In this article, we will discuss some of the best debt free stocks that pay dividends.
Debt financing is not inherently negative; its impact largely depends on how effectively it is utilized. When managed properly, it can drive substantial cash flow and enhance returns for shareholders. However, poor management of debt can weaken a company’s financial stability. In the second quarter, corporate debt levels decreased despite benchmark interest rates remaining unchanged between April and June. Total debt for both investment-grade and non-investment-grade companies fell to $8.432 trillion, down from $8.517 trillion in the previous quarter. Investment-grade companies reduced their debt by approximately 0.9% to $6.610 trillion, while those rated below BBB- by S&P Global Ratings lowered their debt by about 1.2% to $1.822 trillion, based on data from S&P Global Market Intelligence.
Also read: 10 Dividend Knights that Beat The Market Last 3 Years
The S&P Global report also highlighted that while total debt among U.S. investment-grade companies declined overall, seven out of 10 nonfinancial sectors experienced debt growth in the second quarter. The energy sector recorded the largest increase, with total debt rising by 4.1% to $502.03 billion. However, this increase was largely offset by a significant 12.7% drop, equivalent to $98.87 billion, in debt within the information technology sector. For non-investment-grade companies, debt decreased across eight of the 10 sectors, with consumer staples experiencing the steepest decline at 7.7%. Conversely, total debt rose only in the healthcare and energy sectors within this category.
While many US companies maintain strong balance sheets, a significant share of defaults has come from low-rated firms with negative cash flow, high debt levels, and limited liquidity. These heavily indebted businesses, often referred to as “zombies,” struggle to stay afloat, barely covering their loan interest payments, and are vulnerable to even minor setbacks. An analysis by the Associated Press found that nearly 7,000 publicly traded companies globally, including 2,000 in the U.S., fall into this category. These firms were impacted by years of accumulating inexpensive debt, followed by persistent inflation that pushed borrowing costs to their highest levels in a decade. Additionally, much of the borrowed funds were not directed toward growth initiatives like expansion, hiring, or technological investment but were instead used for stock buybacks.
Financial analysts have pointed out that U.S. companies have not taken sufficient steps to reduce their long-term debt, leading to a worsening situation. For the first time, annual interest expenses have exceeded $1 trillion, reaching $1.16 trillion in 2024. According to a Treasury official, the average interest rate on government debt increased to 3.32% in 2024, compared to 2.97% the previous year. The Congressional Budget Office projects that the national debt, currently near 100% of GDP, will climb to 122% by 2034.
Using debt to support dividends is typically viewed unfavorably, especially in light of practices observed during the 2020 pandemic. At that time, many private companies turned to dividend recapitalization, borrowing funds to maintain dividend payouts. The trend persisted in 2024 as well. As of September 30, 2024, US companies, including those not supported by private equity, have secured a record $70.2 billion in leveraged loans for dividend recapitalizations, based on data from PitchBook. This amount surpasses the $67.2 billion recorded in 2021, the previous high point for such activity.
That said, many companies have maintained stable balance sheets, with US firms consistently setting new records for dividend payments year after year. In view of this, we will discuss some of the best debt free stocks that pay dividends.
Photo by Sharon McCutcheon on Unsplash
Our Methodology:
To create this list, we first used a screener and identified companies with minimal or no debt. From this pool, we selected those that consistently pay dividends to shareholders and compared their enterprise value (EV) to their market capitalization to gauge which ones are debt-free. We then narrowed down the list by including stocks that had sustainable dividend yields. From that list, we picked 8 companies with the highest number of hedge funds having stakes in them, as per Insider Monkey’s database of Q3 2024.
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).
8. Epsilon Energy Ltd. (NASDAQ:EPSN)
Number of Hedge Fund Holders: 7
Market Cap as of December 7: $127.43 million
Enterprise Value as of December 7: $119.6 million
Epsilon Energy Ltd. (NASDAQ:EPSN) is an American independent oil and natural gas company that specializes in the acquisition, development, gathering, and production of natural gas and oil reserves. In its recent earnings call, the company reported its fourth consecutive quarter of growth in liquids volume, revenue, and cash flow from its Permian assets, helping to offset the impact of the current natural gas pricing environment. In Pennsylvania, production and cash flow are expected to increase in the fourth quarter and into next year, supported by improving natural gas market conditions. With a diversified and expanding asset portfolio, the company is well-positioned for volume and cash flow growth in 2025.
Epsilon Energy Ltd. (NASDAQ:EPSN) reported revenue of $7.29 million in the third quarter of 2024, up from $6.31 million in the same period last year. The revenue also beat analysts’ estimates by nearly $403,000. It reported capital expenditures of $3.9 million for the quarter ending September 30, 2024. These expenses were mainly attributed to completing one gross (0.25 net) well in Ector County, Texas, and drilling two gross (1 net) wells in Alberta, Canada.
In addition to this, Epsilon Energy Ltd. (NASDAQ:EPSN) demonstrated strong cash generation. In the first nine months of the year, the company generated over $11.8 million in operating cash flow. At the end of the quarter, it had over $8.3 million available in cash and cash equivalents. Moreover, the company returned $2 million to shareholders through dividends and share repurchases. Currently, it offers a quarterly dividend of $0.0625 per share and has a dividend yield of 4.29%, as of December 7. EPSN is one of the best debt free stocks that pay dividends.
At the end of Q3 2024, 7 hedge funds tracked by Insider Monkey held stakes in Epsilon Energy Ltd. (NASDAQ:EPSN), the same as in the previous quarter. These stakes have a consolidated value of over $33.4 million. Among these hedge funds, Solas Capital Management was the company’s leading stakeholder in Q3.
7. FinVolution Group (NYSE:FINV)
Number of Hedge Fund Holders: 10
Market Cap as of December 7: $1.82 billion
Enterprise Value as of December 7: $585.2 million
FinVolution Group (NYSE:FINV) is a Chinese fintech platform that offers a wide range of related services, including credit risk assessment, loan transactions, and fraud detection. The stock has surged by over 45% since the start of 2024 and has produced solid earnings so far this year. In the third quarter of 2024, the company’s cumulative registered users totaled 166.8 million, reflecting a 9.3% increase from the same date in 2023. During the same period, the number of cumulative borrowers rose to 26.3 million, marking a 6.0% year-over-year growth.
In addition to this, FinVolution Group (NYSE:FINV)’s international revenues rose to RMB635.5 million, reflecting an 8.7% year-over-year increase and accounting for 19.4% of total net revenues. Meanwhile, international transaction volume grew by 22.7% compared to the previous year, reaching RMB2.7 billion. Moreover, transaction volume totaled RMB49.5 billion, marking a 0.8% increase compared to the same period in 2023.
FinVolution Group (NYSE:FINV) ended the quarter with over $727.4 million available in cash and cash equivalents. It is one of the best debt free dividend stocks as the company has been growing its payouts for four consecutive years. The company currently pays an annual dividend of $0.237 per share and has a dividend yield of 3.39%, as of December 7.
As of the close of Q3 2024, 10 hedge funds tracked by Insider Monkey held stakes in FinVolution Group (NYSE:FINV), up from 8 in the preceding quarter. The consolidated value of these stakes is more than $27.8 million. Among these hedge funds, GLG Partners was the company’s leading stakeholder in Q3.
6. RPC, Inc. (NYSE:RES)
Number of Hedge Fund Holders: 14
Market Cap as of December 7: $1.26 billion
Enterprise Value as of December 7: $1.01 billion
RPC, Inc. (NYSE:RES) is a Georgia-based oil and gas services company. During the third quarter, the company experienced a decline in revenues and profits due to a challenging oilfield services market. Both oil prices and rig counts decreased sequentially, creating additional difficulties in an already competitive landscape. Non-pressure pumping service lines proved more stable, with a modest 4% aggregate revenue decline, while pressure pumping revenues dropped by a low double-digit percentage. The stock is also down by over 18% since the start of the year.
However, broader service lines and larger, more diversified customers remained relatively stable. RPC, Inc. (NYSE:RES)’s Tier 4 dual fuel assets continued to see high utilization with strong visibility, whereas demand for older equipment was weaker. Management plans to implement targeted cost-saving measures to protect margins until industry conditions improve.
In addition to this, RPC, Inc. (NYSE:RES) remained debt free at the end of the quarter and returned $8.6 million to shareholders through dividends. The company ended the quarter with $277 million available in cash. In the first nine months of the year, it generated $255.2 million in operating cash flow and its free cash flow for the period came in at $75.8 million. On October 24, the company declared a quarterly dividend of $0.24 per share, which was in line with its previous dividend. The stock’s dividend yield on December 7 came in at 2.74%.
The number of hedge funds tracked by Insider Monkey owning stakes in RPC, Inc. (NYSE:RES) grew to 14 in Q3 2024, from 11 in the previous quarter. These stakes have a consolidated value of over $60.4 million. With nearly 3 million shares, GAMCO Investors owned the largest stake in the company.
5. Kulicke and Soffa Industries, Inc. (NASDAQ:KLIC)
Number of Hedge Fund Holders: 19
Market Cap as of December 7: $2.60 billion
Enterprise Value as of December 7: $2.06 billion
Kulicke and Soffa Industries, Inc. (NASDAQ:KLIC) ranks fifth on our list of the best debt free stocks that pay dividends. The Singapore-based semiconductor manufacturing company specializes in cutting-edge semiconductors and electronics assembly solutions. The stock is down by over 8.5% so far this year. The company experienced a significant drop in demand for its core ball-bonder equipment, which is used to package high-volume general electronics like phones and PCs, following the surge during the pandemic. Although these markets have started to rebound slightly, they have yet to show substantial recovery. Additionally, the company’s industrial and automotive wedge-bonding equipment has faced a recent downturn due to the slowdown in the electric vehicle market.
However, in its Q3 2024 earnings call, Kulicke and Soffa Industries, Inc. (NASDAQ:KLIC) highlighted that it is focused on promoting market adoption of its advanced packaging and assembly solutions, which include vertical wire, high-power interconnect (HPI), advanced dispense, and fluxless thermo-compression (FTC) technologies. Demand for these solutions is expected to gain momentum as the general semiconductor and automotive markets recover, projected to accelerate throughout fiscal year 2025. In fiscal Q4 2024, the company reported revenue of $181.3 million, which surpassed analysts’ estimates by $1.02 million.
On November 13, Kulicke and Soffa Industries, Inc. (NASDAQ:KLIC) announced a 2.5% hike in its quarterly dividend to $0.205 per share. This was the company’s fifth consecutive year of dividend growth. Its strong cash position makes it a strong dividend payer. In the most recent quarter, the company generated $31.6 million in operating cash flow and its free cash flow for the period came in at $29.2 million.
Kulicke and Soffa Industries, Inc. (NASDAQ:KLIC) was a part of 19 hedge fund portfolios at the end of Q3 2024, up from 17 in the previous quarter, as per Insider Monkey’s database. The stakes owned by these hedge funds have a consolidated value of nearly $200 million.
4. Cal-Maine Foods, Inc. (NASDAQ:CALM)
Number of Hedge Fund Holders: 24
Market Cap as of December 7: $4.87 billion
Enterprise Value as of December 7: $4.11 billion
Cal-Maine Foods, Inc. (NASDAQ:CALM) is a Mississippi-based producer and distributor of fresh shell eggs in the US. The company’s operations were impacted by disruptions caused by a decline in the national egg supply, which resulted from recent outbreaks of highly pathogenic avian influenza (HPAI). As of September 1, 2024, the total US hen population was about 4.5% lower than the five-year average, totaling 307.6 million layers. Despite this, the stock is generating solid returns, surging by over 75% since the start of 2024.
Given the current challenges, Cal-Maine Foods, Inc. (NASDAQ:CALM) intends to boost its production and purchase more eggs from external suppliers. Higher volumes and sales were driven by the added production capacity from recent acquisitions, along with steady organic growth. Operations ran smoothly as the company expanded its market reach and met the needs of its valued customers. In fiscal Q1 2025, the company reported revenue of $785.8 million, up significantly by over 71% from the same period last year. The revenue also beat analysts’ estimates by $81.22 million.
During the quarter, Cal-Maine Foods, Inc. (NASDAQ:CALM) returned approximately 450 million to shareholders through dividends. The company offers a quarterly dividend of $1.02 per share and has a dividend yield of 2.93%, as of December 7. It has been paying variable dividends since the third quarter of 2008. While its dividend policy was inconsistent in the years following the pandemic, it managed to recover and resume its payouts.
As per Insider Monkey’s database of Q3 2024, 24 hedge funds owned stakes in Cal-Maine Foods, Inc. (NASDAQ:CALM), compared with 25 in the previous quarter. These stakes are worth over $377.3 million in total. Jim Simons’ Renaissance Technologies owned the largest stake in the company in Q3.
3. T. Rowe Price Group, Inc. (NASDAQ:TROW)
Number of Hedge Fund Holders: 26
Market Cap as of December 7: $27.51 billion
Enterprise Value as of December 7: $24.62 billion
T. Rowe Price Group, Inc. (NASDAQ:TROW) is an American asset management company that offers a wide range of related products and services to its consumers. The company is working to develop its own ETF business and has been expanding into other sectors with strong demand, such as alternative investments. It also has significant flexibility to make adjustments, as it carries no long-term debt on its balance sheet, which makes it one of the best debt free stocks that pay dividends. Since the start of 2024, the stock has surged by nearly 15%.
T. Rowe Price Group, Inc. (NASDAQ:TROW) reported mixed earnings for the third quarter of 2024. Its revenue reached $1.8 billion, reflecting a 7% increase compared to the same period last year, but it fell short of analysts’ estimates by more than $61 million. The company ended the quarter with assets under management totaling over $1.63 trillion, up from $1.34 trillion in the previous year.
On November 1, T. Rowe Price Group, Inc. (NASDAQ:TROW) declared a quarterly dividend of $1.24 per share, which was in line with its previous dividend. Overall, the company has raised its payouts for 38 consecutive years. As of December 7, the stock offers an attractive dividend yield of 4.01%.
Insider Monkey’s database of Q3 2024 indicated that 26 hedge funds owned stakes in T. Rowe Price Group, Inc. (NASDAQ:TROW), compared with 28 in the previous quarter. The collective value of these stakes is over $422.5 million. With nearly 2 million shares, Fisher Asset Management was the company’s leading stakeholder in Q3.
2. Mueller Industries, Inc. (NYSE:MLI)
Number of Hedge Fund Holders: 27
Market Cap as of December 7: $8.95 billion
Enterprise Value as of December 7: $8.02 billion
Mueller Industries, Inc. (NYSE:MLI) ranks second on our list of the best debt free stocks that pay dividends. The American machinery industry company manufactures a wide range of products for industrial markets. The company has attracted investors’ interest due to strong operational improvements, favorable market conditions, and its undervalued position relative to competitors. MLI, a leader in essential but often overlooked markets, produces basic components for water infrastructure, HVAC, and industrial applications. The company benefits from a well-balanced business model, with its piping systems segment contributing the majority of its operational profits and revenues. The stock is up nearly 69% YTD.
In the third quarter of 2024, Mueller Industries, Inc. (NYSE:MLI) posted revenues of $997.8 million, which jumped by 21.7% from the same period last year. The company’s operating income came in at $206.7 million, up from $181 million in the prior-year period. The rise in net sales was driven by $102.4 million in sales from recently acquired businesses, along with the increase in copper prices.
Mueller Industries, Inc. (NYSE:MLI) has been growing its dividends for the past four years. The company currently offers a quarterly dividend of $0.20 per share and has a dividend yield of 1.02%, as of December 7.
Of the 900 hedge funds tracked by Insider Monkey at the end of Q3 2024, 27 funds owned stakes in Mueller Industries, Inc. (NYSE:MLI), up from 25 in the previous quarter. The overall value of these stakes is more than $424.7 million. Among these hedge funds, GAMCO Investors was the company’s leading stakeholder in Q3.
1. Janus Henderson Group plc (NYSE:JHG)
Number of Hedge Fund Holders: 29
Market Cap as of December 7: $7.05 billion
Enterprise Value as of December 7: $5.23 billion
Janus Henderson Group plc (NYSE:JHG) is a UK-based asset management company that offers a wide range of financial products and services to its consumers. With a legacy spanning 90 years, the company has supported more than 60 million individuals in building a secure financial future. Its extensive history has fostered a robust research-driven culture and a client-centered philosophy, empowering people to achieve outstanding financial goals. Between 2015 and the second quarter of 2024, the company expanded its assets under management (AUM) from $190 billion to $383 billion. The stock is outperforming the market this year, surging by over 48% since the start of 2024.
In the third quarter of 2024, Janus Henderson Group plc (NYSE:JHG) reported revenue of $624.8 million, which showed a nearly 20% growth from the same period last year. The company reported consistent net inflows, with $0.4 billion added during the third quarter of 2024. Assets under management (AUM) rose by 6% compared to the previous quarter and 24% year-over-year, reaching $382.3 billion as of September 30, 2024. Improved net flows, a steady net management fee rate, and operating leverage contributed to a 42% year-over-year growth in adjusted diluted earnings per share (EPS), which stood at $0.91.
Janus Henderson Group plc (NYSE:JHG) is a strong dividend payer, offering regular payouts to shareholders since 2017. The company remained committed to its shareholder obligation, returning $102 million to investors through dividends and share repurchases in the most recent quarter. It currently pays a quarterly dividend of $0.39 per share and has a dividend yield of 3.52%, as of December 7.
Janus Henderson Group plc (NYSE:JHG) remained popular among elite funds at the end of Q3 2024, with hedge fund positions growing to 29, from 23 in the preceding quarter. The stakes owned by these funds have a total value of more than $1.8 billion.
Overall, Janus Henderson Group plc (NYSE:JHG) ranks first on our list of the best debt free stocks that pay dividends. While we acknowledge the potential for JHG to grow, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than JHG but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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