We recently compiled a list of the 10 Best January Dividend Stocks To Buy. In this article, we are going to take a look at where Pentair plc (NYSE:PNR) stands against the other January dividend stocks.
In 2024, dividend stocks fell short of investor expectations, largely due to the continuing AI boom and a heightened interest in technology stocks. The Dividend Aristocrats index lagged behind the broader market during the year. However, analysts remain optimistic about the future of dividend equities. This positive sentiment is driven by the fact that many US companies have ample cash reserves to sustain their dividend payments. The Wells Fargo Investment Institute reported that large-cap US companies have amassed over $2.4 trillion in cash, which could be used to either start or enhance dividend payouts.
Also read: 10 Best Performing Dividend ETFs In 2024
Despite the lack of enthusiasm for dividend stocks, analysts believe they still offer attractive entry points for investors. Capital Group suggested seeking opportunities in dividend-paying companies that the market has overlooked. This includes pharmaceutical firms that have been neglected due to the current focus on weight loss treatments, as well as utilities and certain banks. Within the dividend space, investors are increasingly drawn toward dividend growth stocks that offer consistent yields. Stocks that pay dividends and boast solid balance sheets with attractive yields can provide reliable income, protect against market declines, and support healthy investment growth. A report by ProShares highlighted that since its inception, the Dividend Aristocrats Index has outperformed the broader market with less volatility. For instance, a $10,000 investment in May 2005 could have grown to over $61,000 by March 2023.
The report also mentioned that the index has demonstrated strong performance in both up and down markets, with an upside capture of 91% and a downside capture of 80%. It has shown notable resilience during market downturns, outperforming the wider market by more than 12% in 2022. In addition, the Dividend Aristocrats Index has outpaced the market in eight of the 10 worst quarterly declines since 2005.
Since the start of 2025, the broader market has only seen a modest increase of 0.66%. In this environment, UBS has identified stocks that are considered high quality compared to their peers and are unlikely to reduce their current dividend payouts. The firm estimates a 22.9% chance of dividend cuts across various regions and sectors, noting that the US remains the most secure region for dividends, with only a 6.2% likelihood of cuts. Moreover, most sectors in the US appear relatively stable. Japan stands out as the most favorable region for dividend growth, with a projected growth rate of 9.9%.
That said, investing in dividend stocks can be more complex than it seems, requiring thorough analysis. Although dividends are often linked to long-term returns, some investors employ a short-term strategy known as dividend capture. This approach involves purchasing shares just before a company pays its dividend and selling them soon after the dividend is received. The objective is to collect the dividend income while possibly benefiting from a rise in the stock’s price leading up to the dividend announcement. In this article, we will take a look at some of the best dividend stocks to buy in January.
Our Methodology:
The following list provides details on the dividend capture strategy, focusing on the selection of prominent dividend-paying stocks set to go ex-dividend in January 2025. The ex-dividend date marks the final day to buy a stock and qualify for its upcoming dividend. The list is ranked chronologically, with earlier dates appearing first and later dates following in order. We also considered hedge fund sentiment around each stock using Insider Monkey’s data for 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).
A factory worker with protective goggles and a hardhat inspecting a water filtration system.
Pentair plc (NYSE:PNR)
Ex-Dividend Date: January 24
Pentair plc (NYSE:PNR) is an American water treatment company. The company is drawing heightened investor attention due to the growing demand for water solutions. Its business model aligns with worldwide initiatives to tackle environmental issues and move towards achieving carbon neutrality. In the past 12 months, the stock has delivered a 47% return to shareholders.
In the third quarter of 2024, Pentair plc (NYSE:PNR) posted revenue of $993.4 million, a slight decrease of 1.5% compared to the same period the previous year. Despite this decline, the revenue surpassed analysts’ expectations by $5.02 million. The company’s operating income for the quarter remained steady at $180 million year-over-year. Pentair has updated its full-year 2024 GAAP EPS forecast to about $3.70 and increased its adjusted EPS guidance to approximately $4.27.
Pentair plc (NYSE:PNR) reported a strong cash position in Q3 2024. The company generated an operating cash flow of $249 million, up from $162 million in the same quarter last year. Its free cash flow also grew to $234 million, compared to $143 million in the previous year’s quarter. On December 17, the company announced an 8.7% increase in its quarterly dividend to $0.25 per share, extending its streak of dividend growth to 49 consecutive years. The stock offers a dividend yield of 0.99%, as of January 5.
The number of hedge funds tracked by Insider Monkey owning stakes in Pentair plc (NYSE:PNR) grew to 47 in Q3 2024, from 40 in the previous quarter. These stakes are worth over $1.7 billion in total. Among these hedge funds, Impax Asset Management was the company’s leading stakeholder in Q3.
Overall PNR ranks 1st on our list of the best January dividend stocks to buy. While we acknowledge the potential of PNR 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 PNR 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.
