In this article, we discuss 25 dividend aristocrats to avoid according to hedge funds. You can skip our detailed analysis of dividend stocks and their performance, and go directly to read 10 S&P 500 Dividend Aristocrats To Avoid.
Over the years, there has been an observable shift in focus from growth stocks to dividend stocks in certain market environments. High inflationary periods have fared well for dividend stocks historically. Dividend investing also often aligns with a long-term investment strategy as investors may find comfort in the consistent dividend income and the potential for capital appreciation that quality dividend stocks can offer over time. In 2022, dividend aristocrat stocks outperformed the broader market, falling by just 6.21%, compared with a much harsher decline of 18.1% in the S&P 500.
Not only the performance of dividend stocks remained strong compared to other asset classes, but companies in the S&P 500 also paid a record amount in dividend payments last year. According to a report by S&P Dow Jones Indices, the S&P 500 corporations distributed $561 billion in dividends in 2022, up from $511.2 billion in 2021. Though the market suffered some setbacks in the face of Silicon Bank Valley’s failure earlier in March, global dividend payouts sustained their position. In the first quarter of 2023, global dividends grew by 12% on a headline basis to a record $327 billion, as reported by Janus Henderson Investors. The increase was mainly driven by special dividends paid by companies during the quarter.
Analysts and economists are giving a positive outlook for dividend stocks as these equities held their ground during uncertain market conditions. Goldman Sachs Chief US Equity Strategist David Kostin spoke with Business Insider in April and mentioned that dividend payments are expected to grow this year as well. Here are some remarks from the analyst:
“We expect that S&P 500 DPS [dividend-per-share] will reach $70 in 2023 and $73 (+4%) in 2024. Recent company actions also point to a healthy dividend growth environment. The difference in outlooks for dividend and buyback growth suggests firms focusing on dividends will continue to outperform buyback stocks.”
Dividend growth track records play an important role when investing in dividend stocks. These companies often exhibit solid financial health, strong cash flows, and a history of successful operations. Walmart Inc. (NYSE:WMT), Johnson & Johnson (NYSE:JNJ), and The Procter & Gamble Company (NYSE:PG) are some of the most popular dividend aristocrat stocks, however, in this article, we will cover the least popular dividend aristocrats among hedge funds.
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Our Methodology:
For this list, we scoured Insider Monkey’s database of 943 hedge funds as of Q1 2023 and picked the 25 least popular dividend aristocrats in terms of hedge fund positions. The list is ranked in descending order of the number of hedge funds having stakes in the companies as of the end of the first quarter.
S&P 500 Dividend Aristocrats To Avoid According to Hedge Funds
25. Church & Dwight Co., Inc. (NYSE:CHD)
Number of Hedge Fund Holders: 38
Church & Dwight Co., Inc. (NYSE:CHD) is an American multinational company that deals in personal care, household, and other specialty products. The company has a 27-year run of raising its dividends and currently pays a quarterly dividend of $0.2725 per share. The stock offers a dividend yield of 1.19%, as of May 30.
Though Church & Dwight Co., Inc. (NYSE:CHD) holds a long dividend growth streak, it is one of the least popular dividend aristocrat stocks according to hedge funds unlike Walmart Inc. (NYSE:WMT), Johnson & Johnson (NYSE:JNJ), and The Procter & Gamble Company (NYSE:PG).
As per Insider Monkey’s Q1 2023 database, 38 hedge funds owned stakes in Church & Dwight Co., Inc. (NYSE:CHD), up from 36 in the previous quarter. These stakes are collectively worth over $1.4 billion.
24. West Pharmaceutical Services, Inc. (NYSE:WST)
Number of Hedge Fund Holders: 37
West Pharmaceutical Services, Inc. (NYSE:WST) deals in the packaging and distribution of pharmaceuticals. The company announced a quarterly dividend of $0.19 per share on April 27, which was consistent with its previous dividend. It has raised its dividends for 30 years straight. The stock’s dividend yield on May 30 came in at 0.23%.
Stephens remained constructive on West Pharmaceutical Services, Inc. (NYSE:WST)’s business and appreciated its dominant market share. In May, the firm upgraded the stock to Overweight with a $400 price target, up from $330.
At the end of the first quarter of 2023, 37 hedge funds in Insider Monkey’s database held stakes in West Pharmaceutical Services, Inc. (NYSE:WST), with a collective value of over $1.36 billion.
23. Pentair plc (NYSE:PNR)
Number of Hedge Fund Holders: 34
Pentair plc (NYSE:PNR) is a Minnesota-based water treatment company that provides sustainable solutions to its consumers. UBS upgraded the stock to Buy in May and also lifted its price target on the stock to $72. The firm expects the company to recover this year with multiple expansions and margin beats.
Pentair plc (NYSE:PNR) has been rewarding shareholders with growing dividends for the past 47 years. It pays a quarterly dividend of $0.22 per share for a dividend yield of 1.54%.
As of the close of Q1 2023, 34 hedge funds tracked by Insider Monkey owned stakes in Pentair plc (NYSE:PNR), up from 29 in the preceding quarter. These stakes have a total value of over $1.32 billion.
22. PPG Industries, Inc. (NYSE:PPG)
Number of Hedge Fund Holders: 34
PPG Industries, Inc. (NYSE:PPG) is an American paint and coating manufacturing company. It currently pays a quarterly dividend of $0.62 per share. The company has been making uninterrupted dividend payments to shareholders for the past 124 years and also maintains a 51-year streak of dividend growth. As of May 30, the company’s shares boast a yield of 1.85%.
At the end of March 2023, 32 hedge funds held stakes in PPG Industries, Inc. (NYSE:PPG), according to Insider Monkey’s database. In the previous quarter, 31 funds had investments in the company.
21. Sysco Corporation (NYSE:SYY)
Number of Hedge Fund Holders: 34
Sysco Corporation (NYSE:SYY) distributes and markets a wide range of consumer and healthcare goods. In May, Credit Suisse maintained an Outperform rating on the stock with an $88 price target, highlighting the company’s resilient model and current valuation.
On April 27, Sysco Corporation (NYSE:SYY) declared a quarterly dividend of $0.50 per share, having raised it by 2%. This marked the company’s 54th consecutive year of dividend growth. SYY has a dividend yield of 2.88%, as of May 30.
At the end of Q1 2023, 34 hedge funds in Insider Monkey’s database reported having stakes in Sysco Corporation (NYSE:SYY), with a collective value of over $610.7 million.
Aristotle Capital Management, LLC mentioned Sysco Corporation (NYSE:SYY) in its Q4 2022 investor letter. Here is what the firm has to say:
“Founded in 1969 and headquartered in Texas, Sysco Corporation (NYSE:SYY) is one of the largest food distribution companies in the world. The company generates more than $68 billion in annual sales and serves approximately 700,000 customers around the world (~90% of sales are generated in North America).
Sysco provides its customers a single partner from which to conveniently source all the ingredients kitchens need to build complete menus. This includes fresh and frozen meats, seafoods, fruits, vegetables, dairy, bakery items and even disposable dishware products. In addition, the company’s more than 6,000 sales consultants work closely with individual chefs, providing product advice and helping construct menus. Sysco’s clients are predominately restaurants (63% of revenue), but also include health care facilities (8%), education and government entities (8%), and travel and leisure establishments (7%), as well as other locations (14%) …” (Click here to view the full text)
20. Aflac Incorporated (NYSE:AFL)
Number of Hedge Fund Holders: 33
Aflac Incorporated (NYSE:AFL) has raised its dividends for 41 years running. The American insurance company offers a per-share dividend of $0.42 every quarter and the stock bears a dividend yield of 2.58%, as of May 30.
Ken Griffin’s Citadel Investment Group was the leading stakeholder of Aflac Incorporated (NYSE:AFL) in Q1 2023. Overall, 33 hedge funds tracked by Insider Monkey owned stakes in the company in Q1, worth collectively over $313.1 million.
19. W.W. Grainger, Inc. (NYSE:GWW)
Number of Hedge Fund Holders: 32
W.W. Grainger, Inc. (NYSE:GWW) specializes in the distribution of industrial supplies and other related equipment. At the end of Q1 2023, the company was a part of 32 hedge fund portfolios, as tracked by Insider Monkey. The stakes held by these funds have a collective value of roughly $286 million.
Loop Capital raised its price target on W.W. Grainger, Inc. (NYSE:GWW) to $800 in May and kept a Buy rating on the shares. The firm acknowledged the company’s gross margin performance in Q1 and mentioned that the demand for the company’s products remains solid.
W.W. Grainger, Inc. (NYSE:GWW) has been growing its dividends consistently for the past 53 years. It currently offers a quarterly dividend of $1.86 per share and has a dividend yield of 1.14%.
18. Expeditors International of Washington, Inc. (NASDAQ:EXPD)
Number of Hedge Fund Holders: 31
An American logistics company, Expeditors International of Washington, Inc. (NASDAQ:EXPD) is another dividend aristocrat stock on our list. On May 2, the company hiked its quarterly dividend by 2% to $0.69 per share. Through this raise, the company’s dividend growth streak now stands at 29 years. The stock’s dividend yield on May 30 came in at 1.20%.
As of the close of Q1 2023, 31 hedge funds tracked by Insider Monkey reported having stakes in Expeditors International of Washington, Inc. (NASDAQ:EXPD), up from 28 in the previous quarter. The total value of these stakes is over $254 million.
17. Cincinnati Financial Corporation (NASDAQ:CINF)
Number of Hedge Fund Holders: 30
Cincinnati Financial Corporation (NASDAQ:CINF) is an American insurance company that offers property and casualty insurance services to its consumers. BofA upgraded the stock to Buy in May and also raised its price target on the stock to $117, appreciating the company’s solid performance in the most recent quarter. The firm also expects a margin upside this year.
Cincinnati Financial Corporation (NASDAQ:CINF) offers a quarterly dividend of $0.75 per share and has a dividend yield of 3.03%, as of May 30. The company holds one of the longest dividend growth streaks of 62 years.
The number of hedge funds in Insider Monkey’s database owning stakes in Cincinnati Financial Corporation (NASDAQ:CINF) grew to 30 in Q1 2023, from 20 in the previous quarter. These stakes are worth over $232.2 million in total.
16. Dover Corporation (NYSE:DOV)
Number of Hedge Fund Holders: 30
Dover Corporation (NYSE:DOV) is an Illinois-based conglomerate that specializes in the manufacturing of industrial products. On May 5, the company announced a quarterly dividend of $0.505 per share, which was in line with its previous dividend. It is among the dividend aristocrat stocks on our list with a 67-year streak of dividend growth. DOV has a dividend yield of 1.48%, as of May 30.
At the end of Q1 2023, 30 hedge funds tracked by Insider Monkey held stakes in Dover Corporation (NYSE:DOV), up from 28 in the previous quarter. These stakes have a collective value of over $510.4 million.
15. Brown-Forman Corporation (NYSE:BF-B)
Number of Hedge Fund Holders: 29
An American distilleries company, Brown-Forman Corporation (NYSE:BF-B) ranks eleventh on our list of the dividend aristocrats stocks that are least popular among hedge funds. At the end of Q1 2023, 29 funds in Insider Monkey’s database owned positions in the company, down from 36 in the previous quarter. The stakes owned by these 29 elite funds have a total value of over $1.5 billion.
Brown-Forman Corporation (NYSE:BF-B) has been growing its dividend for the past 39 years. It currently pays a quarterly dividend of $0.2055 per share and has a dividend yield of 1.34%, as of May 30.
14. Franklin Resources, Inc. (NYSE:BEN)
Number of Hedge Fund Holders: 28
Franklin Resources, Inc. (NYSE:BEN) is an American investment management company that provides services in fixed income, alternative investment products, and mutual funds. In May, BMO Capital reiterated its Market Perform rating on the stock, expecting the company’s organic growth to remain stable.
Franklin Resources, Inc. (NYSE:BEN) offers a quarterly dividend of $0.30 per share for a dividend yield of 4.85%, as of May 30. The company holds a 47-year streak of dividend growth.
At the end of March 2023, 28 hedge funds tracked by Insider Monkey owned stakes in Franklin Resources, Inc. (NYSE:BEN), up from 23 in the previous quarter. These stakes have a consolidated value of over $185.4 million.
13. A. O. Smith Corporation (NYSE:AOS)
Number of Hedge Fund Holders: 28
A. O. Smith Corporation (NYSE:AOS) is a Wisconsin-based company that manufactures residential and commercial water heaters and boilers. The company pays a per-share dividend of $0.30 every quarter and has one of the strongest dividend histories in the market. It has been making regular dividend payments to shareholders for the past 83 years while maintaining a 29-year streak of consistent dividend growth. With a dividend of 1.80%, AOS is among the dividend aristocrat stocks on our list.
In May, DA Davidson raised its price target on A. O. Smith Corporation (NYSE:AOS) to $82 and kept its Buy rating on the stock, presenting a positive stance on the production and demand for water heaters and commercial boilers.
According to Insider Monkey’s Q1 2023 database, 28 hedge funds owned stakes in A. O. Smith Corporation (NYSE:AOS), up from 26 in the previous quarter. These stakes are collectively worth over $528 million.
12. McCormick & Company, Incorporated (NYSE:MKC)
Number of Hedge Fund Holders: 27
McCormick & Company, Incorporated (NYSE:MKC) is an American food company that manufactures and markets a wide range of food products. The company was a part of 27 hedge fund portfolios at the end of Q1 2023, up from 25 in the previous quarter. The stakes owned by these hedge funds are collectively valued at over $1.6 billion.
McCormick & Company, Incorporated (NYSE:MKC) has upped its dividends for 37 years in a row. The company pays a quarterly dividend of $0.39 per share and has a dividend yield of 1.82%, as of May 30.
11. Consolidated Edison, Inc. (NYSE:ED)
Number of Hedge Fund Holders: 27
Consolidated Edison, Inc. (NYSE:ED) is another dividend aristocrat stock on our list. Following the company’s strong performance in the most recent quarter, Guggenheim raised its price target on the stock to $90 with a Neutral rating on the shares.
Consolidated Edison, Inc. (NYSE:ED) pays a quarterly dividend of $0.81 per share, having raised it by 2.5% earlier this year. In 2023, the company stretched its dividend growth streak to 49 years. On May 30, the stock’s dividend yield came in at 3.49%. It is one of the least popular dividend aristocrat stocks among hedge funds. On the other hand, Walmart Inc. (NYSE:WMT), Johnson & Johnson (NYSE:JNJ), and The Procter & Gamble Company (NYSE:PG) remained popular among elite funds in Q1.
As of the close of Q1 2023, 27 hedge funds in Insider Monkey’s database owned stakes in Consolidated Edison, Inc. (NYSE:ED), up from 25 in the previous quarter. The collective value of these stakes is over $344.2 million.
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Disclosure. None. 25 S&P 500 Dividend Aristocrats To Avoid is originally published on Insider Monkey.