We recently compiled a list of the 10 Best Diversified Dividend Stocks To Buy Now. In this article, we are going to take a look at where TE Connectivity plc (NYSE:TEL) stands against the other diversified dividend stocks.
In this article, we will take a look at some of the best diversified dividend stocks.
Diversified stocks refer to companies involved in multiple sectors, industries, or regions. These businesses, often large conglomerates like Warren Buffett’s Berkshire Hathaway, generate income from a variety of operations. The main goal of diversification is to lower risk by spreading investments across various areas, reducing the potential negative impact of poor performance in any one stock or sector. Nathan Wallace, principal wealth manager at Savvy Advisors, also supported the idea of diversifying portfolio. Here are some comments from the analyst:
“Through intelligent portfolio building and diversifying, investors can create a portfolio of risky assets with an aggregate volatility that is lower than any of the individual securities. The key here is to buy securities with attractive risk profiles that are not correlated to each other in a significant way with the goal that when one asset is performing poorly, another asset will pick up the slack through positive performance.”
That said, diversification doesn’t guarantee a lack of correlation between your investments. For example, owning 100 tech stocks might reduce risk compared to holding just one, but those 100 stocks are likely to be correlated with each other. To truly minimize risk, it’s important to diversify beyond just one sector. According to analysts, the higher yields on Treasury bonds could provide some protection in the event of a major stock market decline. Despite this, those who believe in diversification are facing uncertainty. US stocks continue to outperform year after year, driven by the consistent profits of American companies, making other investments seem like a path to underperformance.
On the other hand, a recent study by Preqin revealed that institutions, including pensions, endowments, and foundations, hold $21 trillion in traditional diversified strategies, as of June 2024. These strategies allocate funds across various investments such as bonds, stocks, real estate, and cash.
The year 2024 proved to be exceptional for US stocks, with the broader market rising over 23%. The Nasdaq outperformed with a nearly 29% gain, while the Nasdaq 100 rose close to 25%. These impressive gains were largely driven by the Magnificent 7 stocks, which surged by nearly 67%, along with other mega-cap companies. This marked the second consecutive year that the broader market achieved gains exceeding 20%, a feat last seen in the late 1990s.
Regardless of market conditions, investors have consistently sought comfort in dividend stocks. Among these, dividend growth stocks have gained significant interest. A report from BlackRock revealed that, over time, stocks that consistently increased or maintained their dividends have tended to perform better than those that didn’t pay dividends or cut their payouts. In times of market decline, dividend-paying stocks often offer a safeguard against fluctuating share prices. Companies that pay dividends typically aim to sustain these payments and are usually hesitant to reduce them unless it’s essential.
When considering dividend stocks, investors typically assess the dividend yield. Experts suggest targeting yields between 3% and 6%, as yields higher than this could signal potential yield traps. Brian Bollinger, president of Simply Safe Dividends, has highlighted this advice. Below are some insights from the analyst:
“I generally like to advocate for an approach of targeting great businesses that might pay closer to a 3% to 4% dividend yield.”
Our Methodology:
For this list, we scanned Insider Monkey’s database of Q3 2024 and selected conglomerate firms that specialize in several different businesses and pay regular dividends to shareholders. The list is ranked in ascending order based on the number of hedge funds having stakes in the companies.
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 technician assembling a sensor on an automated assembly line.
TE Connectivity plc (NYSE:TEL)
Number of Hedge Fund Holders: 44
TE Connectivity plc (NYSE:TEL) is an Ireland-based company that designs and produces a diverse range of electronic components and electrical parts, such as different types of connectors, heat shrink tubing, automotive relays, and various sensors. The company reported strong earnings in fiscal Q1 2025. In the transportation segment, the company continued to manage a fluctuating global vehicle production landscape, achieving strong results while fostering innovation among global customers in growth areas like electrification and next-generation vehicle data connectivity. The company also achieved double-digit sales growth in its industrial segment, expanding margins due to strong momentum in AI programs with multiple customers and leveraging ongoing strength in its AD&M and energy businesses.
TE Connectivity plc (NYSE:TEL) reported revenue of $3.84 billion in fiscal Q1 2025, up 0.65% from the same period last year. Orders totaled $4.0 billion, reflecting a 6% year-over-year increase and a 4% rise sequentially, primarily driven by the Industrial segment and growing momentum in artificial intelligence programs. The operating margin was 18%, while the adjusted operating margin reached a quarterly record of 19.4%, fueled by strong operational execution.
The London Company highlighted the strengths of TEL in its Q2 2024 investor letter. Here is what the firm has to say:
“Initiated: TE Connectivity Ltd. (NYSE:TEL) – TEL designs and manufactures connectors and sensors, supplying solutions to the transportation, industrial, and communications industries. The critical components that TEL sells have long life cycles and they make up a small percent of the overall cost of materials for a complex electronic systems (i.e. low cost but high-cost failure products), creating high switching costs and barriers to entry. TEL has leading share in the global connector market (including 30-35% share in automotive) with leverage to secular growth from the ‘electrification’ of multiple end markets. TEL’s management team has enacted successful cost- realignment strategies, driving significant margin improvement and leading to mid-teens returns on invested capital. TEL fits our process well. It has a low level of net debt, generates healthy cash flows, returns a significant amount of capital back to shareholders through its dividend and buyback program, and it currently trades at a discount to our estimate of intrinsic value and a discount to its peers. Given its strong competitive position, capital allocation philosophy, and favorable industry tailwinds, we believe TEL presents an opportunity to own a high quality compounder.”
TE Connectivity plc (NYSE:TEL), one of the best dividend stocks, reported a strong cash position which is sufficient to fund its dividend payouts. The company’s operating cash flow for the quarter came in at $878 million, which saw a 22% growth from the prior-year period. Its free cash flow also jumped to 18% on a YoY basis at $674 million. The company also returned approximately $500 million to shareholders through dividends and share repurchases. It has been growing its payouts for 10 consecutive years and offers a quarterly dividend of $0.65 per share. The stock supports a dividend yield of 1.67%, as of January 22.
TE Connectivity plc (NYSE:TEL) was included in 44 hedge fund portfolios at the end of Q3 2024, down from 46 in the preceding quarter, according to Insider Monkey’s database. The stakes owned by these hedge funds have a total value of roughly $2 billion.
Overall TEL ranks 8th on our list of the best diversified dividend stocks to buy now. While we acknowledge the potential for TEL 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 TEL but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: 20 Best AI Stock To Buy Now and Complete List of 59 AI Companies Under $2 Billion in Market Cap
Disclosure: None. This article is originally published at Insider Monkey.
