In this article, we will be taking a look at the 10 best no-fee DRIP stocks to buy now. To skip our detailed analysis of dividend investing, you can go directly to see the 5 Best No-Fee DRIP Stocks to Buy Now.
Dividend stocks have long been in the game for investors looking for a range of benefits, for instance, the availability of a stable passive income stream especially for retirement, higher and more attractive returns, and much more. Perhaps one of the major reasons these stocks continue to retain their popularity today is the fact that they offer a viable buffer or hedge against economic crises and market volatility. During times of recession or inflation, stocks like Exxon Mobil Corporation (NYSE: XOM), Johnson & Johnson (NYSE: JNJ), AbbVie Inc. (NYSE: ABBV), and Chevron Corporation (NYSE: CVX) can thus be what many investors look towards to bail them out of financial mishaps.
An S&P Global report has mentioned that dividend growers are some of the best options out there for investors looking for stocks that can weather the storm during rough patches for the market. Between 1999 and 2021, for instance, the S&P Composite 1500, representing the market, was down. During this time period, it was estimated that the S&P 500 High Yield Dividend Aristocrats Index was what outperformed and stayed afloat in comparison to other stocks, being ahead by about 143 bps monthly when compared to the S&P Composite 1500 and about 59 bps per month when compared to the S&P 500 High Dividend Index respectively.
However, apart from investors choosing to simply benefit monetarily from dividends, another option that may seem attractive to many is the possibility of gaining more shares, and thus more ownership, in companies they are investing in, through their dividend policies. This can be made possible with dividend reinvestment plans (DRIPs). According to DRIP Investor, an industry newsletter, as of 2020, over 1,000 companies offered one form or another of a DRIP to their investors, which is about twice the number of companies that did so a decade ago. As the years have passed, it has thus become evident that dividend stocks are not alone in terms of gaining popularity, but rather that DRIPs are also becoming highly sought after and common, for the additional benefits they offer. As such, we have compiled a list of no-fee DRIP stocks to buy now, offering investors their own pick of the best stocks to choose from if they are seeking additional benefits and greater ownership in companies without the added disadvantage of paying extra money for that ownership.
Investing has become difficult by the day, even for the smart money. The entire hedge fund industry is feeling the reverberations of the changing financial landscape. Its reputation has been tarnished in the last decade, during which its hedged returns couldn’t keep up with the unhedged returns of the market indices. On the other hand, Insider Monkey’s research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 124 percentage points since March 2017. Between March 2017 and July 2021, our monthly newsletter’s stock picks returned 186.1%, vs. 100.1% for the SPY. Our stock picks outperformed the market by more than 124 percentage points (see the details here). That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to. You can subscribe to our free newsletter on our homepage to receive our stories in your inbox.
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Without further ado, let’s take a look at the 10 best no-fee DRIP stocks to buy now.
Our Methodology
We have selected stocks offering no-fee DRIPs to investors while taking into account hedge fund sentiment on the stocks mentioned by using Insider Monkey’s data on 873 hedge funds. For each stock we have mentioned its yield and the number of hedge fund holders holding a stake in it, ranking them from the lowest to the highest yield. Finally, we have used analysts’ ratings to determine which stocks are favorably placed in analyst and investor circles, picking stocks with mostly positive ratings and strong fundamentals.
Best No-Fee DRIP Stocks to Buy Now
10. Abbott Laboratories (NYSE: ABT)
Number of Hedge Fund Holders: 61
Dividend Yield: 1.42%
Abbott Laboratories (NYSE: ABT), a healthcare company, discovers, develops, manufactures, and sells healthcare products to consumers across the globe. The company ranks 10th on our list of the best no-fee DRIP stocks to buy now. It is based in North Chicago, Illinois.
As of this July, Raymond James analyst Jayson Bedford holds a raised price target of $128 on shares of Abbott Laboratories (NYSE: ABT), compared to the previous price target of $116. The analyst also holds an Outperform rating on the stock.
In the second quarter of 2021, Abbott Laboratories (NYSE: ABT) had an EPS of $1.17, beating estimates by $0.15. The company’s revenue was $10.22 billion, up 39.51% year over year and beating estimates by $550.34 million. Abbott Laboratories (NYSE: ABT) has gained 4.57% in the past 6 months and 15.77% year to date.
By the end of the second quarter of 2021, 61 hedge funds out of the 873 tracked by Insider Monkey held stakes in Abbott Laboratories (NYSE: ABT) worth roughly $4.4 billion. This is compared to 65 hedge funds in the previous quarter with a total stake value of approximately $5.1 billion.
Like Exxon Mobil Corporation (NYSE: XOM), Johnson & Johnson (NYSE: JNJ), AbbVie Inc. (NYSE: ABBV), and Chevron Corporation (NYSE: CVX), Abbott Laboratories (NYSE: ABT) is a good stock to invest in.
Baron Funds, an asset management firm, mentioned Abbott Laboratories (NYSE: ABT) in its second-quarter 2021 investor letter. Here’s what they said:
“Abbott Laboratories detracted from performance in the quarter. Abbott is a diversified large-cap med-tech company. Abbott lowered revenue and earnings guidance due to sales of COVID-19 testing products that missed Street estimates. As vaccination rates have increased, demand for COVID-19 testing has declined. Despite the near-term impact on Abbott’s revenue and earnings, we continue to think Abbott’s long-term growth outlook remains attractive due to multiple growth drivers including Abbott’s diabetes and structural heart businesses.”
9. Chubb Limited (NYSE: CB)
Number of Hedge Fund Holders: 42
Dividend Yield: 1.72%
Chubb Limited (NYSE: CB), a property and casualty insurance company, offers a range of insurance and reinsurance products to consumers globally. It ranks 9th on our list of the best no-fee DRIP stocks to buy now. The company operates through its North America Commercial P&C Insurance, North America Personal P&C Insurance, North America Agricultural Insurance, Overseas General Insurance, Global Reinsurance, and Life Insurance segments.
This August, Wolfe Research analyst Michael Zaremski began covering shares of Chubb Limited (NYSE: CB) with an Outperform rating and a $231 price target.
In the second quarter of 2021, Chubb Limited (NYSE: CB) had an EPS of $3.62, beating estimates by $0.60. The company’s revenue was $8.93 billion, up 15.45% year over year and beating estimates by $581.49 million. Chubb Limited (NYSE: CB) has gained 10.35% in the past 6 months and 24.36% year to date.
By the end of the second quarter of 2021, 42 hedge funds out of the 873 tracked by Insider Monkey held stakes in Chubb Limited (NYSE: CB) worth roughly $1.7 billion. This is compared to 41 hedge funds in the previous quarter with a total stake value of approximately $1.6 billion.
Like Exxon Mobil Corporation (NYSE: XOM), Johnson & Johnson (NYSE: JNJ), AbbVie Inc. (NYSE: ABBV), and Chevron Corporation (NYSE: CVX), Chubb Limited (NYSE: CB) is a good stock to invest in.
Davis Funds, an investment management firm, mentioned Chubb Limited (NYSE: CB) in its fourth-quarter 2020 investor letter. Here’s what they said:
“Chubb is now among the Fund’s largest P&C holdings at 5.2% and illustrates well why we thought there was an opportunity to add to our P&C names. Through September 30, 2020, Chubb had returned −24% for the year, reflecting investors’ fears that (1) the insurance industry would be compelled to cover substantial business interruption claims that were never intended as part of insured’s policies, (2) declining long-term rates would diminish the value of “float” (i.e., customers’ funds that insurers get to hold and invest until claims are paid), and (3) adverse trends (pre-dating the pandemic) in insured loss rates (e.g., rising litigation and settlement costs, increased frequency and severity of catastrophe losses, etc.).
With industry economics already soft, it was only a matter of time before insurance pricing would have to adjust. In fact, P&C pricing had already begun to increase in a number of business lines before COVID hit, and that trend has only increased and broadened since then. Chubb disclosed in Q3 2020 that North American commercial P&C pricing increased by more than 15% in aggregate. Some of the price increase will go to cover rising insurance loss rates, but we certainly do anticipate some dropping into underwriting profit too. Admittedly, some of that increased underwriting profit will itself get offset by a decline in investment income owing to lower interest rates, but that is a “feature,” if you will, of P&C insurance companies. Unlike a bank, where the floor on its deposit funding costs practically speaking is zero, there is in theory no reason underwriting profit cannot increase to offset low interest rates, so it is feasible for its earnings to “normalize” far in advance of an eventual rise in long-term rates.
With respect to the setting of loss reserves, we have always admired Chubb’s conservative approach in establishing cautious initial loss estimates and in recognizing the bad news first. In terms of COVID related losses, Chubb reserved $1.4 billion for customers’ claims in the second quarter, the majority of which were “incurred but not reported” loss estimates for professional and general liability lines that would be the second- and third-order impacts of the virus. Like the banks’ “life-of-loan” reserving described above, Chubb has made an honest effort to put all of COVID’s financial impact behind it.
When we started adding to our position in Chubb this year, it was valued at 1.6x tangible book value, and we expect it has the potential to earn a mid-teens return on capital over time and for it to grow decently and gain market share over time.”
8. Emerson Electric Co. (NYSE: EMR)
Number of Hedge Fund Holders: 45
Dividend Yield: 1.99%
Emerson Electric Co. (NYSE: EMR) is a designer and manufacturer of technology and engineering products for use in industrial, commercial, and consumer markets across the globe. The company operates through its Automation Solutions and Commercial & Residential Solutions segments. It ranks 8th on our list of the best no-fee DRIP stocks to buy now.
Credit Suisse, just this August, raised its price target on shares of Automation Solutions and Commercial & Residential Solutions segments from $103 to $108. The firm also reiterated an Outperform rating on the stock.
In the fiscal third quarter of 2021, Emerson Electric Co. (NYSE: EMR) had an EPS of $1.09, beating estimates by $0.12. The company’s revenue was $4.70 billion, up 20.01% year over year and beating estimates by $115.43 million. Emerson Electric Co. (NYSE: EMR) has gained 17.17% in the past 6 months and 30.37% year to date.
By the end of the second quarter of 2021, 45 hedge funds out of the 873 tracked by Insider Monkey held stakes in Emerson Electric Co. (NYSE: EMR) worth roughly $854 million. This is compared to 45 hedge funds in the previous quarter with a total stake value of approximately $796 million.
Like Exxon Mobil Corporation (NYSE: XOM), Johnson & Johnson (NYSE: JNJ), AbbVie Inc. (NYSE: ABBV), and Chevron Corporation (NYSE: CVX), Emerson Electric Co. (NYSE: EMR) is a good stock to invest in.
7. Illinois Tool Works Inc. (NYSE: ITW)
Number of Hedge Fund Holders: 45
Dividend Yield: 2.12%
Illinois Tool Works Inc. (NYSE: ITW) is an industrials company working to manufacture and sell industrial products and equipment. The company ranks 7th on our list of the best no-fee DRIP stocks to buy now, operating through its Automotive OEM, Food Equipment, Test & Measurement and Electronics, Welding, Polymers & Fluids, Construction Products, and Specialty Products segments.
Andrew Kaplowitz, an analyst at Citigroup, raised his price target on shares of Illinois Tool Works Inc. (NYSE: ITW) this August. The new price target on the shares is $256. Kaplowitz also reiterated a Neutral rating on Illinois Tool Works Inc. (NYSE: ITW) shares.
In the second quarter of 2021, Illinois Tool Works Inc. (NYSE: ITW) had an EPS of $2.10, beating estimates by $0.01. The company’s revenue was $3.68 billion, up 43.37% year over year and beating estimates by $114.36 million. Illinois Tool Works Inc. (NYSE: ITW) has gained 14.41% in the past 6 months and 13.51% year to date.
By the end of the second quarter of 2021, 45 hedge funds out of the 873 tracked by Insider Monkey held stakes in Illinois Tool Works Inc. (NYSE: ITW) worth roughly $657 million. This is compared to 33 hedge funds in the previous quarter with a total stake value of approximately $411 million.
Like Exxon Mobil Corporation (NYSE: XOM), Johnson & Johnson (NYSE: JNJ), AbbVie Inc. (NYSE: ABBV), and Chevron Corporation (NYSE: CVX), Illinois Tool Works Inc. (NYSE: ITW) is a good stock to invest in.
6. Aflac Incorporated (NYSE: AFL)
Number of Hedge Fund Holders: 33
Dividend Yield: 2.34%
Aflac Incorporated (NYSE: AFL) is a provider of supplemental health and life insurance products. The company operates through its Aflac U.S. and Aflac Japan segments. It ranks 6th on our list of the best no-fee DRIP stocks to buy now.
Yaron Kinar, an analyst at Goldman Sachs, raised the price target on shares of Aflac Incorporated (NYSE: AFL) this May from $46 to $47.
In the second quarter of 2021, Aflac Incorporated (NYSE: AFL) had an EPS of $1.59, beating estimates by $0.31. The company’s revenue was $5.56 billion, up 2.9% year over year and beating estimates by $197.02 million. Aflac Incorporated (NYSE: AFL) has gained 14.41% in the past 6 months and 30.49% year to date.
By the end of the second quarter of 2021, 33 hedge funds out of the 873 tracked by Insider Monkey held stakes in Aflac Incorporated (NYSE: AFL) worth roughly $268 million. This is compared to 36 hedge funds in the previous quarter with a total stake value of approximately $343 million.
Like Exxon Mobil Corporation (NYSE: XOM), Johnson & Johnson (NYSE: JNJ), AbbVie Inc. (NYSE: ABBV), and Chevron Corporation (NYSE: CVX), Aflac Incorporated (NYSE: AFL) is a good stock to invest in.
Madison Funds, an investment management firm, mentioned Aflac Incorporated (NYSE: AFL) in its second-quarter 2021 investor letter. Here’s what they said:
“This quarter we are highlighting Aflac (AFL) as a relative yield example in the Financial sector. AFL is a leading provider of life and supplemental medical insurance in Japan and the U.S. AFL products offer financial protection against loss of income for policy holders based on qualifying health events. Aflac Japan generates approximately 70% of total revenues, and the company has dominant market share in Japan. In the U.S., AFL provides voluntary insurance for policy holders at businesses with products sold through payroll deduction by its large sales force which sells primarily through face-to-face interactions. We believe AFL’s dominant market position in Japan and its large U.S. sales force create a sustainable competitive advantage for the company.
Our thesis on AFL is that its sales will recover from the impact of the COVID pandemic, and it will return significant amount of capital to shareholders. Sales were negatively impacted in both Japan and the U.S. but appear to be in early stages of recovering. We believe sales will improve further as economies open and new products are introduced in Japan. In the U.S., agents will be able to return to face-to-face interactions as people get vaccinated, something that was restricted last year.
In terms of capital returns, AFL committed to returning $8-9 billion between 2020-2022, which is expected to be 75% of operating earnings. The company returns capital via share buybacks and dividend increases. AFL is a Dividend Aristocrat that has increased its dividend 39 years in a row including 10% annually over the last five years; it also recently announced an 18% dividend increase. Other favorable attributes include an A- rated balance sheet by Standard and Poor’s and an attractive valuation with a relative yield near the high end of its historical range.
We believe its valuation is cheap with its forward expected Price/Earnings (P/E) ratio just 9x and a relative P/E of 0.4x versus the S&P 500 despite an industry leading return on equity. At the time of purchase, AFL had a dividend yield of 2.5% and its relative dividend yield vs. the S&P 500 was 1.8x, as shown. Some risks to the thesis include a prolonged economic downturn, loss of market share due to unsuccessful new product roll outs and potential losses in its investment portfolio.”
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Disclosure: None. 10 Best No-Fee DRIP Stocks to Buy Now is originally published on Insider Monkey.
