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 S&P Global Inc. (NYSE:SPGI) 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).
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S&P Global Inc. (NYSE:SPGI)
Number of Hedge Fund Holders: 90
S&P Global Inc. (NYSE:SPGI) is a New York-based capital market company that operates in the areas of financial information and analytics. Credit-rating agencies play a vital role in the bond markets by providing investors with insights into a company’s financial health, its ability to meet debt obligations, and the risks associated with holding that debt. The industry is notoriously difficult to penetrate, which gives S&P Global Inc. (NYSE:SPGI) a strong competitive edge. After experiencing a downturn in 2022, the credit ratings industry is now seeing signs of recovery. The stock has gained nearly 17% since the start of 2024 and its 12-month returns came in at roughly 31%.
S&P Global Inc. (NYSE:SPGI) reported strong earnings in the second quarter of 2024. The company’s revenue for the quarter came in at $3.55 billion, which showed a 14.45% growth from the same period last year. The revenue also beat Street estimates by $134 million. The company has also raised its guidance on various fronts for FY24. Its cash flow outlook for the year is particularly well-received by investors. It expects to generate $4.4 billion in operating cash flow in 2024, up from its prior expectation of $4.2 billion. In addition, the company forecasts adjusted free cash flow of $4.7 billion, compared with a prior guidance of $4.5 billion. It revised its cash flow guidance because of the higher expected net income. The company also plans to remain committed to shareholder obligation, anticipating returning around 85% of its adjusted free cash flow to shareholders in 2024 through dividends and share buybacks.
In the first six months of 2024, S&P Global Inc. (NYSE:SPGI) reported an operating cash flow of $2.5 billion, up significantly from $1.36 billion in the prior year period. The company has been increasing its payouts consistently for the past 51 years, which makes SPGI one of the best dividend aristocrat stocks on our list. It pays a per-share dividend of $0.91 every quarter and has a dividend yield of 0.73%, as of August 19.
S&P Global Inc. (NYSE:SPGI) was a part of 90 hedge fund portfolios at the end of Q2 2024, down from 97 in the previous quarter, according to Insider Monkey’s database. The stakes held by these hedge funds have a total value of over $10 billion.
Overall SPGI ranks 3rd on our list of S&P 500 dividend aristocrats. While we acknowledge the potential of SPGI 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 SPGI 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.