In this article, we will take a look at some of the best mid-cap dividend aristocrat stocks.
Investors often overlook mid-cap stocks, assuming they are more volatile than large-cap equities. However, this perception is not entirely accurate, and analysts are increasingly favoring mid-caps. A recent analysis by Goldman Sachs suggested that instead of debating between large-cap and small-cap stocks, investors should prefer mid-caps. Historical data also supports this perspective, with the mid-cap benchmark achieving an 11% compound annual growth rate since 1985, compared to 9% for the broader market and 8% for the small-cap Russell 2000, according to strategist Jenny Ma. Here are some other comments from the analyst:
“Today, mid-cap equities offer investors superior earnings growth at a reasonable price compared with large-caps. Mid-cap stocks have typically outperformed both large-caps and small-caps during the 12 months following the first Fed rate cut in an easing cycle.”
A Bloomberg analysis also revealed that over the past 30 years, mid-cap stocks have significantly outperformed both the broader market and small-cap stocks in cumulative returns. Mid-caps achieved a compound annual growth rate exceeding 12%, compared to approximately 11% for large-caps. This seemingly small difference has a substantial impact over time. For example, a $100,000 investment in mid-cap stocks at the end of 1994 would now be worth around $3 million—about $700,000 more than an equivalent investment in the market. The report also mentioned that between 2000 and 2005, mid-cap stocks outshone all other categories, outperforming not only the broader market but also small-caps and the equal-weighted large-cap index. Their ability to weather the fallout from the internet bubble played a significant role in driving their long-term outperformance over the years.
Also read: 12 Best Long-Term Dividend Stocks to Invest in Right Now
A common misconception about mid-cap stocks is that these companies reinvest most of their earnings into growth initiatives like expansion and R&D, leaving little for dividends. However, analysts suggest that this view may cause investors to overlook valuable opportunities. Mid-cap and small-cap (SMID) dividend-paying stocks, in particular, deserve attention. According to a Wall Street Journal report, SMID dividend stocks have delivered an impressive annual return of 15.68% from 1975 to June 2023, outperforming both large-cap dividend payers and the broader market. In addition, their volatility is about 15% lower than the average SMID stock. The advantages are even greater for SMID stocks that consistently grow their dividends, as these have demonstrated higher annualized returns with lower risk over the past 35 years compared to typical SMID dividend payers.
The MidCap 400 Dividend Aristocrats Index monitors the performance of companies that have consistently increased their dividends for at least 15 consecutive years. A ProShares report highlighted that, since its launch in 2015 through 2022, the index has delivered annualized returns 177 basis points higher than the broader MidCap 400, all while maintaining lower volatility. These mid-cap Dividend Aristocrats have shown resilience during market turbulence by capturing much of the upside during rising markets while limiting losses during downturns—an especially valuable trait during periods of uncertainty. The report further mentioned that during this period, mid-cap Dividend Aristocrats have increased their payouts at an annualized rate exceeding 12%, outpacing both large-cap dividend growth and recent inflation rates. Given this, we will discuss some of the best mid-cap dividend aristocrat stocks.
Image by Steve Buissinne from Pixabay
Our Methodology:
For this list, we scanned the holdings of MidCap 400 Dividend Aristocrats, which tracks the performance of mid-sized companies within the MidCap 400 index that have maintained a consistent track record of increasing dividends annually for at least 15 years. From the index, we picked 10 dividend stocks that have garnered the most attention from hedge fund investors by the conclusion of Q3 2024, using data from Insider Monkey’s database.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points. (see more details here).
10. United Bankshares, Inc. (NASDAQ:UBSI)
Number of Hedge Fund Holders: 14
United Bankshares, Inc. (NASDAQ:UBSI) is a West Virginia-based bank holding company that offers a wide range of related services. The stock has surged by nearly 9% since the start of 2024 and has gained investors’ confidence after delivering strong results this year. The company’s recent quarterly earnings reflected steady and reliable performance. Profitability remained strong, growth trends continued to advance, and costs were efficiently controlled. Furthermore, the firm’s asset quality, liquidity, and capital levels remained significant strengths.
In the third quarter of 2024, United Bankshares, Inc. (NASDAQ:UBSI) reported revenue of $262.2 million, surpassing analysts’ projections by $2.32 million. Net interest income for the period rose 2% year-over-year, reaching $230.3 million. By the end of the quarter, the company held more than $1.6 billion in cash and cash equivalents, a significant increase from $1.13 billion in the same period last year.
United Bankshares, Inc. (NASDAQ:UBSI) declared a quarterly dividend of $0.37 per share on November 10, which was in line with its previous dividend. Overall, the company holds a strong dividend history, having raised its payouts for 50 consecutive years. It offers a dividend yield of 3.60%, as of December 16. UBSI is one of the best dividend stocks in the mid-cap space.
At the end of Q3 2024, 14 hedge funds tracked by Insider Monkey held stakes in United Bankshares, Inc. (NASDAQ:UBSI), up from 13 in the previous quarter. The consolidated value of these stakes is over $76.7 million. With over 1.2 million shares, Fisher Asset Management was the company’s leading stakeholder in Q3.
9. NNN REIT, Inc. (NYSE:NNN)
Number of Hedge Fund Holders: 20
NNN REIT, Inc. (NYSE:NNN) is an American real estate investment trust company, headquartered in Florida. The company adopts a simple investment strategy that has supported its steady performance over time. It specializes in single-tenant net lease retail properties, where tenants handle all operating expenses, including maintenance, property taxes, and insurance. This arrangement enables the company to secure reliable rental income, which grows annually at either a fixed rate or in step with inflation. The firm also focuses on acquiring properties in robust markets, ensuring their appeal to new tenants if the current leases are not renewed. In addition, it maintains a diversified portfolio spanning various regions, industries, and tenant types.
NNN REIT, Inc. (NYSE:NNN), one of the best dividend stocks, currently pays a quarterly dividend of $0.58 per share. The company boasts an impressive track record of dividend growth, with 35 consecutive years of increasing payouts—a feat matched by only two other REITs. As of December 16, the stock has a dividend yield of 5.45%.
In the third quarter of 2024, NNN REIT, Inc. (NYSE:NNN) reported $218.6 million in revenue, reflecting a 6.55% increase compared to the same period last year. Funds from operations (FFO) grew to over $154 million, from $147.2 million in the prior year. By September 30, 2024, the company maintained a strong occupancy rate of 99.3%, with an average remaining lease term of 10.0 years. During the quarter, it invested $113.6 million in properties, acquiring eight assets totaling approximately 626,000 square feet of leasable space at an initial cash cap rate of 7.6%. Moreover, the company sold nine properties for $20.0 million, earning $7.8 million in gains from these transactions.
The number of hedge funds tracked by Insider Monkey owning stakes in NNN REIT, Inc. (NYSE:NNN) grew to 20 in Q3 2024, from 16 in the previous quarter. The collective value of these stakes is more than $230.5 million.
8. National Fuel Gas Company (NYSE:NFG)
Number of Hedge Fund Holders: 21
National Fuel Gas Company (NYSE:NFG) is an American natural gas distribution company that engages in the exploration and development of natural gas and oil reserves. In the most recent quarter, the company reached significant milestones aimed at supporting long-term growth in earnings and free cash flow. Distribution Corporation finalized a multi-year settlement for its New York rate case, which is anticipated to receive approval in the coming months. In addition, Supply Corporation submitted a certificate application for the 190,000 dekatherms per day Tioga Pathway Project, expected to commence operations by late 2026. The stock has surged by over 20% since the start of 2024.
In fiscal Q4 2024, National Fuel Gas Company (NYSE:NFG) reported revenue of $372 million, which grew modestly by 0.85% from the same period last year. Pipeline & Storage segment revenues rose by $33.2 million, or 9%, compared to the previous year, mainly driven by the settlement of the Supply Corporation rate case, which resulted in higher rates starting in February 2024. In the E&P segment, hedging-related gains of $61 million contributed to a $0.07 per Mcfe boost in natural gas price realizations, even as NYMEX prices dropped by $0.40 per MMBtu compared to the previous year.
In FY24, National Fuel Gas Company (NYSE:NFG) generated over $1 billion in operating cash flow. This strong cash position makes the company one of the strongest dividend payers. It currently offers a quarterly dividend of $0.515 per share and has stretched its dividend growth streak to 54 years. With a dividend yield of 3.37% as of December 16, NFG is one of the best dividend stocks in the mid-cap space.
National Fuel Gas Company (NYSE:NFG) was included in 21 hedge fund portfolios at the end of Q3 2024, the same as in the previous quarter, as per Insider Monkey’s database. The stakes held by these hedge funds have a collective value of roughly $214 million. Among these hedge funds, GAMCO Investors was the company’s leading stakeholder in Q3.