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10 Best Dividend Kings to Buy Now According to Hedge Funds

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·12 min read
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In this article, we will be looking at the 10 best dividend kings to buy now according to hedge funds. If you want to skip our detailed analysis of dividend investing, you can go directly to the 5 Best Dividend Kings to Buy According to Hedge Funds.

The economic and financial volatility that came as a result of the events of 2020, in particular the outbreak of the coronavirus pandemic, has introduced an interesting conundrum for investors across the globe. As far as dividend investors are concerned, it should be noted that your typical high yield stock with fundamentals that seem lacking will not cut it anymore. Instead, a focus on stable dividend-yielders with a track record of financial stability and consistent dividend growth is what will save a dividend investor's portfolio. Dividend kings like The Procter & Gamble Company (NYSE: PG), Johnson & Johnson (NYSE: JNJ), and The Coca-Cola Company (NYSE: KO), or even a dividend aristocrat like PepsiCo, Inc. (NASDAQ: PEP) have always gained the market's attention during times of crisis because of their stability and flawless track record.

What is a Dividend King?

The term 'dividend king' is used to refer to a dividend-yielding stock that has increased its dividend yield for at least the past 50 years, without a break. Not many stocks qualify as dividend kings, as increasing their yield for 50 years or more is no small feat.

Merely focusing on high-yielding stocks is ill-advised, as a research report published by S&P Global has also mentioned that about 29 companies from the S&P 500 High Dividend Index, which made up about 36.1% of the entire index, ended up cutting their full-year dividends. Such cuts then become indicators of financial weakness and result in a decrease in the income potential of the high-yield investing strategy as well. In comparison, your typical dividend grower with a track record of consistent dividend increases can act as a useful buffer against increasing financial volatility.

In their research report, S&P Global considered the performance of its S&P High Yield Dividend Aristocrats compared to the S&P Composite 1500 and S&P 500 High Dividend Index from 1999 to 2021, for instance, which showed that dividend growers outperformed the latter two indices by about 143 bps and 59 bps per month. Hence, it becomes clear that not only is it important to pick your dividend stocks wisely, one must also consider the pros and cons of investing in high yield dividend stocks over dividend growers, and vice versa.

Best Dividend Kings to Buy Now According to Hedge Funds
Best Dividend Kings to Buy Now According to Hedge Funds

Photo by Artem Beliaikin on Unsplash

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.

Without further ado, let's look at the 10 best dividend kings to buy now according to hedge funds. These stocks, in addition to being dividend kings, are also popular among the 866 hedge funds tracked by Insider Monkey as of Q1. For each stock we have mentioned the number of hedge funds having stakes in it as of Q1.

We also ensured each stock had increased its dividend for at least 50 years in a row for it to qualify as a dividend king and to indicate that the stock has a stable and safe dividend.

Best Dividend Kings to Buy Now According to Hedge Funds

10. Altria Group, Inc. (NYSE: MO)

Number of Hedge Fund Holders: 38 Number of Years of Consistent Dividend Growth: 51 Dividend Yield: 7.34%

Altria Group, Inc. (NYSE: MO) is a manufacturer and seller of cigarettes and oral tobacco products across the US, with some of its primary brands being Marlboro and Black & Mild. The company ranks 10th on our list of the best dividend kings to buy now according to hedge funds.

In the first quarter of 2021, Altria Group, Inc. (NYSE: MO) had an EPS of $1.07, beating estimates by $0.02. The company's revenue was $4.88 billion but missed estimated by $108.51 million. Altria Group, Inc. (NYSE: MO) has gained 13.94% in the past 6 months and 14.69% year to date as well.

This June, Redburn initiated coverage of Altria Group, Inc. (NYSE: MO) shares with a Neutral rating, while in July Stifel analyst Christopher Growe reiterated his Buy rating on the shares with a $65 price target. Altria Group, Inc. (NYSE: MO) has announced that it would be selling its Ste. Michelle Wine Estates business for about $1.2 billion, which Growe cited as being a positive development while commenting on the stock.

By the end of the first quarter of 2021, 38 hedge funds out of the 866 tracked by Insider Monkey held stakes in Altria Group, Inc. (NYSE: MO) worth roughly $1.10 billion. This is compared to 37 hedge funds in the previous quarter with a total stake value of about $1.08 billion.

Like The Procter & Gamble Company (NYSE: PG), Johnson & Johnson (NYSE: JNJ), The Coca-Cola Company (NYSE: KO), and PepsiCo, Inc. (NASDAQ: PEP), Altria Group, Inc. (NYSE: MO) is a good dividend stock to invest in.

9. 3M Company (NYSE: MMM)

Number of Hedge Fund Holders: 41 Number of Years of Consistent Dividend Growth: 63 Dividend Yield: 2.97%

3M Company (NYSE: MMM) has four business segments, through which the company operates in a range of areas and manufactures various products. The segments are: Safety and Industrial, Transportation and Electronics, Health Care, and Consumer. The company ranks 9th on our list of the best dividend kings to buy now according to hedge funds.

This April, Deutsche Bank raised its price target on 3M Company (NYSE: MMM) from $192 to $199, keeping a Hold rating on the shares. As of this July, Credit Suisse has a price target of $212 on the shares, up from $210. Analyst John Walsh commented that he still sees a potential upside in the company's shares and that 3M Company's (NYSE: MMM) EPS may reach $11 by 2022.

In the first quarter of 2021, 3M Company (NYSE: MMM) had an EPS of $2.77, beating estimates by $0.48. The company's revenue was $8.85 billion, up 9.61% year over year and beating estimates by $412.11 million. 3M Company (NYSE: MMM) has gained 19.94% in the past 6 months and 16.13% year to date.

By the end of the first quarter of 2021, 41 hedge funds out of the 866 tracked by Insider Monkey held stakes in 3M Company (NYSE: MMM) worth roughly $1.51 billion. This is compared to 44 hedge funds in the previous quarter with a total stake value of about $1.36 billion.

Like The Procter & Gamble Company (NYSE: PG), Johnson & Johnson (NYSE: JNJ), The Coca-Cola Company (NYSE: KO), and PepsiCo, Inc. (NASDAQ: PEP), 3M Company (NYSE: MMM) is a good dividend stock to invest in.

8. Sysco Corporation (NYSE: SYY)

Number of Hedge Fund Holders: 42 Number of Years of Consistent Dividend Growth: 51 Dividend Yield: 2.56%

Sysco Corporation (NYSE: SYY) is a distributer of food and related products to the foodservice industry in the US, Canada, the UK, France, and internationally. It ranks 8th on our list of the best dividend kings to buy now according to hedge funds.

This May, Barclays raised its price target on Sysco Corporation (NYSE: SYY) from $80 to $83, keeping an Equal Weight rating on the shares. Additionally, the company's CEO Kevin Hourican also commented that the recovering restaurant business would lead to only an upside for Sysco Corporation (NYSE: SYY) which will be able to increase its share of wallet as it has the "broadest and strongest" supply chain operating in the foodservice sector.

In the fiscal third quarter of 2021, Sysco Corporation (NYSE: SYY) had an EPS of $0.22, beating estimates by $0.02. The company's revenue was $11.82 billion, surpassing the previous quarter's $11.56 billion revenue. Sysco Corporation (NYSE: SYY) has gained 38.43% in the past year as well.

By the end of the first quarter of 2021, 42 hedge funds out of the 866 tracked by Insider Monkey held stakes in Sysco Corporation (NYSE: SYY) worth roughly $2.71 billion. This is compared to 40 hedge funds in the previous quarter with a total stake value of about $2.51 billion.

Like The Procter & Gamble Company (NYSE: PG), Johnson & Johnson (NYSE: JNJ), The Coca-Cola Company (NYSE: KO), and PepsiCo, Inc. (NASDAQ: PEP), Sysco Corporation (NYSE: SYY) is a good dividend stock to invest in.

7. Parker-Hannifin Corporation (NYSE: PH)

Number of Hedge Fund Holders: 43 Number of Years of Consistent Dividend Growth: 65 Dividend Yield: 1.33%

Parker-Hannifin Corporation (NYSE: PH) is a manufacturer of motion and control technologies and systems for the mobile, industrial, and aerospace markets across the globe. The company ranks 7th on our list of the best dividend kings to buy now according to hedge funds.

This June, KeyBanc upgraded Parker-Hannifin Corporation (NYSE: PH) shares to Overweight with a $350 price target. Analyst Jeffrey Hammond commented that the company has the potential to push its margins into the top quartile of its peer group, seeming overall optimistic about Parker-Hannifin Corporation (NYSE: PH) shares.

In the fiscal third quarter of 2021, Parker-Hannifin Corporation (NYSE: PH) had an EPS of $4.11, beating estimates by $0.38. The company's revenue was $3.75 billion, up 1.19% year over year and beating estimates by $26.09 million. Parker-Hannifin Corporation (NYSE: PH) has gained 6.42% in the past 6 months and 16.46% year to date as well.

By the end of the first quarter of 2021, 43 hedge funds out of the 866 tracked by Insider Monkey held stakes in Parker-Hannifin Corporation (NYSE: PH) worth roughly $1.25 billion. This is compared to 56 hedge funds in the previous quarter with a total stake value of about $1.60 billion.

Like The Procter & Gamble Company (NYSE: PG), Johnson & Johnson (NYSE: JNJ), The Coca-Cola Company (NYSE: KO), and PepsiCo, Inc. (NASDAQ: PEP), Parker-Hannifin Corporation (NYSE: PH) is a good dividend stock to invest in.

Oakmark Funds, an investment management firm, mentioned Parker-Hannifin Corporation (NYSE: PH) in its first-quarter 2021 investor letter. Here's what they said:

“Parker Hannifin approached our estimates of intrinsic value and were, therefore, eliminated during the period. The company was a longstanding investment of the Fund and produced successful outcomes. We believe Parker Hannifin, one of our longest tenured positions, is a high-quality, well-managed industrial with strong competitive positions in good end markets. However, after the market price reflected these positives, we elected to sell to pursue more attractive alternatives that were priced at steeper discounts to our estimates of intrinsic value.”

6. Emerson Electric Co. (NYSE: EMR)

Number of Hedge Fund Holders: 45 Number of Years of Consistent Dividend Growth: 64 Dividend Yield: 2.07%

Emerson Electric Co. (NYSE: EMR) manufactures technology and engineering products for industrial, commercial, and consumer markets across the globe. The company ranks 6th on our list of the best dividend kings to buy now according to hedge funds.

This June, JP Morgan analyst Stephen Tusa reiterated an Overweight rating on Emerson Electric Co. (NYSE: EMR) shares, alongside a $100 price target. Tusa's comments on the stock have been positive in light of his interactions with the company's new management and his belief that business trends in the company were ahead of schedule.

In the fiscal second quarter of 2021, Emerson Electric Co. (NYSE: EMR) had an EPS of $0.97, beating estimates by $0.07. The company's revenue was $4.43 billion, up 6.46% year over year and beating estimates by $74.53 million. Emerson Electric Co. (NYSE: EMR) has also gained 17.35% in the past 6 months and 25.37% year to date.

By the end of the first quarter of 2021, 45 hedge funds out of the 866 tracked by Insider Monkey held stakes in Emerson Electric Co. (NYSE: EMR) worth roughly $796 million. This is compared to 46 hedge funds in the previous quarter with a total stake value of about $1.04 billion.

Like The Procter & Gamble Company (NYSE: PG), Johnson & Johnson (NYSE: JNJ), The Coca-Cola Company (NYSE: KO), and PepsiCo, Inc. (NASDAQ: PEP), Emerson Electric Co. (NYSE: EMR) is a good dividend stock to invest in.

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