In this article, we will take a look at some of the best dividend stocks according to hedge funds.
The sustained high inflation over the past two years has resulted in increased borrowing costs, posing difficulties for both businesses and consumers. Additionally, uncertainty surrounding potential interest rate cuts by central banks, regulatory changes under the new US administration, and ongoing geopolitical tensions have further dampened economic activity. In this challenging landscape, competition for capital has intensified, with companies focusing on their competitive advantages and adjusting their strategies for both short-term stability and long-term growth to secure essential resources amid rising economic uncertainty.
Also read: 12 High Growth Low Dividend Stocks To Invest In
Dividends are becoming increasingly attractive in the current market environment. A report from S&P Global indicates that global dividend growth saw a significant boost in 2024, rising by 8.5%. This growth was especially notable in the Asia-Pacific region, where government policies encouraged companies to shift from annual to semiannual dividend distributions. Meanwhile, the US market experienced a surge in new and reinstated dividends, with the technology, media, and telecommunications (TMT) sector playing a key role in driving this trend. The report also pointed out that over the past decade, companies across the broader market—excluding real estate investment trusts (REITs)—have, on average, distributed 85% of their discretionary cash flow (DCF), which is calculated as operating cash flow minus capital expenditures. On average, this distribution has been divided between dividends and share buybacks, with 47% allocated to dividends and 38% directed toward buybacks.
Global dividend growth had been slowing since the post-COVID recovery, but that trend reversed last year, with the growth rate accelerating to 8%. Shareholders received approximately $180 billion more in payouts than in 2024, which came as a surprise given the prevailing geopolitical and economic uncertainties, according to an S&P Global report. The firm projects that total global dividend payments will remain at $2.3 trillion in 2025.
Analysts point out that earnings growth has traditionally been the key driver of dividend increases. With strong earnings growth recorded last year, expectations for 2025 are even higher. Goldman projects an 11% rise in earnings per share this year, up from an estimated 8% in 2024, which is expected to drive a 7% increase in dividends, compared to a 6% rise last year. Meanwhile, Ohsung Kwon, a US equity strategist at BofA Securities, holds an even more optimistic view, forecasting a 12% dividend boost this year, supported by accelerating earnings growth.
Historically, dividends accounted for 40% of the market’s total returns from 1936 to 2012, but their contribution has dropped to just 16% over the past decade, according to a BofA Securities research note published late last year. However, Kwon expects dividends to play a more substantial role in overall market returns moving forward. In view of this, we will take a look at some of the best dividend stocks according to hedge funds.
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Our Methodology:
For this article, we scanned Insider Monkey’s database of over 1,000 hedge funds and identified the top 10 companies that pay regular dividends to shareholders and have dividend yields of at least 1%, as of February 25. This means the stocks mentioned in this list are the most popular dividend stocks among the elite hedge funds in America. The list is ranked in ascending order of 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 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
10. Union Pacific Corporation (NYSE:UNP)
Number of Hedge Fund Holders: 93
Union Pacific Corporation (NYSE:UNP) is a Nebraska-based transport company. It transports a wide range of products and commodities, providing it with broad exposure across multiple industries. This diversification helps mitigate the effects of downturns in any single market segment. Since the start of 2025, the stock has surged by over 7.5%.
In the fourth quarter of 2024, Union Pacific Corporation (NYSE:UNP) reported $6.12 billion in revenue, marking a 1% decline from the previous year. However, a 5% rise in revenue carloads contributed to improved overall performance. The operating ratio strengthened to 58.7%, showing a 220-basis-point improvement, despite a 70-basis-point impact from the ratification of a crew staffing agreement. Additionally, operating income grew by 5% to $2.5 billion.
On February 6, Union Pacific Corporation (NYSE:UNP) declared a quarterly dividend of $1.34 per share, which was in line with its previous dividend. The company maintained a solid cash position in FY24, generating more than $9.3 billion in operating cash flow. By the end of the quarter, the company had over $1 billion in cash and cash equivalents. This financial strength has allowed it to reward shareholders with dividends for 125 consecutive years consistently. Moreover, it has increased its payouts annually for the past 18 years, which makes it one of the best dividend stocks on our list. The stock has a dividend yield of 2.18%, as of February 25.
9. Wells Fargo & Company (NYSE:WFC)
Number of Hedge Fund Holders: 96
Wells Fargo & Company (NYSE:WFC) is an American financial services company, headquartered in California. In the fourth quarter of 2024, the company reported revenues of $20.3 billion, reflecting a slight 0.5% decline from the same quarter the previous year. However, net income saw a substantial increase, rising to $5.07 billion from $3.4 billion a year earlier. This improvement was driven by a 15% year-over-year growth in fee-based revenue, which helped counterbalance the anticipated decline in net interest income. In addition, operating expenses were lower than the prior year, and credit trends remained stable. The company also maintained a strong capital position, ending the year with a CET1 ratio of 11.1%.
Although consumer banking remains Wells Fargo & Company (NYSE:WFC)’s main revenue generator, its investment banking division has emerged as a key growth driver. In the most recent quarter, investment banking fees saw a significant 59% year-over-year increase. In the past 12 months, the stock has surged by nearly 41%.
On January 28, Wells Fargo & Company (NYSE:WFC) announced a quarterly dividend of $0.40 per share, maintaining the same payout as the previous quarter. The company has consistently distributed dividends to shareholders since 1988, which makes it one of the best dividend stocks. As of February 25, the stock has a dividend yield of 2.10%.
At the end of Q4 2024, 96 hedge funds tracked by Insider Monkey held stakes in Wells Fargo & Company (NYSE:WFC), growing significantly from 72 in the previous quarter. The collective value of these stakes is over $6.6 billion. With over 14.4 million shares, Harris Associates was the company’s leading stakeholder in Q3.
