In this article, we will analyze the list of the best dividend aristocrat stocks according to hedge funds.
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.
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Our Methodology:
For this article, we first listed down all dividend aristocrat stocks — the companies with 25+ years of consecutive dividend increases. We also measured hedge fund sentiment around each stock according to Insider Monkey’s database of 912 funds as of Q2 2024. We chose 10 dividend aristocrat stocks with the highest number of hedge fund investors.
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).
10. 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.
9. McDonald’s Corporation (NYSE:MCD)
Number of Hedge Fund Holders: 67
An American fast-food restaurant company, McDonald’s Corporation (NYSE:MCD) ranks ninth on our list of the best dividend aristocrat stocks.
A few years ago, McDonald’s Corporation (NYSE:MCD) saw significant benefits during the pandemic due to rising prices. However, the current situation is different, as customers are now pushing back against higher costs caused by inflation. In response, the company has extended its $5 Meal Deal Promotion. McDonald’s management observed that consumer sentiment, especially among lower-income groups, remains weak across its key markets, with people being very selective in their spending. They expect these challenging conditions to continue for several more quarters, suggesting that consumers are finally resisting the substantial price increases in the fast-food industry in recent years. The stock is down by nearly 4% since the start of 2024 as the company has been facing some challenges due to ongoing geopolitical conflicts.
Carillon Tower Advisers also highlighted these issues in its Q1 2024 investor letter. Here is what the firm has to say:
“McDonald’s Corporation (NYSE:MCD) faces several short-term headwinds. Lower-income consumers have been cautious with spending, as they are feeling the cumulative effects of inflation more than higher-income cohorts. As the low cost/ value player in fast food, McDonald’s has a customer base that skews lower income. Also, as an international company, McDonald’s is feeling negative effects from war and tensions in the Middle East, as well as softness in China.”
McDonald’s Corporation (NYSE:MCD) showed signs of weakness in its second quarter 2024 earnings report. Global comparable sales dropped by 1.0%, with decreases seen across all segments, and quarterly revenues remained unchanged from the previous year. Despite these challenges, analysts have not been overly critical of the company’s performance. Due to its large size and scale, McDonald’s has considerable leverage to adapt through its purchasing power and marketing strategies.
McDonald’s Corporation (NYSE:MCD) currently offers a quarterly dividend of $1.67 per share and has a dividend yield of 2.33%, as of August 19. It is one of the best dividend aristocrat stocks on our list as the company has been growing its payouts for 67 years consistently.
The number of hedge funds tracked by Insider Monkey owning stakes in McDonald’s Corporation (NYSE:MCD) grew to 67 in Q2 2024, from 63 in the previous quarter. The consolidated value of these stakes is over $2.1 billion. With nearly 2 million shares, Viking Global was the company’s leading stakeholder in Q2.
8. The Coca-Cola Company (NYSE:KO)
Number of Hedge Fund Holders: 68
The Coca-Cola Company (NYSE:KO) is a Georgia-based multinational beverage company that deals in a wide range of beverages, including non-alcoholic beverage concentrates and syrups. The company reported strong earnings in the second quarter of 2024. Its revenue for the quarter came in at over $12.3 billion, up 3% from the same period last year. The company has grown over the years by making strategic acquisitions and responding to changing consumer preferences that are moving away from sugary sodas. Over the last decade, the company has invested significantly in diversifying its product range. These efforts have enabled Coca-Cola to turn around a major revenue decline, increasing net sales from $33 billion in 2020 to $46 billion in 2023.
Though The Coca-Cola Company (NYSE:KO) has a strong balance sheet and its earnings are in place, the company’s larger size poses bigger challenges for it. As of the most recent quarter, the company has over $45 billion in debt and has a debt-to-equity ratio of 1.64. Its cash position is strong, with an operating cash flow of $4.1 billion in the second quarter of 2024 and a free cash flow of $3.3 billion. The company remains committed to fulfilling its obligations to shareholders, but after covering its cash outflows, there is limited capacity to reduce its overall debt. That said, the company has maintained strong operations and income over the years, which should help gradually reduce its debt over time.
One of the best dividend aristocrat stocks, The Coca-Cola Company (NYSE:KO) has been rewarding shareholders with 62 consecutive years of dividend growth. The company’s current quarterly dividend comes in at $0.485 per share and has a dividend yield of 2.81%, as of August 19.
Insider Monkey’s database of Q2 2024 indicated that 68 hedge funds owned stakes in The Coca-Cola Company (NYSE:KO), growing from 62 in the preceding quarter. These stakes are worth nearly $32 billion in total. With 400 million shares, Warren Buffett’s Berkshire Hathaway owned the largest stake in the company.
7. Abbott Laboratories (NYSE:ABT)
Number of Hedge Fund Holders: 69
Abbott Laboratories (NYSE:ABT) is an Illinois-based medical device company that also specializes in various healthcare products and services. The company currently offers a quarterly dividend of $0.55 per share and has a dividend yield of 1.96%, as of August 19. It is one of the best dividend aristocrat stocks on our list as the company has paid dividends consistently for 402 quarters and also raised its payouts for 52 consecutive years.
Abbott Laboratories (NYSE:ABT) greatly benefits from its diversified business model, which offers multiple growth opportunities and allows it to generate revenue from various sources. In the second quarter of 2024, the company reported $10.38 billion in revenue, reflecting a 4% increase compared to the same period last year. However, its diagnostic segment faced challenges during the quarter, with revenues falling by 5.3% to $2.2 billion compared to the previous year. Analysts remain optimistic about the company’s prospects for the future. Diamond Hill Capital, in its Q2 2024 investor letter, also highlighted the company’s growth prospects. Here is what the firm has to say:
“Abbott Laboratories (NYSE:ABT) is a diversified health care company with an extensive portfolio that spans medical devices, pharmaceuticals, nutritionals and diagnostics. With a substantial portion of its revenues generated internationally, emerging markets contribute about 40% of overall sales. We have always liked Abbott’s diverse mix of businesses and its fundamental growth prospects. The management team has consistently demonstrated skill in capital allocation, highlighted by strategic divestitures such as the European generic business in 2014, and significant acquisitions like St. Jude in 2016.”
While the healthcare sector is generally resilient and can perform well through various market conditions, companies face risks related to research and development. New innovations might lead to legal challenges if their products do not meet market expectations, and high legal costs can affect a company’s cash flow and its ability to invest in growth. For Abbott Laboratories (NYSE:ABT), however, the financial outlook remains positive. The company boasts a strong cash position, with a trailing twelve-month operating cash flow of $7.9 billion and a levered free cash flow of $5.39 billion. As of the latest quarter, Abbott had $7.22 billion in cash reserves, supporting its ability to maintain regular dividend payments in the future.
Abbott Laboratories (NYSE:ABT) remained popular among elite funds at the end of Q2 2024 as hedge fund positions grew to 69, from 62 a quarter earlier, as per Insider Monkey’s database. The stakes held by these hedge funds have a total value of over $3.5 billion. With over 10.5 million shares, Fisher Asset Management was the company’s leading stakeholder in Q2.
6. NextEra Energy, Inc. (NYSE:NEE)
Number of Hedge Fund Holders: 73
NextEra Energy, Inc. (NYSE:NEE) is an American renewable energy company, headquartered in Florida. The company mainly focuses on the generation of energy from solar and wind projects. It gains significantly from current industry trends. The US Department of Energy reports that solar and wind energy made up only 13% of the electricity generated domestically in 2022, but this share is expected to increase in the coming years. Furthermore, the overall demand for electricity in the US is also rising.
In response to these growing demands, NextEra Energy, Inc. (NYSE:NEE) has consistently invested in expanding its capacity and operations. Analysts also think that the company is strategically positioned to benefit from the increasing need for renewable energy driven by technology firms. These tech companies are working to achieve their climate objectives while growing their electricity-hungry data centers. Since the start of 2024, the stock has surged by over 28%, surpassing the broader market, which gained nearly 18% during this period.
ClearBridge Investments also highlighted AI momentum in the energy sector in its Q2 2024 investor letter. Here is what the firm has to say about NextEra Energy, Inc. (NYSE:NEE):
“AI-related momentum was a key driver of performance in the second quarter, lifting the enablers in technology as well as holdings like renewable power producer NextEra Energy, Inc. (NYSE:NEE) that supply the increasing energy needs of data centers. Parts of the market lacking an AI connection, like our medical device holdings, underperformed despite no change to fundamentals. We have managed through several similar momentum periods over our tenure and have delivered long-term results for shareholders by staying true to an approach that emphasizes diversification across three buckets of growth companies (select, stable and cyclical) and seeks to take advantage of attractive entry points into quality growth businesses.”
On July 25, NextEra Energy, Inc. (NYSE:NEE) announced a quarterly dividend of $0.515 per share, which fell in line with its previous dividend. The company’s dividend growth streak currently spans over 28 years, which makes NEE one of the best dividend aristocrat stocks on our list. The stock has a dividend yield of 2.61%, as of August 19.
Of the 912 hedge funds tracked by Insider Monkey at the end of Q2 2024, 73 funds owned stakes in NextEra Energy, Inc. (NYSE:NEE), up from 72 in the previous quarter. These stakes have a total value of more than $2.1 billion.
5. The Sherwin-Williams Company (NYSE:SHW)
Number of Hedge Fund Holders: 76
The Sherwin-Williams Company (NYSE:SHW) is an Ohio-based paint and coating manufacturing company that specializes in the manufacturing and production of related products. The stock is up by over 16% this year so far as consumers are moving toward smaller home improvement tasks that they previously overlooked after the pandemic. The consumer enthusiasm was seen in the company’s earnings for the second quarter of 2024. Driven by robust performance in the Paint Stores Group, the company successfully implemented its established strategy, resulting in consolidated sales that met expectations, expanded gross margins, increased EBITDA, and a 12.5% rise in adjusted diluted net income per share. Sales in the Paint Stores Group were notably higher, aligning with the midpoint of the company’s guidance, despite a challenging double-digit comparison. The company generated $6.2 billion in revenues, up modestly 0.5% from the same period last year.
The Sherwin-Williams Company (NYSE:SHW), one of the best dividend aristocrat stocks, currently pays a quarterly dividend of $0.715 per share. The company holds a 45-year track record of consistent dividend growth. In the first six months of 2024, the company returned $1.34 billion to shareholders through dividends and share repurchases. The stock’s dividend yield on August 19 came in at 0.81%.
Although The Sherwin-Williams Company (NYSE:SHW) may not achieve the explosive growth seen in cutting-edge tech stocks, its earnings have demonstrated strong performance. The company is showing resilience in a difficult market. For investors looking for stability in their portfolios, the company presents a compelling choice.
According to Insider Monkey’s database of Q2 2024, 76 hedge funds held stakes in The Sherwin-Williams Company (NYSE:SHW), down slightly from 78 in the previous quarter. These stakes are worth over $4.05 billion in total. Among these hedge funds, D E Shaw was the company’s largest stakeholder in Q2.
4. Johnson & Johnson (NYSE:JNJ)
Number of Hedge Fund Holders: 80
Johnson & Johnson (NYSE:JNJ) ranks fourth on our list of the best dividend aristocrat stocks. The American pharmaceutical industry company specializes in a wide range of biotech and medical products and services. A recent report by S&P Global highlighted Johnson & Johnson (NYSE:JNJ) as one of the most resilient pharmaceutical companies, noting its low business and financial risks compared to other major drugmakers. The report praises the company for its substantial scale and its portfolio of blockbuster drugs. It emphasizes the importance of competitive advantages derived from sustainable innovations, which can lead to premium pricing and product differentiation. This assessment is based on factors such as the company’s investment in R&D, its R&D track record, the strength of its pipeline and marketing, and its ability to maintain long-term revenue growth and strong margins, even as products lose exclusivity.
In the second quarter of 2024, Johnson & Johnson (NYSE:JNJ) reported revenue of $22.4 billion, which showed a 4.3% growth from the same period last year. In the first half of 2024, medical technology sales increased by 3.3%, or 5.4% when adjusted for constant currency rates. The company’s management has recently lowered its earnings forecast for 2024, reflecting the impact of recent acquisitions, including Shockwave. Shockwave is the sole producer of intravenous lithotripsy devices that are approved for softening calcified blood vessels.
Johnson & Johnson (NYSE:JNJ) is a reliable investment for income investors. The company offers a quarterly dividend of $1.24 per share, having raised it by 4% in April this year. Through this increase, the company stretched its dividend growth streak to 62 years. The stock supports a dividend yield of 3.11%, as of August 19.
As of the close of the June quarter of 2024, 80 hedge funds in Insider Monkey’s database held stakes in Johnson & Johnson (NYSE:JNJ), which remained unchanged from the previous quarter. These stakes have a total value of nearly $4.7 billion. Ken Fisher’s Fisher Asset Management held the largest stake in the company in Q2.
3. 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.
2. Exxon Mobil Corporation (NYSE:XOM)
Number of Hedge Fund Holders: 92
An American energy company, Exxon Mobil Corporation (NYSE:XOM) ranks second on our list of the best dividend aristocrat stocks. The company has gained popularity among investors for its strong financial stability and consistent profitability over the years, allowing it to distribute substantial dividends to its shareholders. The stock has gained by nearly 16% year-to-date.
In the second quarter of 2024, Exxon Mobil Corporation (NYSE:XOM) reported revenue of $93.06 billion, which showed a 12.24% growth from the same period last year. The company’s solid cash position is a positive indicator, particularly for maintaining and potentially increasing its dividends. It generated $10.6 billion in operating cash flow and its free cash flow for the period came in at $9.5 billion.
Exxon Mobil Corporation (NYSE:XOM) has gained significantly from its acquisitions. On May 3, 2024, ExxonMobil finalized its purchase of Pioneer Natural Resources. The deal involved issuing 545 million shares of ExxonMobil stock, valued at $63 billion at the time, and taking on $5 billion in debt. This merger established the world’s largest high-return unconventional resource development potential. After finalizing the acquisition, the company accelerated its annual share repurchase program to $20 billion through 2025, provided market conditions remain favorable. It aims to buy back over $19 billion worth of shares in 2024.
Exxon Mobil Corporation (NYSE:XOM) declared a quarterly dividend of $0.95 per share on August 2, which fell in line with its previous dividend. The company has been increasing its dividends consistently for the past 41 years, which makes XOM one of the best dividend aristocrat stocks on our list. The stock’s dividend yield on August 19 came in at 3.21%.
The number of hedge funds tracked by Insider Monkey owning stakes in Exxon Mobil Corporation (NYSE:XOM) jumped to 92 in Q2 2024, from 81 in the previous quarter. The consolidated value of these stakes is nearly $6.2 billion.
1. Walmart Inc. (NYSE:WMT)
Number of Hedge Fund Holders: 95
Walmart Inc. (NYSE:WMT) is an American retail corporation that operates a chain of hypermarkets, discount stores, and grocery stores in the US. The stock is outperforming the broader market this year, delivering a 38% return to shareholders. This is due to a growing number of customers frequenting its stores and making greater use of its online shopping platforms. In its fiscal Q2 2025 earnings, the company reported a higher e-commerce penetration across all segments. Its global e-commerce sales grew by 21% on a YoY basis. Its consolidated revenues for the quarter came in at $168 billion, up 4.8% from the same period last year.
From a dividend point of view, Walmart Inc. (NYSE:WMT) is a reliable choice because of its strong balance sheet. The company ended the quarter with $8.8 billion available in cash and cash equivalents. It generated an operating cash flow of $16.4 billion and its free cash flow came in at $5.9 billion. Year-to-date, the company repurchased 33.4 million shares, worth $2.1 billion. The company pays a quarterly dividend of $0.2075 per share and has a dividend yield of 1.13%, as of August 19. WMT tops our list of the best dividend aristocrat stocks as the company has raised its payouts for 51 years in a row.
Insider Monkey’s database of Q2 2024 showed that 95 hedge funds held stakes in Walmart Inc. (NYSE:WMT), up significantly from 88 in the previous quarter. These stakes have a total value of nearly $9.2 billion. With over 45.5 million shares, Fisher Asset Management was the company’s leading stakeholder in Q2.
While we acknowledge the potential of NTR 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 NTR 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.
