & Gamble Company (NYSE:PG), Colgate-Palmolive Company (NYSE:CL), and PepsiCo, Inc. (NASDAQ:PEP) are some other reliable options for generating passive income.
Comcast Corporation (NASDAQ:CMCSA) has raised its dividends for 15 years in a row. The company currently pays a quarterly dividend of $0.29 per share and has a dividend yield of 2.65%, as of October 12.
At the end of Q2 2023, 66 hedge funds in Insider Monkey's database reported having stakes in Comcast Corporation (NASDAQ:CMCSA), down from 68 a quarter earlier. The consolidated value of these stakes is over $3.14 billion.
ClearBridge Investments mentioned Comcast Corporation (NASDAQ:CMCSA) in its Q3 2023 investor letter. Here is what the firm has to say:
“Long-term holdings Charter and Comcast Corporation (NASDAQ:CMCSA) delivered strong second-quarter results relative to expectations; their stable recurring revenue streams and undemanding valuations were rewarded in the current environment. Cable multiples compressed over the past 24 months on fears of heightened competition in their core broadband business from fixed wireless and fiber providers. While fiber remains a competitive alternative to cable broadband over the long term, high upfront investments and a materially higher cost of capital are resulting in slower buildouts than previously expected. Fixed wireless also continues to gain traction, particularly in rural markets, but share gains also appear to be moderating. At the same time, both Comcast and Charter are expanding their footprints into rural and adjacent markets while gaining wireless market share, leveraging their mobile virtual network operator agreements with Verizon. We think both cable companies are well-positioned to continue to grow while generating substantial free cash flows. We added to Comcast during the quarter.”
Costco Wholesale Corporation (NASDAQ:COST) is a well-known American multinational retail corporation that operates a chain of membership-based warehouse clubs. The company's dividend growth streak stands at 19 years, which makes it one of the best dividend stocks on our list. It currently pays a quarterly dividend of $1.02 per share and has a dividend yield of 0.72%, as of October 12.
In fiscal Q4 2023, Costco Wholesale Corporation (NASDAQ:COST) reported revenue of roughly $79 billion, which saw a 9.5% growth from the same period last year. For FY23, the company generated over $11 billion in operating cash flow, up from $7.4 billion in the past year.
The number of hedge funds tracked by Insider Monkey owning stakes in Costco Wholesale Corporation (NASDAQ:COST) grew to 67 in Q2 2023, from 63 in the previous quarter. The collective value of these stakes is over $2.24 billion. Among these hedge funds, Bridgewater Associates was the company's largest stakeholder in Q2.
The Home Depot, Inc. (NYSE:HD) is a home improvement retailer that specializes in a wide range of products and services for both consumers and professional customers. The company's cash position remained strong in the second quarter of 2023 as it had over $2.8 billion available in cash and cash equivalents. Its operating cash flow jumped to $12.2 billion, from $7.1 billion in the prior-year period.
The Home Depot, Inc. (NYSE:HD), one of the best dividend stocks, currently pays a quarterly dividend of $2.09 per share. The company maintains a 13-year streak of consistent dividend growth. The stock has a dividend yield of 2.86%, as of October 12.
At the end of the second quarter of 2023, 68 hedge funds in Insider Monkey's database owned stakes in The Home Depot, Inc. (NYSE:HD), growing from 65 in the previous quarter. The total value of these stakes is $2.23 billion.
Linde plc (NYSE:LIN) is a multinational industrial gases and engineering company with a focus on providing a wide range of gases, applications, and services for a variety of industries. The company has been raising its dividends consistently for the past 28 years, which makes it one of the best dividend stocks for passive income. It currently pays a quarterly dividend of $1.275 per share and has a dividend yield of 1.35%, as of October 12.
Linde plc (NYSE:LIN) reported a strong cash generation in the second quarter of 2023. The company's operating cash flow for the quarter came in at $2.1 billion, up 1% from the same period last year. Its free cash flow for the quarter amounted to $1.3 billion. The company also returned $1.53 billion to shareholders through dividends and share repurchases.
Insider Monkey's database of Q2 2023, 70 hedge funds owned stakes in Linde plc (NYSE:LIN), which remained unchanged from the previous quarter. The total value of these stakes is over $4.5 billion. Among these hedge funds, Scopus Asset Management was the company's leading stakeholder in Q2.
NIKE, Inc. (NYSE:NKE) is an Oregon-based multinational corporation that is one of the world's leading and most recognizable athletic footwear, apparel, and sports equipment manufacturers. The company recently announced its fiscal Q1 2024 results and posted revenue of $13 billion, up 2% from the same period last year. During the quarter, it also returned $524 million to shareholders through dividends, which also showed a 9% growth from the prior-year period.
NIKE, Inc. (NYSE:NKE) currently pays a quarterly dividend of $0.34 per share and has a dividend yield of 1.37%, as of October 12. The company maintains a 21-year streak of consistent dividend growth, which makes it one of the best dividend stocks for passive income.
At the end of June 2023, 70 hedge funds in Insider Monkey's database reported having stakes in NIKE, Inc. (NYSE:NKE), worth over $2.4 billion in total.
Broadcom Inc. (NASDAQ:AVGO) is an American global tech company that specializes in designing and manufacturing semiconductor devices and other solutions for a wide range of industries. The company currently pays a quarterly dividend of $4.60 per share and has a dividend yield of 2.03%, as of October 12. It is one of the best dividend stocks on our list as the company has been growing its dividends consistently for the past 12 years.
In the third quarter of 2023, Broadcom Inc. (NASDAQ:AVGO) generated over $8.88 billion in revenues, which showed a 5% growth over a year-over-year basis. The company's free cash flow for the quarter amounted to over $4.6 billion. It also returned $1.9 billion to shareholders through dividends during the quarter.
The number of hedge funds in Insider Monkey's database owning stakes in Broadcom Inc. (NASDAQ:AVGO) stood at 72 in Q2 2023, the same as in the previous quarter. The total value of these stakes is roughly $4.2 billion.
QUALCOMM Incorporated (NASDAQ:QCOM) is an American multinational semiconductor and telecommunications equipment company that is a leading player in the development of wireless technology and telecommunications solutions.
In fiscal Q3 2023, QUALCOMM Incorporated (NASDAQ:QCOM) generated over $2.6 billion in operating cash flow. The company ended the quarter with over $6 billion in cash and cash equivalents. It also returned $893 million to shareholders through dividends, which makes it one of the best dividend stocks for passive income. The Procter & Gamble Company (NYSE:PG), Colgate-Palmolive Company (NYSE:CL), and PepsiCo, Inc. (NASDAQ:PEP) are also grabbing investors' attention.
QUALCOMM Incorporated (NASDAQ:QCOM) has been raising its dividends consistently for the past 19 years. The company offers a quarterly dividend of $0.80 per share and has a dividend yield of 2.87%, as of October 12.
As of the close of Q2 2023, 73 hedge funds tracked by Insider Monkey reported having stakes in QUALCOMM Incorporated (NASDAQ:QCOM), up from 69 in the previous quarter. The overall value of these stakes is over $2.3 billion.
