We recently compiled a list of the 10 Best Halal Dividend Stocks To Invest In. In this article, we are going to take a look at where Kenvue Inc. (NYSE:KVUE) stands against the other halal dividend stocks.
Halal stocks are shares in companies that adhere to Shariah law. These companies operate in accordance with Islamic principles, avoiding industries such as alcohol, gambling, tobacco, and non-Islamic finance. They also maintain ethical business practices, ensuring their revenue sources are consistent with Islamic values. The S&P High Yield Dividend Aristocrats Shariah index tracks the performance of Shariah-compliant companies from the Composite 1500 that have a history of consistently raising their dividends for at least 20 years. These companies follow a managed dividend strategy, ensuring steady growth in dividend payouts.
When investing in halal stocks, it’s important for investors to carefully consider a company’s balance sheet. Companies with debt exceeding 33% of their market value are disqualified from halal investing, though this ratio can fluctuate for some businesses. According to a World Bank report, the Islamic finance industry has grown quickly in the last decade, with an annual growth rate of 10-12%. Currently, Sharia-compliant financial assets are valued at approximately $2 trillion, encompassing both bank and non-bank institutions, as well as capital markets, money markets, and insurance.
Also read: 10 Best Diversified Dividend Stocks To Buy Now
Halal investing is still a relatively new concept in the US, where Muslims make up around 1% of the population, as of 2020. In the past, older generations of Muslims typically focused on real estate and physical gold as investments or chose stocks recommended by friends and community members. The complexities of Islamic finance have led many to overlook it. However, this is beginning to change as technology advances and demographic trends shift. Financial educators, along with fintech startups, halal stockpickers, and specialized exchange-traded funds (ETFs), are helping fill the gap. In addition, the rise of zero-fee brokerages has made investing more accessible to Muslims who follow strict financial guidelines. These low-cost platforms have made it easier to serve clients who were previously overlooked or considered unprofitable. Omar Shaikh, director of Islamic Finance Council UK, made the following comment about this:
“Islamic finance as a sector is barely 30 years old, with the past 15 years seeing the most development. It takes time to educate and create awareness and as this has happened, more banks have focused on servicing the demand for halal investing. This in turn helps to create more products, which then creates more demand.”
Halal investing is experiencing growth despite limited awareness. A 2023 report by the General Council for Islamic Banks and Financial Institutions revealed that the global Islamic funds market has expanded by over 300% in the past decade, with nearly $200 billion in assets now managed worldwide. A Goldman Sachs report from December 2022 projected that by 2075, five of the world’s ten largest economies—India, Indonesia, Nigeria, Pakistan, and Egypt—will have Muslim populations exceeding 850 million people.
As the Muslim population grows, so does the demand for financial products tailored to their needs. According to the State of the Global Islamic Economy Report 2023 by DinarStandard, approximately $25.9 billion was invested in Sharia-compliant investments during the 2022-23 financial year, reflecting a 128% increase from the previous year.
Our Methodology:
To compile this list, we chose the top 10 stocks from the S&P High Yield Dividend Aristocrats Shariah Index. These specific companies are known for consistently providing substantial dividends to their shareholders and demonstrating robust financial stability. We ranked these holdings based on the number of hedge funds that had invested in them by the end of Q3 2024, using data from Insider Monkey’s database.
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).
A pharmacist at a local store, stocking shelves with products from the consumer health company.
Kenvue Inc. (NYSE:KVUE)
Number of Hedge Fund Holders: 46
Kenvue Inc. (NYSE:KVUE), a consumer health company based in New Jersey, became a fully independent entity in 2023 following its separation from Johnson & Johnson. Corporate breakups and restructurings often create uncertainty, which has impacted the recent stock performance of both Kenvue and Johnson & Johnson. Nevertheless, Kenvue has the potential to establish itself as a robust high-yield dividend stock, making it an appealing option for long-term investors. In the past 12 months, the stock has surged modestly by a little over 1.5%.
In the third quarter of 2024, Kenvue Inc. (NYSE:KVUE) maintained strong productivity and achieved efficiency gains through its Vue Forward initiative. These improvements are being reinvested into its iconic brands to unlock the business’s full potential and uphold its commitment to delivering long-term value for shareholders. The reinvestment is allowing the company to sustain market share growth in Self Care, achieve widespread growth across Essential Health categories, and establish a solid foundation in Skin Health and Beauty, where early signs of recovery are becoming evident. The company reported revenue of $3.9 billion, which showed a 0.4% decline from the same period last year.
Kenvue Inc. (NYSE:KVUE)’s cash position was also noticed by income investors. In the first nine months of the year, the company generated $1 billion in operating cash flow and its free cash flow came in at $0.7 billion. On January 17, the company declared a quarterly dividend of $0.205 per share, having raised it by 2.5% in July 2024. With a dividend yield of 3.95% as of January 22, KVUE is one of the best halal stocks to buy.
Kenvue Inc. (NYSE:KVUE) was a part of 46 hedge fund portfolios at the end of Q3 2024, as per Insider Monkey’s database. The stakes owned by these hedge funds are worth over $1.3 billion. With more than 31.4 million shares, Harris Associates was the company’s leading stakeholder in Q3.
Overall KVUE ranks 7th on our list of the best halal stocks that pay dividends. While we acknowledge the potential for KVUE as an investment, 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 KVUE but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.