We recently published a list of 10 Safest Dividend Stocks in the UK. In this article, we are going to take a look at where Pentair plc (NYSE:PNR) stands against other safest dividend stocks in the UK.
In recent years, investors have increasingly shifted away from UK equities, favoring global stocks, particularly high-growth sectors like US technology. The UK stock market is shrinking at its fastest pace in over a decade, largely due to a wave of takeovers involving London-listed companies. Bloomberg data showed that around 45 firms have been delisted from the London market in 2024 through mergers and acquisitions, reflecting a 10% rise from last year’s total. This marks the highest level of delistings since 2010. At the same time, the value of deals involving UK companies has climbed 81% this year, surpassing $160 billion.
Over the last ten years, the British index has delivered an annual total return of 6%, significantly lagging behind the 13% return of the broader US market. Analysts attribute this weaker performance to sluggish earnings growth, political uncertainty within the UK, and the lack of a dominant technology sector. However, a key factor has been the sharp drop in valuations as investors have increasingly moved away from UK stocks. According to Goldman Sachs, the issue is not a lack of foreign investor interest—who currently account for roughly two-thirds of the UK market capitalization—but rather the low engagement of domestic investors in UK equities.
Also read: 10 Best Annual Dividend Stocks To Buy Now
That said, several factors seem to be contributing to a shift in investor sentiment. In November 2024, UK equity funds saw inflows after more than three years of continuous monthly withdrawals and a large sell-off leading up to the Budget. According to data from Calastone, retail investors invested a net £317 million into UK-focused stock funds that month. This marks a significant change, halting a streak of 41 months of net outflows, during which over £25 billion had been pulled from these funds since May 2021.
Analysts also believe that the UK stock market may be on the verge of recovery, although the exact timing and pace of this shift are unclear. In this context, dividend stocks are crucial. Focusing on stocks with growing dividends can offer stability and consistency across different market conditions. These stocks also provide long-term growth potential, compounding returns as share prices recover. The UK market offers some of the highest dividend yields among major markets, with the “Footsie” yielding 3.46%, and the FTSE 250 offering slightly lower but still attractive yields. This setup enables investors to focus on high-growth areas, like smaller companies, while enjoying the benefit of increasing dividends. According to BlackRock, UK market dividends are currently growing at a rate of 2-3%, roughly in line with long-term inflation. Companies with growing dividends typically have strong cash flows, allowing them to increase payouts over time.
Janus Henderson’s 2023 annual dividend report highlighted a significant increase in dividend growth, revealing that the UK paid out roughly $86 billion in dividends last year, up from $63.1 billion in 2020. Looking ahead, the UK’s stock market index is projected to distribute about £83.6 billion in dividends in 2025, marking a 6.5% rise from the £78.5 billion expected in 2024. Given this, we will take a look at some of the best FTSE dividend stocks.
Our Methodology:
For this article, we scanned Insider Monkey’s database of 900 hedge funds as of Q3 2024 to find FTSE stocks that are also traded on US exchanges. Our focus was on companies that have strong dividend policies and consistently distribute dividends to their shareholders. The stocks are ranked in ascending order of hedge funds’ sentiment toward them.
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)
Number of Hedge Fund Holders: 47
Pentair plc (NYSE:PNR) is an American company specializing in water treatment. Although headquartered in the United States, it is legally incorporated in Ireland and maintains its tax residency in the United Kingdom. In the fourth quarter of 2024, it reported revenue of $973 million, reflecting a 1% decline from the previous year. Despite this, the figure exceeded analysts’ expectations by $2.05 million. The company’s Move, Improve, and Enjoy Water segments continued their strong performance, achieving record margins for another consecutive year following the nVent separation in 2018. Within the Flow segment, the Commercial division experienced further expansion, while adjustments were made to enhance the go-to-market strategy in the Industrial division. Meanwhile, Water Solutions saw continued growth in filtration sales, and the Pool segment returned to sales growth, driven by robust aftermarket demand.
Analysts see potential for growth in Pentair plc (NYSE:PNR)’s residential and industrial water technology solutions, as well as its residential pool products, particularly as lower interest rates drive higher consumer spending. This is especially relevant for pool products, where discretionary purchases are closely linked to housing market trends. In the past 12 months, the stock has surged by over 30%.
Pentair plc (NYSE:PNR) delivered solid cash flow performance, generating $767 million in operating cash flow and $693 million in free cash flow. The company currently distributes a quarterly dividend of $0.23 per share, following an 8.7% increase in December 2024. This latest hike extended its record of consecutive annual dividend increases to 49 years, which makes it one of the best FTSE dividend stocks on our list. On February 10, the stock’s dividend yield came in at 1.01%.
Overall, PNR ranks 2nd on our list of safest dividend stocks in the UK. While we acknowledge the potential for 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.
