We recently published a list of S&P 500 Dividend Aristocrats List: Sorted By Hedge Fund Sentiment. In this article, we are going to take a look at where Parker-Hannifin Corporation (NYSE:PH) stands against the other S&P 500 dividend aristocrats.
The appeal of dividend growth growth stocks is unmatched. For those considering investing in dividend stocks, growth typically outweighs yield due to the consistent returns they have delivered over the years. Within dividend growth strategies, the dividend aristocrats stand out. Of the approximately 6,000 stocks listed on the NYSE and NASDAQ, only 67 companies earn the title of dividend aristocrats. These companies have consistently increased their dividend payouts for a minimum of 25 consecutive years. They are part of the broader market and are tracked by the Dividend Aristocrat Index.
Also read: 10 Best Dividend-Paying Stocks Under $50
Companies that regularly increase their dividends typically show strong financial health and stability, indicating their consistent profitability. A report by Fortune highlighted that, although it has lagged behind its benchmark, the Dividend Aristocrat Index has surpassed nearly all US active managers over the past decade. Rupert Watts, the head of factors and dividend indices at S&P Dow Jones Indices, discussed dividend growth strategies with the global media organization. Here is what the analyst said:
“Raising your dividend for 25 plus years is no easy feat. These are high-quality companies.”
Dividend aristocrats have delivered impressive returns, surpassing other asset classes. Since the index’s inception in 2005 through September 2023, the dividend aristocrats index has provided a total return of 10.35%, outpacing the broader market’s return of 9.54% for the same period. These stocks are celebrated not only for their dividend growth and steady equity gains but also for their lower volatility. During this timeframe, dividend aristocrats exhibited a volatility level of 15.35%, compared to the market’s slightly higher 16.31%. This indicates that dividend aristocrats tend to have more stable price movements. Their consistent dividend increases over 25 years or more demonstrate their ability to reward shareholders even during tough times, such as the 2007 financial crisis and the 2020 pandemic.
The debate between high yields and dividend growth continues. As of August 19, the High Dividend ETF, which tracks high-yielding companies in the broader market, offers a dividend yield of 4.18%. This yield would have been quite attractive to investors in the past. However, this year the ETF has only returned 4.8%, compared to the market’s 18% return. According to FactSet, investors have withdrawn over $1.1 billion from the fund, which is more than 15% of its $6 billion in assets. This indicates that investors tend to prefer dividend growth over high yields, as high yields are often seen as a sign of financial difficulties. In this article, we will take a look at some of the best dividend aristocrat stocks according to hedge funds.
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 robotic arm in a factory demonstrating the application of motion control technologies.
Parker-Hannifin Corporation (NYSE:PH)
Number of Hedge Fund Holders: 67
Parker-Hannifin Corporation (NYSE:PH) is an American manufacturing company, based in Ohio. The company specializes in motion and control technologies. Despite challenges in the industrial sector this year, the company reported strong earnings in fiscal Q4 2024. It achieved record sales nearing $20 billion, a record adjusted segment operating margin with a 200 basis point increase from the previous year, 18% growth in adjusted earnings per share, and a record $3 billion in free cash flow. The company’s strong outlook for fiscal year 2025 suggests a promising future, keeping it on track to meet its financial targets for fiscal year 2029.
In addition to its recent earnings, Parker-Hannifin Corporation (NYSE:PH) has shown growth over the years. In the past five years, the stock surged by over 270%, outperforming the broader market, which gained nearly 96% during this period. The company also stands out as a strong dividend payer with remarkable cash flow generation. For fiscal 2024, the company saw a 20% increase in year-to-date cash flow from operations, reaching a record $2.1 billion, which represents 14.6% of sales, up from $1.8 billion or 12.8% of sales the previous year. The company also achieved significant improvements in adjusted segment operating margins, with the Aerospace Systems Segment performing exceptionally well. This strong performance contributed to record year-to-date operating cash flow. Looking ahead, the company anticipates a 50% increase in free cash flow and plans to double its dividend over the next five years, resulting in larger dividends for shareholders each year, which is expected to positively influence the stock’s price.
Parker-Hannifin Corporation (NYSE:PH), one of the best dividend aristocrat stocks, declared a quarterly dividend of $1.63 per share on August 15, which was in line with its previous dividend. Overall, the company has been growing its payouts for 68 consecutive years. The stock’s dividend yield on August 19 came in at 1.11%.
At the end of Q2 2024, 67 hedge funds tracked by Insider Monkey reported having stakes in Parker-Hannifin Corporation (NYSE:PH), up from 63 in the previous quarter. These stakes have a total value of more than $2 billion. Among these hedge funds, Diamond Hill Capital was the company’s leading stakeholder in Q2.
Overall PH ranks 10th on our list of S&P 500 dividend aristocrats. While we acknowledge the potential of PH as an investment, our conviction lies in the belief that some deeply undervalued dividend stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for a deeply undervalued dividend stock that is more promising than PH but that trades at less than 7 times its earnings and yields nearly 10%, check out our report about the dirt cheap dividend stock.
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Disclosure: None. This article is originally published at Insider Monkey.