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10 Dividend Aristocrats with Payout Ratio Less than 55%

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In this article, we will be taking a look at 10 dividend aristocrats with payout ratio less than 55%. To skip our detailed analysis of dividend investing, you can go directly to see the 5 Dividend Aristocrats with Payout Ratio Less than 55%.

The coronavirus pandemic has resulted in the stock market and dividend stocks like Hormel Foods Corporation (NYSE: HRL), AbbVie Inc. (NYSE: ABBV), Abbott Laboratories (NYSE: ABT), and Verizon Communications (NYSE: VZ), among others, taking massive hits. CNBC estimated, for instance, that global dividends declined by about 12.2% last year to about $1.26 trillion because of the pandemic. Dividend cuts, at the time, totaled about $220 billion between the second quarter of 2020 and the fourth quarter of 2020. However, despite the initially worrisome situation, two things were observed: first, that US dividends remained resilient, and second, that more reliable dividend stocks like the dividend aristocrats retained their popularity among investors especially after the economy bounced back.

What is a Dividend Aristocrat?

Dividend aristocrats are publicly traded S&P 500 companies that have managed to raise their dividends consistently for at least the past 25 years. These stocks are among some of the best dividend investment options, and currently, about 65 companies are on the list of dividend aristocrats one can invest in.

On the above point, while it was true that dividend stocks suffered like all others in light of the pandemic, it should be noted, as was done by Janus Henderson, that between April and December 2020, about $965.2 billion were still successfully paid out in dividends. These payments came from about 1,200 large firms, categorized as large on the basis of their market capitalization. Secondly, the fact that within the US, dividend payouts were on a rise rather than a decline, managed to breathe hope into income investor circles in any case.

For instance, it was estimated that dividend payouts in the US rose by about 2.6% on a headline basis throughout 2020. Hence, it was concluded that not all hope was lost for dividend stocks, provided one carefully took into account a range of factors before settling on one investment or another. One such key metric we can take into account is the payout ratio, signifying how much a company reinvests in its own growth, and how much it pays out to its shareholders, from its earnings.

Investing has become 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 July 2021, our monthly newsletter’s stock picks returned 186.1%, vs. 100.1% for the SPY. Our stock picks outperformed the market by more than 124 percentage points (see the details here). 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 Joshua Hoehne on Unsplash

Without further ado, let's take a look at the 10 dividend aristocrats with payout ratio less than 55%.

Our Methodology

We have selected dividend aristocrat stocks with yields of 2% and above, and payout ratios of about 55% and below for our list. Insider Monkey tracks the data of about 873 hedge funds, and we have also used this data to pick dividend stocks that are highly popular among hedge funds today. For each stock we have mentioned its yield, payout ratio, and the number of hedge fund holders holding a stake in it, ranking them from the lowest to the highest payout ratio. Finally, we have used analysts' ratings to determine which stocks are favorably placed in analyst and investor circles, picking stocks with mostly positive ratings and strong fundamentals.

Dividend Aristocrats with Payout Ratio Less than 55%

10. McDonald's Corporation (NYSE: MCD)

Number of Hedge Fund Holders: 66 Dividend Yield: 2.18% Number of Years of Consistent Dividend Increases: 45

Payout Ratio: 55%

McDonald's Corporation (NYSE: MCD) is a food and beverage industry renowned for its chain of multinational fast-food restaurants. The company ranks 10th on our list of dividend aristocrats with payout ratio less than 55%

RBC Capital raised the price target on shares of McDonald's Corporation (NYSE: MCD) from $263 to $268 this July, while reiterating an Outperform rating on the stock.

In the second quarter of 2021, McDonald's Corporation (NYSE: MCD) had an EPS of $2.37, beating estimates by $0.25. The company's revenue was $5.89 billion, up 56.53% year over year and beating estimates by $319.30 million. McDonald's Corporation (NYSE: MCD) has gained 14.04% in the past 6 months and 12.97% year to date.

By the end of the second quarter of 2021, 66 hedge funds out of the 873 tracked by Insider Monkey held stakes in McDonald's Corporation (NYSE: MCD) worth roughly $2.7 billion. This is compared to 67 hedge funds in the previous quarter with a total stake value of approximately $3.8 billion.

Like Hormel Foods Corporation (NYSE: HRL), AbbVie Inc. (NYSE: ABBV), Abbott Laboratories (NYSE: ABT), and Verizon Communications (NYSE: VZ), McDonald's Corporation (NYSE: MCD) is a good stock to invest in.

9. Leggett & Platt, Incorporated (NYSE: LEG)

Number of Hedge Fund Holders: 14 Dividend Yield: 3.4% Number of Years of Consistent Dividend Increases: 48

Payout Ratio: 53.5%

Leggett & Platt, Incorporated (NYSE: LEG), a home furnishings company, is next on our list of dividend aristocrats with payout ratio less than 55%. The company operates through its Bedding Products, Specialized Products, and Furniture, Flooring & Textile Products segments. It ranks 9th on our list.

Raymond James analysts, as of this February, have an Outperform rating on shares of Leggett & Platt, Incorporated (NYSE: LEG).

In the second quarter of 2021, Leggett & Platt, Incorporated (NYSE: LEG) had an EPS of $0.66, beating estimates by $0.12. The company’s revenue was $1.27 billion, up 50.23% year over year and beating estimates by $41.90 million. Leggett & Platt, Incorporated (NYSE: LEG) has gained 12.24% in the past 6 months and 14.07% year to date.

By the end of the second quarter of 2021, 14 hedge funds out of the 873 tracked by Insider Monkey held stakes in Leggett & Platt, Incorporated (NYSE: LEG) worth roughly $106 million. This is compared to 24 hedge funds in the previous quarter with a total stake value of approximately $83 million.

Like Hormel Foods Corporation (NYSE: HRL), AbbVie Inc. (NYSE: ABBV), Abbott Laboratories (NYSE: ABT), and Verizon Communications (NYSE: VZ), Leggett & Platt, Incorporated (NYSE: LEG) is a good stock to invest in.

8. Caterpillar Inc. (NYSE: CAT)

Number of Hedge Fund Holders: 62 Dividend Yield: 2.1% Number of Years of Consistent Dividend Increases: 28

Payout Ratio: 52.3%

Caterpillar Inc. (NYSE: CAT), a manufacturer of construction and mining equipment, diesel and natural gas engines, industrial gas turbines, and diesel-electric locomotives, ranks 8th on our list of dividend aristocrats with payout ratio less than 55%. The company operates internationally.

This August, Baird reiterated an Outperform rating and $270 price target on shares of Caterpillar Inc. (NYSE: CAT), led by analyst Mircea Dobre.

In the second quarter of 2021, Caterpillar Inc. (NYSE: CAT) had an EPS of $2.60, beating estimates by $0.19. The company's revenue was $12.89 billion, up 28.93% year over year and beating estimates by $360.55 million. Caterpillar Inc. (NYSE: CAT) has gained 16.84% year to date and 48.18% in the past year.

By the end of the second quarter of 2021, 62 hedge funds out of the 873 tracked by Insider Monkey held stakes in Caterpillar Inc. (NYSE: CAT) worth roughly $5.3 billion. This is compared to 53 hedge funds in the previous quarter with a total stake value of approximately $5 billion.

Like Hormel Foods Corporation (NYSE: HRL), AbbVie Inc. (NYSE: ABBV), Abbott Laboratories (NYSE: ABT), and Verizon Communications (NYSE: VZ), Caterpillar Inc. (NYSE: CAT) is a good stock to invest in.

7. Cardinal Health, Inc. (NYSE: CAH)

Number of Hedge Fund Holders: 40 Dividend Yield: 3.7% Number of Years of Consistent Dividend Increases: 34

Payout Ratio: 48.8%

Cardinal Health, Inc. (NYSE: CAH), an integrated healthcare services and products company, ranks 7th on our list of dividend aristocrats with payout ratio less than 55%. The company is based in Ohio.

Deutsche Bank has a Hold rating on shares of Cardinal Health, Inc. (NYSE: CAH), alongside a price target of $51 as of this August.

In the fiscal fourth quarter of 2021, Cardinal Health, Inc. (NYSE: CAH) had an EPS of $0.77, missing estimates by $0.43. The company’s revenue was $42.59 billion, up 16.07% year over year and beating estimates by $2.37 billion. Cardinal Health, Inc. (NYSE: CAH) has also gained 2.46% in the past year.

By the end of the second quarter of 2021, 40 hedge funds out of the 873 tracked by Insider Monkey held stakes in Cardinal Health, Inc. (NYSE: CAH) worth roughly $897 million. This is compared to 39 hedge funds in the previous quarter with a total stake value of approximately $967 million.

Like Hormel Foods Corporation (NYSE: HRL), AbbVie Inc. (NYSE: ABBV), Abbott Laboratories (NYSE: ABT), and Verizon Communications (NYSE: VZ), Cardinal Health, Inc. (NYSE: CAH) is a good stock to invest in.

6. Atmos Energy Corporation (NYSE: ATO)

Number of Hedge Fund Holders: 18 Dividend Yield: 2.6% Number of Years of Consistent Dividend Increases: 37 Payout Ratio: 45.6%

Atmos Energy Corporation (NYSE: ATO) is a participant in the regulated natural gas distribution, and pipeline and storage businesses in the US. The company ranks 6th on our list of dividend aristocrats with payout ratio less than 55%, and operates through its Distribution, and Pipeline and Storage segments.

This August, Mizuho raised its price target on shares of Atmos Energy Corporation (NYSE: ATO) from $109 to $110. The firm also reiterated a Buy rating on the stock.

In the fiscal third quarter of 2021, Atmos Energy Corporation (NYSE: ATO) had an EPS of $0.78, beating estimates by $0.04. The company's revenue was $605.55 million, up 22.83% year over year and beating estimates by $22.82 million. Atmos Energy Corporation (NYSE: ATO) has gained 13.56% in the past 6 months and 3.56% year to date.

By the end of the second quarter of 2021, 18 hedge funds out of the 873 tracked by Insider Monkey held stakes in Atmos Energy Corporation (NYSE: ATO) worth roughly $84 million. This is compared to 15 hedge funds in the previous quarter with a total stake value of approximately $172 million.

Like Hormel Foods Corporation (NYSE: HRL), AbbVie Inc. (NYSE: ABBV), Abbott Laboratories (NYSE: ABT), and Verizon Communications (NYSE: VZ), Atmos Energy Corporation (NYSE: ATO) is a good stock to invest in.

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Disclosure: None. 10 Dividend Aristocrats with Payout Ratio Less than 55% is originally published on Insider Monkey.