5 Best Dividend Growth Stocks With High Upside Potential: Part 1

#3 Target Corporation (NYSE:TGT)

– Number of Hedge Fund Holders (as of September 30): 30
– Total Value of Hedge Fund Holdings (as of September 30): $702.82 million
– Hedge Fund Holdings as Percent of Float (as of September 30): 1.80%

While it may not be an e-commerce giant with a fast-growing cloud division, Target Corporation (NYSE:TGT) is a dividend aristocrat, having raised its annual payout for 48-straight years. Due to its dividend hikes, Target currently pays an annual dividend of $2.40 per share, good for a 3.05% yield. If Donald Trump follows through with his promise of making the economy stronger and cutting taxes for the middle class, Target could benefit with higher growth and margins. Given management’s history of generously returning capital back to shareholders, Target shareholders could see more buybacks and dividend hikes. John A. Levin‘s Levin Capital Strategies increased its stake in Target by 334% during the third quarter, to slightly over 1.8 million shares at the end of September.

#2 Altria Group Inc (NYSE:MO)

– Number of Hedge Fund Holders (as of September 30): 40
– Total Value of Hedge Fund Holdings (as of September 30): $1.77 billion
– Hedge Fund Holdings as Percent of Float (as of September 30): 1.40%

Cigarettes may be bad for one’s health, but Altria Group Inc (NYSE:MO) has certainty been healthy for many investors’ portfolios. As the parent company of Philip Morris USA and accounting for spin-offs, Altria has raised its payout for 46-consecutive years, giving it a current yield of 3.78%. Although the stock topped in early-July, some traders hope that potential industry consolidation could lead to even better margins for Altria in the quarters to come. 40 funds that we track had a bullish position in Altria Group Inc (NYSE:MO) at the end of the third quarter, down by 6 funds from the end of the previous quarter.

#1 AT&T Inc. (NYSE:T)

– Number of Hedge Fund Holders (as of September 30): 51
– Total Value of Hedge Fund Holdings (as of September 30): $2.55 billion
– Hedge Fund Holdings as Percent of Float (as of September 30): 1.30%

With 51 funds out of the 742 that we follow which filed 13Fs for the September quarter, AT&T Inc. (NYSE:T) is the smart money’s favorite dividend growth stock on our list. Given the telecom’s capital return policies, it’s not hard to see why so many hedge funds like the stock. Not only has AT&T grown its dividend for the past 31 years, but the stock also pays a yield of around 5%. While shares have been under pressure due to debt concerns caused by the tentative Time Warner purchase, many funds evidently think that the deal will either be rejected and the debt concerns will go away, or that the deal will get the green light and management will successfully integrate Time Warner. The bears likely disagree with that sentiment, however.

Disclosure: None