Why These Dividend Stocks are Gaining in 2025?

1. Capital Southwest Corporation (NASDAQ:CSWC)

Dividend yield: 10.83%

Dividend payout ratio: 180.71%

Ex-Dividend Date: March 14, 2025

Number of Hedge Funds: 5

The business development company Capital Southwest Corporation (NASDAQ:CSWC) experienced a 7.52% increase in year-to-date (YTD) as of February 16, 2025, overperforming the 3.96% YTD of the broader index. With a market capital of $1.19 billion, the company has a modest P/E ratio of 16.64.

Capital Southwest Corporation (NASDAQ:CSWC) was among the few companies that capitalized on the interest rate shifts by rapidly growing their portfolio with the help of new investments. The net investment income gradually increased, causing the recent upward trend in the stock price.

Capital Southwest Corporation (NASDAQ:CSWC) offers a dividend yield of 10.83% but with a high payout ratio of 180.71%, suggesting debt risk in the dividend payments. Hedge funds have recently modified their company holdings, resulting in the number of hedge fund portfolios going up from 5 in the third quarter of 2024 to 8 in the fourth quarter. The company has a 52-week low of $20.68 and a 52-week high of $27.23. The current price of $15.38 indicates that the stocks are undervalued. The ex-dividend date of March 14 presents an opportunity for investors looking for high dividend income. However, the risks posed by the high payout ratio must be considered before investing.

Overall Capital Southwest Corporation (NASDAQ:CSWC) ranks first on our list of the best dividend stocks from the banking sector. While we acknowledge the potential for CSWC 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 CSWC but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

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