We recently compiled a list of 10 Best Performing Dividend Stocks in 2024. In this article, we’ll take a look at where Oracle Corporation (NYSE:ORCL) stacks up to other top-performing dividend stocks in 2024.
Over time, dividend stocks have demonstrated consistent resilience in difficult market conditions. Despite recent interest in AI, the long-term appeal of these stocks has increased. Income investors have noticed this shift, which is reflected in the growing role of dividends in personal income. A report from S&P Dow Jones Indices reveals that the share of dividend income increased from 2.68% in the fourth quarter of 1980 to 7.88% in the second quarter of 2024, highlighting the importance of dividends as a key source of income. The report also notes that since 1936, dividends have accounted for more than a third of total stock returns in the broader market, with the remainder coming from capital gains.
The dividend growth strategy seems to work for long-term investors, as these stocks have generated strong returns over the years. Accounting for inflation, dividends have exceeded it, suggesting that investors should focus on these stocks. A report from Wisdom Tree highlighted that from 1957 to 2023, dividends grew at an average annual rate of 5.7%, more than 2% above the rate of inflation. The report also highlights that dividends have only fallen in six years over the past 64 years, and only once by more than 5%. By comparison, stock prices fell in 18 of those years, with the worst decline exceeding 40% and an average decline of more than 11%. Stock prices were more than twice as volatile as dividend cash flows because short-term price movements are more influenced by market sentiment, while long-term value is determined by flow stability cash flow.
This year, dividend stocks have underperformed the broader market. The Dividend Aristocrat Index has gained just 6% year to date, while the market has surged more than 27%. While this may seem daunting to dividend investors, seasoned investors recognize that this represents a great opportunity to buy dividend stocks. Chris O’Keefe, portfolio manager at Logan Capital Management, noted that the growing performance gap between the market and dividend stocks in 2024 creates an ideal time for investors to consider these stocks. Along with O’Keefe, many analysts encourage investors to focus on dividend stocks because of their favorable prospects. The Dividend Aristocrats Index has struggled to keep pace with the market since 2020. Dividend stocks saw a brief resurgence in 2022 as recession fears led investors to seek out stable sectors like utilities and consumer goods, but the recovery was short-lived. In 2023, rising interest rates have made bond and money market yields more attractive than dividend yields, prompting companies to adopt a more cautious stance and conserve cash amid economic uncertainty. This year, many of the best-performing stocks of the COVID era have once again propelled the market to new highs.
Despite underperformance over the past two years in a row, analysts remain bullish on dividend stocks. They believe dividend-paying stocks could see a resurgence in 2025 as investors increasingly seek cash returns. The broader market’s dividend yield recently fell to a 20-year low, falling below 1.19%, significantly lower than the long-term historical average of 4.3%. With interest rates rising on risk-free investments like Treasury bonds, companies are recognizing growing competition for yield. As a result, many are responding by increasing dividends or introducing them for the first time. Notably, several large technology companies have started paying dividends in 2024, signaling to the market that they are positioning themselves as value players within a high-growth sector.
Is Oracle Corporation (ORCL) the Best Edge Computing Stock to Invest in According to Analysts?
A team of IT professionals meticulously building a large-scale enterprise performance management system.
For this article, we first used a stock screener to identify stocks that have reported positive returns so far in 2024. From this selection, we chose the dividend stocks with the highest levels since the start of year (YTD) to December 25. Stocks were then ranked in ascending order of their year-to-date gains. We also looked at hedge fund sentiment around each stock using Insider Monkey data for Q3 2024.
Why are we interested in stocks that hedge funds are piling into? The reason is simple: our research has shown that we can outperform the market by imitating the stocks selected by the best hedge funds. Our quarterly newsletter strategy selects 14 small- and large-cap stocks each quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points. (see more details here).
Cumulative return as of December 25: 64.7%
Oracle Corporation (NYSE: ORCL) is an American software company based in Texas. The company is best known for its best-in-class data center infrastructure, crucial for AI development, and is facing demand that exceeds its current supply. The company’s efficient operations have made it a preferred partner of leading AI startups, such as OpenAI, Cohere, and Elon Musk’s xAI. Despite these efforts, Oracle is still struggling to meet high demand, with 162 data centers operational or under construction in the first quarter of fiscal 2025. To meet this challenge, the company plans to expand significantly, aiming to develop its data center. network to between 1,000 and 2,000 in the future. The stock has surged nearly 65% since the start of 2024, making it one of the best-performing stocks on our list.
Oracle Corporation (NYSE: ORCL) reported strong earnings in the second quarter of fiscal 2025, with revenue totaling $14.06 billion, an increase of 9% from the same period of the year. last year. Cloud revenue, which includes both infrastructure as a service (IaaS) and software as a service (SaaS), reached $5.9 billion, reflecting 24% growth in US dollars and constant currency. Within this segment, cloud infrastructure (IaaS) revenue was $2.4 billion, an impressive 52% increase in US dollars and constant currencies. Oracle’s cloud revenue is expected to exceed $25 billion for the current fiscal year.
“Oracle Company (NYSE: ORCL) reported second-quarter results that beat consensus expectations, driven by growth in its cloud infrastructure business, which is benefiting from demand for AI applications. Investor confidence was further boosted by the company’s announcement of a new partnership with Amazon.
Oracle Corporation (NYSE: ORCL) has a strong cash position that supports its dividend payments. The company has been consistently paying dividends to shareholders since 2009. Over the past 12 months, its operating cash flow was $20.3 billion and its free cash flow during that period was $20.3 billion. $9.5 billion. It offers a quarterly dividend of $0.40 per share and a dividend yield of 0.93% as of December 25.
Of the 900 hedge funds tracked by Insider Monkey at the end of the third quarter of 2024, 91 funds held stakes in Oracle Corporation (NYSE:ORCL), up from 93 in the previous quarter. These issues are collectively valued at more than $7 billion. Among these hedge funds, Ken Fisher Fisher Asset Management was the company’s largest stakeholder in the third quarter.
Overall, ORCL ranks 5th on our list of best performing dividend stocks in 2024. While we recognize ORCL’s growth potential, our conviction lies in the belief that some AI stocks hold more promise in terms of higher returns and to do so in a shorter period of time. If you’re looking for an AI stock that’s more promising than ORCL but is trading at less than 5x earnings, check out our report on Cheapest AI stock.
