In this article, we discussed 12 best ESG dividend stocks according to hedge funds. You can skip our detailed analysis of ESG investing and its prospects, and go directly to read 5 Best ESG Dividend Stocks to Buy According to Hedge Funds.
The concept of ESG, which stands for Environmental, Social, and Governance, was initially introduced in a 2004 United Nations report titled “Who Cares Wins.” The term was coined with the intention of offering recommendations to the financial sector on how to effectively incorporate environmental, social, and governance factors into investment decisions, recognizing their potential to significantly influence the value of investments.
Climate change remains a top priority for the majority of countries, investors, and international organizations. With the approach of 2050 and the increasing emphasis on globally agreed ‘net-zero’ commitments, addressing climate issues will become even more crucial. This agenda item is expected to gain significance, not only driven by public markets but also by the private sector. The significant focus on addressing climate issues has led to a notable increase in ESG-focused investments in recent times. According to a widely cited survey conducted by Morgan Stanley, over half of individual investors, approximately 54%, intend to boost their sustainable investments in 2024. Additionally, the survey indicated that more than three-quarters of individuals, around 77%, express interest in sustainable investing. The report provided the following observation regarding the trend in ESG investments over the years:
“Even investors who know or assume that their sustainable investments underperformed their traditional investments in 2022 report growing interest in sustainable investing. This suggests that sustainability-focused investors tend to be more focused on long-term investment horizons and may not be deeply concerned by short-term fluctuations.”
However, investors lacked confidence in their ESG-focused investments in 2023, withdrawing a total of $5 billion from these funds in the fourth quarter, which contributed to a yearly outflow of $13 billion. This decline was attributed to poor performance, ongoing political scrutiny in the US, and challenges faced by an iShares fund, according to a report by Morningstar. While the outflows may seem concerning at the moment, they don’t necessarily paint a grim picture of ESG investing overall. Despite these outflows and the fact that sustainable equity funds often trailed behind conventional peers in terms of returns for 2023, market appreciation helped bolster sustainable fund assets by the end of the year. The total assets in sustainable funds reached $323 billion by the close of 2023. This figure reflects a decrease of nearly 12% from the peak recorded at the end of 2021, but it marks an increase of 18% from the recent low point observed in the third quarter of 2022.
One prime example illustrating unwavering confidence in ESG investing can be seen through BlackRock’s steadfast commitment to sustainable investment practices. Despite facing criticism from Republican circles, experiencing relatively modest returns, and observing a decline in client interest within the US, BlackRock Inc. has been discreetly expanding its influence in ESG investing. Data from Morningstar Direct reveals that BlackRock’s assets under management linked to ESG surged by 53% from the beginning of 2022 to the end of the previous year. In comparison, the broader ESG fund market experienced only an 8% growth during the same period. Currently, BlackRock manages approximately $320 billion in ESG funds, surpassing any other investment firm in Europe, the US, or globally.
Microsoft Corporation (NASDAQ:MSFT), NVIDIA Corporation (NASDAQ:NVDA), and Visa Inc. (NYSE:V) are some of the best ESG dividend stocks to invest in among others that are discussed below.
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Our Methodology:
For this list, we scanned the holdings of Vanguard ESG U.S. Stock ETF, which is a market capitalization-weighted index composed of large-, mid-, and small-cap stocks of companies located in the US that are screened for certain environmental, social, and corporate governance (ESG) criteria by the index provider, which is independent of Vanguard. From the index, we picked 12 stocks that pay dividends and have garnered the most attention from hedge fund investors by the conclusion of Q4 2023, using data from Insider Monkey’s database. The stocks are ranked in ascending order of the number of hedge funds having stakes in them. Hedge funds’ top 10 consensus stock picks outperformed the S&P 500 Index by more than 140 percentage points over the last 10 years (see the details here).
12. The Procter & Gamble Company (NYSE:PG)
Number of Hedge Fund Holders: 71
The Procter & Gamble Company (NYSE:PG) is an Ohio-based multinational consumer goods company that manufactures a wide range of related products across various categories. The company has committed to various environmental sustainability initiatives, including reducing its carbon footprint, conserving water, and minimizing waste generation throughout its supply chain.
The Procter & Gamble Company (NYSE:PG) currently offers a quarterly dividend of $0.9407 per share and has a dividend yield of 2.36%, as of February 28. It is one of the best ESG dividend stocks on our list as the company has been growing its dividends for 67 consecutive years.
At the end of Q4 2023, 71 hedge funds tracked by Insider Monkey reported having stakes in The Procter & Gamble Company (NYSE:PG), compared with 75 in the previous quarter. The total value of these stakes is roughly $6 billion.
11. AbbVie Inc. (NYSE:ABBV)
Number of Hedge Fund Holders: 76
AbbVie Inc. (NYSE:ABBV) is next on our list of the best ESG dividend stocks to buy. The global biopharmaceutical company is known for its commitment to advancing healthcare and improving patient outcomes. The company places a strong emphasis on social responsibility, particularly in terms of improving access to healthcare, promoting patient well-being, and supporting underserved communities.
On February 15, AbbVie Inc. (NYSE:ABBV) declared a quarterly dividend of $1.55 per share, which was in line with its previous dividend. In 2023, the company achieved its 51st annual consecutive dividend growth. The stock’s dividend yield on February 28 came in at 3.46%.
The number of hedge funds tracked by Insider Monkey owning stakes in AbbVie Inc. (NYSE:ABBV) grew to 76 in Q4 2023, from 73 in the preceding quarter. The overall value of these stakes is over $3.5 billion. With over 3.1 million shares, Marshall Wace LLP was the company’s leading stakeholder in Q4.
10. Broadcom Inc. (NASDAQ:AVGO)
Number of Hedge Fund Holders: 91
Broadcom Inc. (NASDAQ:AVGO) is a multinational technology company that designs, develops, and supplies a broad range of semiconductor and infrastructure software solutions. The company pays a quarterly dividend of $5.25 per share and has a dividend yield of 1.62%, as of February 28. Its dividend growth streak currently spans over 13 years, which makes AVGO one of the best dividend stocks on our list.
Broadcom Inc. (NASDAQ:AVGO) prioritizes social responsibility by promoting diversity, equity, and inclusion within its workforce and supporting initiatives that benefit communities where it operates. In addition to this, the company upholds high standards of corporate governance, transparency, and ethical conduct.
As of the close of Q4 2023, 91 hedge funds in Insider Monkey’s database reported having stakes in Broadcom Inc. (NASDAQ:AVGO), up from 87 in the previous quarter. The total value of these stakes is over $8.8 billion.
9. Merck & Co., Inc. (NYSE:MRK)
Number of Hedge Fund Holders: 98
Merck & Co., Inc. (NYSE:MRK) is an American multinational pharmaceutical company known for its contributions to healthcare and innovation. While the primary focus of Merck remains on pharmaceutical research, development, and manufacturing, the company has taken steps to integrate ESG considerations into its practices. The company currently offers a quarterly dividend of $0.77 per share and has a dividend yield of 2.39%, as of February 28. With a dividend growth streak of 13 years, MRK is one of the best ESG dividend stocks on our list.
Merck & Co., Inc. (NYSE:MRK) was a part of 98 hedge fund portfolios at the end of Q4 2023, up significantly from 85 in the previous quarter, as per Insider Monkey’s database. The stakes owned by these hedge funds have a collective value of over $7.16 billion. Among these hedge funds, Fisher Asset Management was the company’s leading stakeholder in Q4.
8. Eli Lilly and Company (NYSE:LLY)
Number of Hedge Fund Holders: 102
An American pharmaceutical company, Eli Lilly and Company (NYSE:LLY) invests in initiatives to reduce greenhouse gas emissions, conserve water resources, manage waste responsibly, and improve energy efficiency. Eli Lilly may also engage in sustainable sourcing practices and invest in eco-friendly technologies to mitigate environmental impact.
Eli Lilly and Company (NYSE:LLY) offers a quarterly dividend of $1.30 per share, having raised it by 15% in December 2023. Through this increase, the company achieved its growth streak of 10 years, which makes LLY one of the best dividend stocks on our list. The stock’s dividend yield came in at 0.68%, as of February 28.
At the end of December 2023, 102 hedge funds in Insider Monkey’s database reported having stakes in Eli Lilly and Company (NYSE:LLY), the same as in the previous quarter. The collective value of these stakes is over $11.1 billion.
7. JPMorgan Chase & Co. (NYSE:JPM)
Number of Hedge Fund Holders: 103
JPMorgan Chase & Co. (NYSE:JPM) provides a wide range of banking services to individuals, businesses, and institutions. The company has committed to environmental sustainability by setting goals to reduce its own carbon footprint and mitigate climate-related risks. Currently, it pays a quarterly dividend of $1.05 per share and has a dividend yield of 2.29%, as of February 28.
Insider Monkey’s database of Q4 2023 indicated that 103 hedge funds owned stakes in JPMorgan Chase & Co. (NYSE:JPM), compared with 109 in the preceding quarter. The consolidated value of these stakes is over $9 billion.
6. UnitedHealth Group Incorporated (NYSE:UNH)
Number of Hedge Fund Holders: 113
UnitedHealth Group Incorporated (NYSE:UNH) ranks sixth on our list of the best ESG dividend stocks to invest in. The diversified healthcare company is committed to environmental sustainability and reducing its environmental footprint. The company has been growing its dividends for the past 13 years and offers a per-share dividend of $1.88 every quarter. As of February 28, the stock has a dividend yield of 1.52%.
UnitedHealth Group Incorporated (NYSE:UNH) ended the fourth quarter with 113 hedge fund positions, up from 104 in the previous quarter, according to Insider Monkey’s database. The stakes owned by these funds have a total value of over $11 billion.
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Disclosure. None. 12 Best ESG Dividend Stocks to Buy According to Hedge Funds is originally published on Insider Monkey.
