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10 Best Dividend Aristocrats to Buy According to Hedge Funds

·11 min read

In this article, we will be looking at the 10 best dividend aristocrats to buy according to hedge funds. If you want to skip our detailed analysis of dividend aristocrats, and dividend investing, you can go directly to the 5 Best Dividend Aristocrats to Buy According to Hedge Funds.

According to a report by Post Oak Private Wealth Advisors, dividends have been contributing more than half of the average annual total return of the S&P 500 Index between 1900 and 2000. During this time period, the return from dividends was around 5.5%, while the return from price appreciation was valued at 4.9%, to make up a total return of 10.4%, showcasing the greater importance of dividends in terms of the Index's returns. Additionally, Post Oak Private Wealth Advisors have added that despite dividend stocks' lesser contribution to the S&P 500's total return during bull market periods, these stocks significantly improve their influence on total return during bear markets.

For instance, between 1900 and 2000 it has been estimated that dividends have contributed to about 90% of the S&P 500's total returns in bear market periods. However, it should be noted that regardless of the profitability of a dividend stock, an important factor to take into account while picking from dividend stocks is dividend growth and safety. In this situation, reliable dividend-yielders like dividend aristocrats can be considered the best option for an income investor.

What is a Dividend Aristocrat?

Launched in May 2005, the dividend aristocrats list is a list of publicly-traded S&P 500 companies that have all increased their dividends for at least the past 25 years in a row. This is a more selective list than the dividend contenders, containing only the companies that have proven to have stable dividend payouts for a significant time period to demonstrate their financial strength and dividend security.

A Ned Davis Research-led analysis of 40 years of stock data on S&P 500 companies has estimated that the companies that raised their dividends each year without a break returned about 9.4% on an average annual basis. Comparatively, dividend stocks that did not grow their dividend payments only returned about 7% on an average annual basis. Based on this evidence, the Post Oak Private Wealth Advisors report has fixated on dividend aristocrats as being the best investment option for a dividend investor in light of their continuous dividend growth of 25 years or more. Given that the S&P 500 Dividend Aristocrats Index was able to outperform the S&P 500 Index between 2006 and 2015 by about 3% each year, this claim seems well-founded. Hence, investing in dividend aristocrats like PepsiCo, Inc. (NASDAQ: PEP), AbbVie Inc. (NYSE: ABBV), Walmart Inc. (NYSE: WMT), and Target Corporation (NYSE: TGT) should be part of every income investor's strategy.

Investing is becoming difficult by the day, even for the smart money. The entire hedge fund industry is feeling the reverberations of the changing financial landscape. Its reputation has been tarnished in the last decade, during which its hedged returns couldn’t keep up with the unhedged returns of the market indices. On the other hand, Insider Monkey’s research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 124 percentage points since March 2017. Between March 2017 and February 26th 2021 our monthly newsletter’s stock picks returned 197.2%, vs. 72.4% for the SPY. Our stock picks outperformed the market by more than 124 percentage points (see the details here). We were also able to identify in advance a select group of hedge fund holdings that significantly underperformed the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 16th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to. You can subscribe to our free newsletter on our homepage to receive our stories in your inbox.

Photo by lucas Favre on Unsplash

With the above in mind, we can now take a look at the 10 best dividend aristocrats to buy according to hedge funds. Each stock in the list has been selected on the basis of its strong fundamentals and growth potential.

These stocks have mostly received positive ratings from analysts and are among the most popular picks for some of the most famous hedge funds out of the 866 hedge funds tracked by Insider Monkey.

We have mentioned each stock's dividend yield, number of hedge fund holders, and number of years of consistent dividend increases as well while ranking them from the lowest to the highest number of hedge fund holders.

Best Dividend Aristocrats to Buy According to Hedge Funds

10. AT&T Inc. (NYSE: T)

Number of Hedge Fund Holders: 63 Number of Years of Consecutive Dividend Increases: 36 Dividend Yield: 7.1%

AT&T Inc. (NYSE: T), through its various segments, provides communications services alongside products such as handsets, wirelessly enabled computers, data cards, and other accessories. The company's products are marketed under the AT&T, Cricket, AT&T TV, and other brands, and it ranks 10th on our list of the best dividend aristocrats to buy according to hedge funds.

This July, RBC Capital's Kutgun Maral took over coverage of AT&T Inc. (NYSE: T) shares with a Sector Perform rating and a $30 price target.

In the second quarter of 2021, AT&T Inc. (NYSE: T) had an EPS of $0.89, beating estimates by $0.09. The company's revenue was $44.05 billion, up 7.56% year over year and also beating estimates by $1.32 billion.

By the end of the first quarter of 2021, 63 hedge funds out of the 866 tracked by Insider Monkey held stakes in AT&T Inc. (NYSE: T) worth roughly $2.701 billion. This is compared to 58 hedge funds in the previous quarter with stakes worth approximately $1.04 billion.

Like PepsiCo, Inc. (NASDAQ: PEP), AbbVie Inc. (NYSE: ABBV), Walmart Inc. (NYSE: WMT), and Target Corporation (NYSE: TGT), AT&T Inc. (NYSE: T) is a good dividend stock to invest in.

9. Medtronic plc (NYSE: MDT)

Number of Hedge Fund Holders: 65 Number of Years of Consecutive Dividend Increases: 44 Dividend Yield: 1.8%

Medtronic plc (NYSE: MDT) is a healthcare company operating across the world and based in Dublin, Ireland. The company has four segments through which it operates, namely the Cardiovascular Portfolio, Neuroscience Portfolio, Medical-Surgical Portfolio, and Diabetes Operating Unit segments. It ranks 9th on our list of the best dividend aristocrats to buy according to hedge funds.

Argus has raised its price target on Medtronic plc (NYSE: MDT) shares as of this June to $150. The firm's analyst, David Toung, has also raised his financial year 2022 EPS view on Medtronic plc (NYSE: MDT) to $5.70.

In the fiscal fourth quarter of 2021, Medtronic plc (NYSE: MDT) had an EPS of $1.50, beating estimates by $0.08. The company's revenue was $8.19 billion, up 36.51% year over year and also beating estimates by $59.18 million. Medtronic plc (NYSE: MDT) has gained about 8.73% in the past 6 months and 9.56% year to date as well.

By the end of the first quarter of 2021, 65 hedge funds out of the 866 tracked by Insider Monkey held stakes in Medtronic plc (NYSE: MDT) worth roughly $3.62 billion. This is compared to 59 hedge funds in the previous quarter with stakes worth approximately $2.81 billion.

Like PepsiCo, Inc. (NASDAQ: PEP), AbbVie Inc. (NYSE: ABBV), Walmart Inc. (NYSE: WMT), and Target Corporation (NYSE: TGT), Medtronic plc (NYSE: MDT) is a good dividend stock to invest in.

8. Exxon Mobil Corporation (NYSE: XOM)

Number of Hedge Fund Holders: 65 Number of Years of Consecutive Dividend Increases: 38 Dividend Yield: 5.5%

Exxon Mobil Corporation (NYSE: XOM), an energy company, explores for crude oil and natural gas in the US and across the globe. The company also transports, trades in, produces, and sells crude oil, natural gas, petroleum products, petrochemicals, and other specialty products. It ranks 8th on our list of the best dividend aristocrats to buy according to hedge funds.

BMO Capital's Phillip Jungwirth has commented that Exxon Mobil Corporation (NYSE: XOM) has quite a bit of momentum, and has thus initiated coverage of the company's shares with a Market Perform rating and a $69 price target this July. Wells Fargo also raised its price target on Exxon Mobil Corporation (NYSE: XOM) shares to $72 this June.

In the first quarter of 2021, Exxon Mobil Corporation (NYSE: XOM) had an EPS of $0.65, beating estimates by $0.05. The company's revenue was $59.15 billion, up 5.32% year over year and also beating estimates by $2.89 billion. Exxon Mobil Corporation (NYSE: XOM) has gained about 21.77% in the past 6 months and 37.61% year to date as well.

By the end of the first quarter of 2021, 65 hedge funds out of the 866 tracked by Insider Monkey held stakes in Exxon Mobil Corporation (NYSE: XOM) worth roughly $2.77 billion. This is compared 63 to hedge funds in the previous quarter with stakes worth approximately $2.20 billion.

Like PepsiCo, Inc. (NASDAQ: PEP), AbbVie Inc. (NYSE: ABBV), Walmart Inc. (NYSE: WMT), and Target Corporation (NYSE: TGT), Exxon Mobil Corporation (NYSE: XOM) is a good dividend stock to invest in.

7. Becton, Dickinson and Company (NYSE: BDX)

Number of Hedge Fund Holders: 65 Number of Years of Consecutive Dividend Increases: 49 Dividend Yield: 1.3%

Becton, Dickinson and Company (NYSE: BDX) is a medical supplies, devices, lab equipment, and diagnostic products manufacturer. The company operates across the world to offer a range of healthcare products, and it ranks 7th on our list of the best dividend aristocrats to buy according to hedge funds.

Analyst Travis Steed from Barclays initiated coverage of Becton, Dickinson and Company (NYSE: BDX) shares just this May with an Equal Weight rating. Steed also set a $270 price target on the company's shares.

In the fiscal second quarter of 2021, Becton, Dickinson and Company (NYSE: BDX) had an EPS of $3.19, beating estimates by $0.15. The company's revenue was $4.91 billion, up 15.38% year over year and also beating estimates by $27.48 million.

By the end of the first quarter of 2021, 65 hedge funds out of the 866 tracked by Insider Monkey held stakes in Becton, Dickinson and Company (NYSE: BDX) worth roughly $3.73 billion. This is compared to 65 hedge funds in the previous quarter with stakes worth approximately $3.96 billion.

Like PepsiCo, Inc. (NASDAQ: PEP), AbbVie Inc. (NYSE: ABBV), Walmart Inc. (NYSE: WMT), and Target Corporation (NYSE: TGT), Becton, Dickinson and Company (NYSE: BDX) is a good dividend stock to invest in.

6. Abbott Laboratories (NYSE: ABT)

Number of Hedge Fund Holders: 65 Number of Years of Consecutive Dividend Increases: 49 Dividend Yield: 1.5%

Abbott Laboratories (NYSE: ABT) is yet another healthcare company on our list of the best dividend aristocrats to buy according to hedge funds and ranks 6th. It operates through its Established Pharmaceutical Products, Diagnostic Products, Nutritional Products, and Medical Devices segments.

Larry Biegelsen, an analyst at Wells Fargo, raised his price target on Abbott Laboratories (NYSE: ABT) shares just this July. The new price target is $135, up from the previous $125 price target, and Biegelsen has also retained the firm's Overweight rating on Abbott Laboratories (NYSE: ABT) shares.

In the second quarter of 2021, Abbott Laboratories (NYSE: ABT) had an EPS of $1.17, beating estimates by $0.15. The company's revenue was $10.22 billion, up 39.51% year over year and also beating estimates by $550.34 million. Abbott Laboratories (NYSE: ABT) has gained about 3.08% in the past 6 months and 8.38% year to date as well.

By the end of the first quarter of 2021, 65 hedge funds out of the 866 tracked by Insider Monkey held stakes in Abbott Laboratories (NYSE: ABT) worth roughly $5.13 billion. This is compared to 64 hedge funds in the previous quarter with stakes worth approximately $4.30 billion.

Like PepsiCo, Inc. (NASDAQ: PEP), AbbVie Inc. (NYSE: ABBV), Walmart Inc. (NYSE: WMT), and Target Corporation (NYSE: TGT), Abbott Laboratories (NYSE: ABT) is a good dividend stock to invest in.

Polen Capital, an investment management firm, mentioned Abbott Laboratories (NYSE: ABT) in its first-quarter 2021 investor letter. Here is what they said:

“Abbott Laboratories developed and commercialized multiple COVID tests during 2020, delivering a double-digit performance in what could have otherwise been a very challenging year. Management expects earnings per share to grow more than 30% in 2021. We believe it is poised to sustainably deliver double-digit earnings per share growth even as COVID testing sales decline from an expected $6.5-7.5 billion in the fiscal year 2021 to potentially as low as $300-$500 million several years from now.

We have always been believers in Abbott management’s capital allocation prowess, and we think they continue to invest prudently.

Management is taking advantage of the COVID test profits to invest roughly $2 billion into R&D and marketing to bolster growth in the core business as it recovers from the pandemic. We think there could even be a durable increase in the longer-term growth rates of both the diagnostics and medical device segments, given investments in product development and direct-to-consumer (DTC) capabilities. Testing sales created a windfall for Abbott in the near term, and management is exploiting it with what we view as sound capital allocation.

We believe the company continues to be fairly valued despite being rewarded for such favorable business momentum during the quarter.”

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Disclosure: None. 10 Best Dividend Aristocrats to Buy According to Hedge Funds is originally published on Insider Monkey.