What’s the first thing that springs to mind when someone mentions the Nasdaq Composite? It’s likely tech stocks that are trading at nosebleed valuations, many without any cash flow at all. The index is packed with the world’s fastest-moving software, semiconductor, and social-media giants, all of them celebrated more for explosive price swings than for the slow, steady drip of cash that dividends provide.
However, the Nasdaq Composite is massive, and it also has a cohort of dividend stocks that often get overlooked by the market. These companies are reliable dividend payers with strong cash flows and have lengthy records of increasing their dividends.
The five names ahead sit inside that underappreciated pocket of the index. Each one comes with a handsome yield and a sturdy balance sheet.
Exelon (EXC)
Exelon (NASDAQ:EXC | EXC Price Prediction) is a utility holding company that delivers electricity and natural gas to its customers. Utility companies are almost entirely domestic and are shielded from tariffs. They are also inelastic as electricity and natural gas are essentials with no immediate substitutes. On top of that, the data center build-out is leading to an uptick in demand for new electricity connections.
Exelon has a pipeline of 17 GW already in queue, with another 16 GW undergoing assessment for a total of 33 GW of potential data center demand. CEO Calvin Butler stated during the Q2 earnings call that this pipeline is due to data centers and high-density load projects in their service territories.
For context, 33 GW is “enough power all of the homes in California, New York and Texas, combined”.
And per BofA research analysts, “electricity supply is still struggling to catch up with the rapid increases in demand”.
EXC stock is set to benefit, and is already up ~27% year-to-date.
You get a 3.35% dividend yield with a payout ratio of just 58.65%. This leaves room for plenty of dividend hikes.
Amgen (AMGN)
Amgen (NASDAQ:AMGN) makes and sells drugs for cancer, heart disease, weak bones, rare illnesses, and a few inflammatory/autoimmune problems.
This is a big biopharmaceutical company with a variety of products. As such, both the stock and its dividends have been remarkably consistent over the past decade, and it is likely to continue on its trajectory.
The company pays a 3.14% dividend yield with a 42% dividend payout ratio. The 3-year dividend growth rate is at 8.5% annually, with a 3-year average share buyback ratio of 1.3% annually.
I expect the buybacks and the dividend hikes to get more aggressive in the coming years due to the increase in electricity demand, plus rate cuts. Net interest losses were $3.2 billion in 2024, and the company still managed to post $4.1 billion in net income.
PepsiCo (PEP)
PepsiCo (NASDAQ:PEP) has been going through a rough patch since the summer of 2023, but there are strong signs that it may have bottomed out, with plenty of more gains to come.
This is mainly a snacking company, and investors grew pessimistic about its future as GLP-1 drugs gained popularity. Revenue growth did slow down, but it is still significantly higher than where it was pre-pandemic ($67.16 billion in 2019 vs $91.85 billion in 2024). There’s plenty of room for a significant turnaround as margins recover.
The dividend yield is 3.7%. PepsiCo is also a Dividend King with 52 years of consecutive increases.
Automatic Data Processing (ADP)
Automatic Data Processing (NASDAQ:ADP) has a self-explanatory name: the company is simply using computers and software to handle data tasks with as little human work as possible.
It came decades before today’s AI started automating things. The company runs behind-the-scenes paperwork that gets people paid and keeps companies compliant.
And instead of AI stealing its cake, it’s making the company leaner. Net margin surged from 16.25% in 2019 to nearly 20% today. That’s because most of its customers do not have the expertise to integrate AI into their systems in-house, so ADP keeps the customers and uses AI to derive fatter margins.
The cash flows are stable and the stock has been a great long-term hold.
ADP has a 2.19% dividend yield. Dividends have also been hiked for 26 consecutive years.
Kimberly-Clark (KMB)
Kimberly-Clark (NASDAQ:KMB) is more of a steady-Eddie holding. The stock has remained rangebound for over a decade. It sells diapers, tissues, and other hygiene products.
That said, KMB is one of the only few Nasdaq stocks with such defense characteristics. Hygiene products have inelastic demand and the cash flows have been dependable enough for 52 years of consecutive dividend growth.
Analysts believe the coming decades will be more bullish for the stock due to aging demographics. Kimberly-Clark sells “Adult Care” products, such as diapers for the elderly. It also has products for bladder leakage.
The forward dividend yield is 4.15% with a payout ratio of ~72%.
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