We recently compiled the list of 25 Best Dividend Aristocrats Stocks According to Analysts. Since Cincinnati Financial Corporation (NASDAQ:CINF) is part of the list, we have analyzed the stock in detail.
The age-old debate of investing in dividend growth or high-yield stocks continues to reappear within the dividend investing realm. Between these two, dividend growth is currently the favored option in the market as investors seek out strategies to grow their income over time. In this regard, investors turn to dividend aristocrats, which are the companies that have raised their payouts for 25 consecutive years or more. These stocks have delivered strong returns over the years regardless of market conditions. Between February 2005 and December 2023, dividend aristocrats delivered a 12.50% return in falling interest rate periods and an 11.5% return in rising interest rate periods, according to data by Bloomberg.
Numerous analysts have pointed out the long-term potential of dividend growth stocks, a sentiment echoed by Warren Buffett’s investment in Coca-Cola. Back in August 1994, Berkshire Hathaway completed its acquisition of 400 million shares in the company, worth $1.3 billion. Berkshire initially received a cash dividend of $75 million from Coca-Cola in 1994, the amount which surged to $704 million in 2022. This shows a remarkable growth potential of dividend-paying investments over the long term.
With investors showing a growing preference for dividend-paying stocks, major tech companies started initiating their dividend policies this year. Mark Iong, an equity fund manager at Homestead Advisers, expressed his approval of this move by tech companies in one of his recent interviews with Bloomberg. Here are some comments from the analyst:
“Dividends will be table-stakes for big tech going forward. I think if you don’t pay one, it will now be taken as a sign your business is more volatile. What’s exciting is they are doing dividends and buybacks simultaneously, while also cutting costs and growing, which is them stepping on the pedal for profits across the board.”
Not limited to the tech sector alone, companies across the broader market are showing a strong commitment to dividends this year. Though these equities lagged behind the market last year, their outlook remains strong this year. According to a recent report by S&P Dow Jones Indices, in the first quarter of 2024, companies in the index paid $151.6 billion in dividends, up from $146.8 billion paid during the same period last year. In addition, 796 companies reported dividend hikes during the quarter, amounting collectively to $22.7 billion. Howard Silverblatt, Senior Index Analyst at S&P Dow Jones Indices, expects that the index will report a 6% year-over-year increase in dividend payments in 2024.
Now, let’s take a look at some of the best dividend aristocrat stocks to buy according to analysts.
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Our Methodology:
For our list, we first scanned a list of the best dividend aristocrat stocks, which are the companies that have raised their dividends for 25 consecutive years or more. From this group, we picked stocks with a projected upside potential of over 10% based on analyst price targets. The stocks are ranked according to their upside potential, as of May 26. We also measured hedge fund sentiment around each stock according to Insider Monkey’s database of 920 funds as of Q1 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).
Cincinnati Financial Corporation (NASDAQ:CINF)
Upside Potential as of May 26: 12.31%
An American insurance company, Cincinnati Financial Corporation (NASDAQ:CINF) is 23rd on our list of the best dividend aristocrat stocks to buy now. In the first quarter of 2024, the company’s revenue jumped by 31% on a year-over-year basis to $2.9 billion. Its net income for the quarter came in at $755 million, up from $225 million during the same period last year.
Cincinnati Financial Corporation (NASDAQ:CINF) currently pays a quarterly dividend of $0.81 per share and has a dividend yield of 2.75%, as recorded on May 26. The company has been rewarding shareholders with growing dividends for the past 63 years.
Cincinnati Financial Corporation (NASDAQ:CINF) was a part of 24 hedge fund portfolios at the end of Q1 2024, down from 33 in the previous quarter, as per Insider Monkey’s database. The stakes held by these hedge funds have a collective value of over $625.8 million. Among these hedge funds, Select Equity Group was the company’s leading stakeholder in Q1.
Though hedge fund sentiment toward Cincinnati Financial Corporation (NASDAQ:CINF) remained negative in the first quarter, the company is still positioned to benefit from its strong market position. As interest rates are expected to stay elevated this year, the company could profit from the increase in its investment income. The company’s future also looks promising because of the growing demand for insurance products and services. In addition to its consistent dividend growth for over six decades, the stock also supports an attractive dividend yield. As of the close of 24, one of the best dividend aristocrat stocks is up by 11.1% this year so far, while its 12-month returns came in at 19.01%. Aristotle Value Equity Strategy said the following about the stock at the beginning of this year:
“We first invested in property and casualty insurer Cincinnati Financial during the fourth quarter of 2020. We continue to admire the company’s prudent underwriting, strong relationships with agencies and financial strength, as evidenced by 60+ consecutive years of dividend increases. Catalysts that have been realized during our holding period include market share gains for agencies and areas that were entered in prior years. We continue to admire this business but decided to sell in favor of what we think is a more optimal opportunity.”
We tend to agree with them. CINF currently trades at a forward PE of 18 which doesn’t look too cheap for an insurance company.
Overall, CINF ranks 23rd among the best dividend aristocrat stocks according to analysts, but it ranks #1 among insurance dividend aristocrats. You can visit 25 Best Dividend Aristocrats Stocks According to Analysts to see other dividend aristocrats that are on analysts’ radar. While we acknowledge the potential of dividend growth stocks, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is as promising as NVIDIA but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
Read Next: Michael Burry Is Selling These Stocks and Jim Cramer is Recommending These Stocks.
Disclosure: None. This article is originally published at Insider Monkey.