In this comprehensive exploration, we reveal the top 15 dividend aristocrats favored by hedge funds. If you prefer to bypass an in-depth analysis of dividend stocks and their historical performance, feel free to jump straight to our highlighted section: Dividend Aristocrats Ranked: Top 5 According To Hedge Funds.
As recession concerns mount and market uncertainties continue, investors are increasingly turning to dividend stocks for stability. A report from the Wall Street Journal indicates that companies within the S&P 500 distributed more than $561 billion in dividends last year, a significant increase from $511.2 billion in 2021. Analysts predict another record-breaking year for dividend distributions in 2023, reflecting growing investor confidence in reliable income sources.
Over the years, dividend stocks have consistently outperformed inflation, especially during high inflation periods. Since 1957, dividends have seen an average annual growth of 5.7%, while the Consumer Price Index (CPI) has only grown by 3.63% during the same period, as reported by Wisdom Tree. Additionally, the S&P 500’s dividends have increased by 5.45% over the last three decades, compared to a mere 2.51% growth in the CPI. The returns from last year underscore the strength of robust dividend growers in comparison to other asset classes, with high dividend stocks yielding an impressive 8.38% return to shareholders, while growth equities plummeted by 29.1% and value stocks fell by 7.54%.
Achilleas Taxildaris, a seasoned portfolio manager at Bristol Gate Capital Partners, shared insights with Morningstar in a January interview regarding the advantages of investing in dividend stocks. She highlighted that companies with a track record of dividend growth perform better over the long term due to their ‘pristine balance sheets’ and emphasized the importance of strong fundamentals when selecting dividend stocks. Noteworthy companies that have demonstrated consistent dividend growth include Caterpillar Inc. (NYSE:CAT), Exxon Mobil Corporation (NYSE:XOM), and AbbVie Inc. (NYSE:ABBV). We will delve deeper into the top dividend aristocrats favored by hedge funds in the following sections.
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Our Methodology:
The term dividend aristocrats refers to companies within the S&P 500 index that have consistently increased their dividends for a minimum of 25 consecutive years. We analyzed the database of 920 hedge funds compiled by Insider Monkey to identify the top 15 dividend aristocrats, which represent the most sought-after stocks among elite hedge funds across the United States. The following list is organized in ascending order based on the number of hedge funds holding stakes in these companies.
Explore the Top 15 Hedge Fund-Favored Dividend Aristocrats
15. Discover Why McDonald’s Corporation (NYSE:MCD) is a Preferred Choice for Hedge Funds
Number of Hedge Fund Holders: 53
Established in 1940, McDonald’s Corporation (NYSE:MCD) stands as a leading American multinational fast-food giant. Recently, Loop Capital adjusted its price target for the stock to $328 while maintaining a Buy rating, attributing this to the company’s remarkable growth in same-store sales. This achievement positions McDonald’s as one of the best dividend stocks to consider, especially among hedge funds.
Currently, McDonald’s Corporation (NYSE:MCD) offers a quarterly dividend of $1.52 per share, marking a 10% increase implemented last October. The company has an impressive history of raising its dividends for 46 consecutive years. As of January 18, the stock’s dividend yield stood at 2.22%, indicating its attractiveness to income-focused investors.
In conjunction with other prominent dividend stocks like Caterpillar Inc. (NYSE:CAT), Exxon Mobil Corporation (NYSE:XOM), and AbbVie Inc. (NYSE:ABBV), McDonald’s Corporation (NYSE:MCD) has gained favor among analysts and investors alike, thanks to its exemplary record of dividend growth.
According to Insider Monkey’s data, McDonald’s Corporation (NYSE:MCD) was included in 53 hedge fund portfolios during Q3 2022, a rise from 50 in the previous quarter. The total stakes held by these hedge funds exceeded $1.8 billion. Notably, Bridgewater Associates emerged as the leading stakeholder in Q3.
14. Medtronic plc (NYSE:MDT) – A Reliable Dividend Growth Stock
Number of Hedge Fund Holders: 55
Medtronic plc (NYSE:MDT) is a global leader in the medical device sector, providing essential healthcare solutions to consumers worldwide. On December 8, the company declared a quarterly dividend of $0.68 per share, consistent with its previous dividend. Medtronic has maintained a remarkable streak of 45 years of uninterrupted dividend growth, solidifying its position as one of the best dividend stocks favored by hedge funds. As of January 18, the stock’s dividend yield was recorded at 3.39%.
In the six months leading up to October, Medtronic plc (NYSE:MDT) reported an operating cash flow of $2 billion, while its free cash flow during the same period amounted to $1.2 billion. In fiscal Q2 2023, the company achieved a revenue of approximately $7.6 billion, demonstrating its robust financial health.
In January, RBC Capital issued a Sector Perform rating for Medtronic plc (NYSE:MDT) with a price target of $89, reflecting a positive outlook for medical supply and device stocks amidst evolving market conditions.
As of the end of Q3 2022, 55 hedge funds tracked by Insider Monkey held stakes in Medtronic plc (NYSE:MDT), an increase from 54 in the previous quarter. The total value of these stakes exceeded $2.6 billion.
Artisan Partners highlighted Medtronic plc (NYSE:MDT) in its Q2 2022 investor letter, noting its potential for long-term growth and resilience against market fluctuations:
“While Medtronic plc (NYSE:MDT)’s procedure volumes recovered to pre-COVID levels, foreign exchange headwinds overshadowed underlying business value growth, and supply chain issues, including those related to China’s lockdowns, impacted the surgical innovations business. The downdraft in the market during the quarter led to a pile-on. We are being patient with our investment in Medtronic because the company continues to be a strong free cash flow generator and is attractively priced, with a FCF yield of 5% on trailing one-year numbers and a dividend yield of 3%. Medtronic is under new management that is focused on growing the company’s top line, reinvesting in R&D, returning cash to shareholders and growing operating profits. We like new management’s strategy and believe new product launches, increased surgery visits, sound M&A transactions and a shareholder returns focus, should reinvigorate the business. We added to our positions in these health care names during the quarter.”
13. Linde plc (NYSE:LIN) – A Leader in the Chemical Industry
Number of Hedge Fund Holders: 56
Linde plc (NYSE:LIN) is a prominent multinational chemicals company based in Ireland, serving a diverse range of industries. In the third quarter of 2022, Linde reported an operating cash flow of $2.6 billion, reflecting a 3% increase compared to the same period last year. The company generated a free cash flow of $1.87 billion and distributed $1.7 billion to shareholders through dividends and stock repurchases, making it a standout choice among dividend stocks favored by hedge funds.
In December, Citigroup revised its price target for Linde plc (NYSE:LIN) to $402, maintaining a Buy rating due to the company’s strong performance and defending its position in a challenging market environment.
Linde plc (NYSE:LIN) currently offers a quarterly dividend of $1.17 per share and boasts a dividend yield of 1.42% as of January 18. The company’s impressive 28-year track record of consistent dividend growth reinforces its reputation as a reliable investment.
At the end of September, 56 hedge funds tracked by Insider Monkey reported owning stakes in Linde plc (NYSE:LIN), up from 48 in the previous quarter. The total value of these stakes exceeded $3.4 billion, with Impax Asset Management being the top stakeholder in Q3.
Madison Funds referenced Linde plc (NYSE:LIN) in its Q4 2022 investor letter, offering insights into its future prospects:
“Linde plc (NYSE:LIN) stock was strong during the fourth quarter following a solid third quarter. Linde remains well positioned with the passage of the Inflation Reduction Act and energy transition with carbon dioxide sequestration opportunities, gasification services, and various hydrogen projects. Linde and Schlumberger announced that they entered into a collaboration of carbon capture, utilization, and sequestration (CCUS) projects to accelerate decarbonization solutions across industrial and energy sectors. The collaboration will combine decades of experience in carbon dioxide capture and sequestration. The collaboration will focus on hydrogen and ammonia production where carbon dioxide is a by-product. The International Energy Agency estimates that 6 Gigatons of carbon dioxide will need to be abated with CCUS in order to reach net zero by 2050. During the quarter, Linde also announced that it became a signatory to the United Nations Global Compact (UNGC), the world’s largest corporate sustainability initiative. As a signatory, Linde has committed to aligning its strategy and activities with the UNGC’s Ten Principles across human rights, labor, environment, and anti-corruption.”
12. Colgate-Palmolive Company (NYSE:CL) – A Resilient Player in Consumer Goods
Number of Hedge Fund Holders: 57
Colgate-Palmolive Company (NYSE:CL), headquartered in New York, is a leading multinational consumer products company. In January, JPMorgan raised its price target for the stock to $86, providing an Overweight rating as inflation is expected to drive sales momentum for consumer and household companies.
On January 12, Colgate-Palmolive Company (NYSE:CL) announced a quarterly dividend of $0.47 per share, maintaining consistency with its previous dividend. The company has a remarkable history of increasing its dividends for 60 consecutive years, making it one of the most reliable dividend stocks according to hedge funds. As of January 18, the stock’s dividend yield was recorded at 2.40%.
In the third quarter of 2022, Colgate-Palmolive Company (NYSE:CL) showcased a robust cash position, returning $1.3 billion to shareholders through dividends during the quarter, further solidifying its standing in the market.
At the end of Q3 2022, 57 hedge funds tracked by Insider Monkey expressed bullish sentiments toward Colgate-Palmolive Company (NYSE:CL), an increase from 55 in the previous quarter. The total value of stakes held by these hedge funds exceeded $4 billion.
Third Point highlighted Colgate-Palmolive Company (NYSE:CL) in its Q3 2022 investor letter, providing critical insights into the company’s investment appeal:
“Third Point recently acquired a significant position in Colgate-Palmolive Company (NYSE:CL). The investment fits several important criteria in the current investment environment. First, the business is defensive and has significant pricing power in inflationary conditions. Second, there is meaningful hidden value in the company’s Hill’s Pet Nutrition business, which we believe would command a premium multiple if separated from Colgate’s consumer assets. Third, there is a favorable industry backdrop in consumer health, with new entrants via spin-offs and potential for consolidation. Finally, the current valuation is attractive both because earnings growth is poised to inflect higher, and because shareholders are paying very little for the optionality around Hill’s or Colgate’s ability to participate in further consolidation in the consumer health sector.
Colgate has a strong portfolio of brands and operates across four categories that should perform well across most economic conditions: oral care, home care, personal care, and pet nutrition. Although Colgate has delivered organic sales growth of 5-6% over the past few years, earnings growth has been disappointing, and the stock has become a perennial underperformer. Foreign exchange headwinds have pressured reported results. Business reinvestment, supply chain disruption, and inflationary pressures have weighed heavily on margins; those headwinds are now reversing. Stepped up investments in demand generation, product innovation, and digital capabilities are starting to pay off. Global supply chain bottlenecks are easing and product availability on the shelf is improving. And, most importantly, raw material, transportation, and wage pressures are stabilizing, and even reversing in some areas, at the same time additional pricing takes effect. Taken together, the stage is set for Colgate to deliver several years of outsized earnings growth, as sales continue to increase, foreign exchange movements are annualized, and margins finally recover…” (Click here to view the full text)
11. The Coca-Cola Company (NYSE:KO) – A Time-Tested Dividend Champion
Number of Hedge Fund Holders: 59
As a prominent American multinational beverage corporation, The Coca-Cola Company (NYSE:KO) ranks among the top dividend stocks favored by hedge funds. Analysts have given the stock positive ratings, recognizing its strong performance and resilience in the market. In December, Atlantic Equities raised its price target on Coca-Cola to $69, assigning an Overweight rating to the shares, which underscores the company’s ongoing investments and effective execution strategies.
The Coca-Cola Company (NYSE:KO) currently pays a quarterly dividend of $0.44 per share, resulting in a dividend yield of 2.85% as of January 18. The company has a stellar reputation for consistent dividend payments, having maintained this practice since 1920. Furthermore, it has increased its dividends for the past 60 years, making it a reliable choice for income-seeking investors.
As of the end of Q3 2022, 59 hedge funds in Insider Monkey’s database held stakes in The Coca-Cola Company (NYSE:KO), with a total collective value of $25 billion. Notably, Berkshire Hathaway holds the largest stake in the company, valued at over $22.4 billion.
Rowan Street Capital featured The Coca-Cola Company (NYSE:KO) in its Q4 2022 investor letter, offering its perspective on the stock’s performance:
“Let’s take The Coca-Cola Company (NYSE:KO) for example. Its dividend yield is 2.8%, earnings are estimated to grow at only 3.6% rate per year over next 4 years, and its earnings multiple is currently at 24x (based on next years forecasted earnings). KO has an anemic growth, so we can argue that paying 24x earnings is not very attractive. Let’s assume that the multiple will stay constant over the next 3-5 years, thus our expected annual returns will be 2.8%+3.6% = 6.4% (that is below the current reported inflation rate and only slightly above the risk-free rate of 4%).”
10. The Sherwin-Williams Company (NYSE:SHW) – A Leader in Paint and Coatings
Number of Hedge Fund Holders: 63
The Sherwin-Williams Company (NYSE:SHW), based in Ohio, specializes in manufacturing paint and coating materials and operates in approximately 109 countries worldwide. In the first three quarters of 2022, the company generated significant cash flow to meet shareholder obligations, reporting an operating cash flow of $1.28 billion and returning $1.2 billion to shareholders through dividends and share repurchases.
The Sherwin-Williams Company (NYSE:SHW) received favorable ratings from analysts due to its performance during economic downturns. In December, both Citigroup and JPMorgan increased their price targets for the stock to $270 and $260, respectively, reflecting confidence in the company’s future prospects.
With a remarkable 43-year history of consistent dividend increases, The Sherwin-Williams Company (NYSE:SHW) currently pays a quarterly dividend of $0.60 per share, translating to a dividend yield of 0.97% as of January 18.
This company is regarded as one of the best dividend stocks among hedge funds, with 63 funds tracked by Insider Monkey holding stakes in the company during Q3 2022, a rise from 52 in the preceding quarter. The total value of these stakes exceeds $2.8 billion.
ClearBridge Investments included The Sherwin-Williams Company (NYSE:SHW) in its Q3 2022 investor letter, highlighting its potential for growth:
“The third strategy is buying growth companies with idiosyncratic or stock-specific catalysts unrelated to the direction of the market like The Sherwin-Williams Company (NYSE:SHW). The stock is an example of a company we categorize in our cyclical bucket that should experience a step change in earnings over the medium to long term with solid execution and its ability to pass through price increases. While relative performance has been challenged by binary decisions around a handful of mega cap technology stocks, we’re entering a lower-growth period in which we’ve historically delivered strong relative results from our balanced approach.”
9. Chevron Corporation (NYSE:CVX) – A Strong Player in the Energy Sector
Number of Hedge Fund Holders: 66
Chevron Corporation (NYSE:CVX) is a leading American multinational energy company based in California. The company has consistently increased its dividends for the past 35 years, currently offering a quarterly dividend of $1.42 per share, which results in a dividend yield of 3.15% as of January 18. Chevron is recognized as one of the best dividend stocks to consider according to hedge funds.
In Q3 2022, Chevron Corporation (NYSE:CVX) reported impressive revenue of $66.6 billion, marking a 49% increase from the same period the previous year. The company also demonstrated strong cash generation capabilities, with an operating cash flow of $15.3 billion and free cash flow of $12.3 billion. In addition, Chevron distributed $2.7 billion to shareholders in dividends during the quarter, reinforcing its commitment to returning value to investors.
The number of hedge funds tracked by Insider Monkey holding stakes in Chevron Corporation (NYSE:CVX) rose to 66 in Q3 2022, up from 59 in the preceding quarter. The cumulative value of these stakes exceeded $27 billion, reflecting significant interest in the company.
Diamond Hill Capital highlighted Chevron Corporation (NYSE:CVX) in its Q1 2022 investor letter, emphasizing its strong market position:
“Other top contributors in Q1 included multinational energy company Chevron Corp. (NYSE:CVX). The company benefited from increased energy demand as COVID-related economic restrictions eased in tandem with concerns regarding supply interruptions related to Russia’s invasion of Ukraine.”
8. Walmart Inc. (NYSE:WMT) – A Resilient Retail Giant
Number of Hedge Fund Holders: 68
Walmart Inc. (NYSE:WMT), an American multinational retail corporation, has garnered attention from hedge funds for its stability and growth. In December, Credit Suisse raised its price target on the stock to $170 while assigning an Outperform rating, positioning Walmart as a critical defensive name in today’s inflationary environment.
Walmart Inc. (NYSE:WMT) currently pays a quarterly dividend of $0.56 per share, resulting in a dividend yield of 1.55%. The company has consistently
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