UNH - The 10 Best Dividend Stocks of All Time 

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Discussions regarding the best dividend stocks of all time often start with the Dividend Aristocrats. They are S&P 500 companies that have increased their annual dividend payment for at least 25 consecutive years. There are currently 65 names on this prestigious list.

While there is no question the 65 Dividend Aristocrats have staying power, that doesn’t necessarily mean they qualify for the best dividend stocks of all time. To my mind, it’s not just about increasing the annual dividend payment but also about delivering market-beating total returns. 

So, for this article, I am interested in S&P 1500 companies that demonstrate shareholder-friendly capital allocation by delivering hefty dividends and share repurchases.  To make the cut, the companies on this list must have a 10-year annualized total return greater than the entire U.S. market, which stands at 12.7%, and have paid out at least $100 million in dividends and share repurchases in the latest fiscal year.

And since these are the best dividend stocks of all time, the bigger, the better.

Best Dividend Stocks of All Time: MSCI (MSCI)

Dividends Paid: $302.4 million
Share Repurchases: $198.4 million
10-Year Annualized Total Return: 33.2%
Current Yield: 1.1%

MSCI (NYSE:MSCI) has long been a favorite of mine. While it might not pay out the amount of dividends and share repurchases that some of the other names on my list do, I don’t think you can argue with its shareholder returns over the past decade. 

On Oct. 25, MSCI reported its Q2 results. They included year-over-year increases of 8.4% in revenue, 10.5% in operating income, and 17.5% in recurring subscription revenue. For the nine months ended Sept. 30, recurring subscription revenue was $1.23 billion, accounting for nearly three-quarters of MSCI’s overall revenue. 

The company’s total run rate through Sept. 30 was $2.2 billion, 5.1% higher than in the same period a year earlier, led by an 11.5% increase in recurring subscriptions and offset by a 12.9% decrease in asset-based fees from its index business.

At the midpoint of its guidance, MSCI expects free cash flow for 2022 of $1.05 billion, up from $1.03 billion previously. 

MSCI stock isn’t cheap at 17.3x sales, but when you deliver annual returns greater than 30%, you deserve a higher multiple. 

Lam Research (LRCX)

Dividends Paid: $815.3 million
Share Repurchases: $3.7 billion
10-Year Annualized Total Return: 28.2%
Current Yield: 1.7%

When Lam Research (NASDAQ:LRCX) released its latest quarterly results in mid-October, the chipmaker said it expects to lose as much as $2.5 billion in revenue in 2023 from the Biden administration’s regulations that make it harder for U.S. companies to supply equipment to Chinese chipmakers. According to Reuters, China accounts for 30% of Lam Research’s business.

Despite the black cloud hanging over its business, the company’s fiscal first-quarter results were excellent, and the expectations for Q2 are also good. In the September quarter, record sales of $5.07 billion were 9.5% higher on a sequential basis. Its operating margin was 33.3% of revenue, 180 basis points higher than in the previous quarter. Deferred revenue was $2.76 billion, 25% higher than at the end of June. 

During the first quarter of its new fiscal year, Lam paid out $206 million in dividends and repurchased $110 million of its stock.

Whatever lies ahead, the company’s record quarterly revenue suggests that it’s got what it takes to lead the way over the next 10 years.

Best Dividend Stocks of All Time: UnitedHealth Group (UNH)

Dividends Paid: $5.28 billion
Share Repurchases: $5 billion
10-Year Annualized Total Return: 26.5%
Current Yield: 1.2%

UnitedHealth Group (NYSE:UNH) reported Q3 results in mid-October that were more than adequate. The health insurer’s stock is up nearly 7% since the announcement, a sign that investors were happy with the results.

From a cash flow standpoint, it’s hard not to like the fact it converted each dollar of net income during the quarter into $1.60 in cash flows from operations. Its free cash flow in the trailing 12 months was $20.5 billion, more than plenty to pay out $10.5 billion in dividends and share repurchases during the third quarter.

One of UnitedHealth’s key metrics is the medical care ratio. MCR is the amount of premiums paid out to cover its members’ medical costs. Lower is better. Analysts were expecting an MCR of 82.4%. UnitedHealth delivered an MCR that was 80 basis points lower at 81.6%.     

Based on its current market capitalization of $512.4 billion, UnitedHealth’s free cash flow yield is 4%. I consider anything between 4% and 8% to be fair value.

Northrop Grumman (NOC)

Dividends Paid: $983 million
Share Repurchases: $3.7 billion
10-Year Annualized Total Return: 23.7%
Current Yield: 1.3%

Northrop Grumman  (NYSE:NOC) announced on Oct. 20 that it would unveil its B-21 Raider stealth bomber, which it calls “the world’s first sixth-generation aircraft,” in early December. Currently, the defense and aerospace company is building six B-21’s and they are “on time and on budget,” according to Sen. Mike Rounds (R-S.D.), who visited the plant. An individual plane is estimated to cost the U.S. Air Force $639 million. Over 30 years, the B-21 program will cost taxpayers more than $200 billion. 

My wife’s uncle’s family had their home taken by the Russians in Lithuania during World War II. They used it as a college after the war. It’s now a derelict building in the countryside. He always says that war pays. At $639 million a pop, you better believe it.  

Northrop expects 2022 revenues of $36.4 billion at the midpoint of its guidance with earnings per share of $24.80. Its adjusted free cash flow guidance is $1.65 billion.

Shares definitely aren’t cheap at 40x cash flow, but defense spending isn’t going down anytime soon.

Best Dividend Stocks of All Time: Lockheed Martin (LMT)

Dividends Paid: $2.9 billion
Share Repurchases: $4.1 billion
10-Year Annualized Total Return: 19.6%
Current Yield: 2.5%

Lockheed Martin (NYSE:LMT) got a new CEO in June when board member Jim Taiclet replaced Marillyn Hewson, who served in the top job since 2013. Under Hewson’s leadership, LMT stock gained 366% compared to 190% for the S&P 500. It’s another example of why more women should be CEOs. They deliver the goods. 

As I said in the Northrop section, companies in the defense and aerospace businesses make excellent investments. There’s always some big project they’re working on that generates massive cash flow. 

In Lockheed Martin’s case, it has a $140 billion backlog that will take several years to fulfill. In the meantime, the company continues to generate a lot of free cash flow — $2.7 billion in the third quarter and an estimated $6 billion for the full year.   

In the third quarter, the company paid out $739 million in dividends and completed $1.4 billion in share repurchases.

Home Depot (HD)

Dividends Paid: $7 billion
Share Repurchases: $14.8 billion
10-Year Annualized Total Return: 18.4%
Current Yield: 2.6%

Home Depot (NYSE:HD) is having a rare down year in the markets. It’s off more than 30% year to date and 21% over the past 52 weeks. Investors, rightly or wrongly, feel higher interest rates and inflation make home improvement stocks off limits. If you’re buying for the long term, though, there is no question HD stock will deliver above-average returns. 

Diamond Hill Capital bought shares of HD during the second quarter. “We believe Home Depot is well positioned to continue gaining share due to its premium real estate locations, strong operations and recent investments in its supply chain,” the investment management firm with a long-term focus stated in its shareholder letter.

To help grow its Pro business, HomeDepot has launched a jobseeker platform called Path to Pro Network that connects skilled tradespeople looking for work with construction and renovation firms that are hiring. As they say, Home Depot’s chosen to be part of the solution rather than the problem.

With shares yielding 2.6%, investors get paid to wait for the markets to come around.

Best Dividend Stocks of All Time: American Financial Group (AFG)

Dividends Paid: $2.4 billion
Share Repurchases: $319 million
10-Year Annualized Total Return: 18.4%
Current Yield: 1.7%

Ohio-based property and casualty insurer American Financial Group (NYSE:AFG) just released its third-quarter results. The company reported core net operating earnings of $2.24 per share. This was down from $2.71 per share in the 2021 third quarter due mostly to lower alternative investment returns, the company said. However, it was better than the $2.20 per share analysts were expecting. 

The company specializes in commercial coverage rather than personal. It provides coverage to businesses in three main areas: Property and Transportation, which accounted for 55% of gross premiums in Q3, followed by Specialty Casualty at around 38% and Specialty Financial at around 7%.

 The company had a combined ratio was 91.1%. A combined ratio under 100 indicates it achieved an underwriting profit during the quarter.   

For the full year, the company raised the lower end of its core net operating earnings guidance range. It now expects to earn $11 to $11.75 per share compared with previous guidance of $10.75 to $11.75 per share. Based on the midpoint of the new range, AFG stock trades at 12.4x, well below its five-year average of 15.4x.   

BlackRock (BLK)

Dividends Paid: $2.5 billion
Share Repurchases: $1.5 billion
10-Year Annualized Total Return: 15%
Current Yield: 3%

BlackRock (NYSE:BLK) was downgraded in mid-October by UBS analyst Brennan Hawken, who lowered his rating from “buy” to “neutral” because of the asset management company’s focus on environmental, social and governance principles. Hawken also slashed his target price by $115 to $585, which is 8.4% below where it’s currently trading.

While it is true that BlackRock is facing criticism from all sides on this issue, the potential loss of business it faces is overstated. As Barron’s reported, BlackRock has attracted $1.5 trillion in net new investments since the end of 2018. So, it must be doing something right. 

On Oct. 13, BlackRock reported third-quarter results including adjusted EPS of $9.55. That was down from $11.34 a year earlier, but 30% higher than at the end of June.  

“BlackRock generated industry-leading long-term net inflows of $248 billion in the first nine months of 2022, including $65 billion in the third quarter. We once again saw strong growth in bond ETFs, with $37 billion of net inflows,” CEO Larry Fink said in the press release accompanying the announcement. 

As Mark Twain would say, “The reports of BlackRock’s death are greatly exaggerated.”

Best Dividend Stocks of All Time: Amgen (AMGN)

Dividends Paid: $4 billion
Share Repurchases: $5 billion
10-Year Annualized Total Return: 13.8%
Current Yield: 2.9%

Morgan Stanley analyst Matthew Harrison upgraded Amgen (NASDAQ:AMGN) stock in mid-October from “equal weight” to “overweight” with a $279 price target. While the upgrade is nice, the target price is barely above where shares are currently trading.

The analyst believes Amgen’s weight-loss drug will be more attractive to patients because it will last longer than similar drugs from Eli Lilly (NYSE:LLY) and others. “We expect AMG 133 could achieve similar weight loss as [Lilly’s] tirzeptide at a maximum dose, but we see the likely differentiation as a longer duration of effect… or better tolerability,” Harrison wrote in a note to clients. 

AMGN stock is having a good year, up 20% YTD compared to a 7.4% drop for the S&P 500 healthcare sector.

Amgen’s trailing 12-month free cash flow is $8.4 billion. Based on a market cap of $143.9 billion, it has a free cash flow yield of 5.8%, putting it squarely in fair value territory. 

As the Morgan Stanley analyst said, Amgen is an excellent defensive play at this point in the cycle. 

McDonald’s (MCD)

Dividends Paid: $3.9 billion
Share Repurchases: $845.5 million
10-Year Annualized Total Return: 13.7%
Current Yield: 2.2%

As long as I’ve followed McDonald’s (NYSE:MCD), the one thing that I’ve found about its stock is that it always seems to deliver when people least expect it to. Take this year, for example. Shares are up nearly 1% on the year at a time when most large restaurant stocks are getting hammered. In fact, MCD stock just hit an all-time high of $276.67.  

On. Oct. 27, Cowen analyst Andrew Charles raised his target price by $13 to $293, suggesting that the company’s ongoing domination of the U.S. market will continue to drive above-average performance. 

In these inflationary times, we in the media often talk about pricing power. McDonald’s has it. It raised prices by 10%, on average, in Q3 compared to last year. During its third-quarter conference call, CFO Ian Borden said the company was gaining market share among low-income consumers because it still provides value and affordability.

In the U.S., same-store sales grew more than 6%, its ninth consecutive quarter of growth. Internationally, they were even better, resulting in global same-store sales growth of nearly 10%. 

On the date of publication, Will Ashworth did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

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