In this article, we will take a look at 10 Undervalued Dividend Aristocrats to Buy According to Hedge Funds.
A dividend aristocrat is an S&P 500 company that not only maintains regular dividend payments to shareholders but also increases its payouts annually. To qualify as a dividend aristocrat, a company must raise its dividends consistently for at least 25 consecutive years.
Michael Clarfeld, Portfolio Manager at ClearBridge, recently talked about why companies that consistently grow their dividends are well-positioned to handle the challenges of 2025. With rising costs, tighter margins, higher interest rates, and inflation on the horizon, Clarfeld is still optimistic about the economy. He pointed to strong employment numbers, upbeat consumer sentiment, and confident businesses, especially after the election. Pro-business policies under the Trump administration could drive investments and growth, which sounds great, but there’s a catch. For instance, bringing manufacturing back to the US would create jobs and boost wages, but it could also increase business costs. After two strong years, Clarfeld doesn’t see much room for big capital gains in 2025. Plus, with inflation sticking around, the Federal Reserve is likely to take a more cautious approach. That said, he sees opportunities in sectors like European and global consumer staples and US energy infrastructure.
Clarfeld is a big fan of dividend growth stocks, calling them a timeless investment. They can act as a safety net during volatile markets and provide steady income, which is especially useful when capital appreciation feels out of reach. He also highlighted how dividends help protect your purchasing power by keeping up with inflation. In his view, dividend growth is a smart and reliable strategy for navigating a potentially bumpy 2025.
Paul Baiocchi of SS&C ALPS Advisors sees dividend investing as a smart move, expecting the Fed to ease rates. According to Baiocchi, investors are shifting from money markets and fixed income to dividend-paying stocks, especially companies with leverage that could benefit from lower interest rates. Similarly, Mike Akins of ETF Action also sees dividend ETFs as a defensive play, highlighting that the companies included typically have strong balance sheets. He notes the growing popularity of dividend-focused ETFs, suggesting that consistent dividends give investors confidence in a company’s stability and financial health. Both experts agree that dividends offer a sense of durability and drawdown protection in uncertain markets.
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Our Methodology
In this article, we selected stocks from the Dividend Aristocrats List that had a P/E ratio below 20 as of December 23. Our focus was on identifying stocks with the strongest hedge fund sentiment in Q3 2024 among the 66 Dividend Aristocrats that also met our P/E criteria. The stocks are ranked below in ascending order based on the number of hedge fund holders for each company.
At Insider Monkey, we are obsessed with the stocks that hedge funds pile into. The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
10. Amcor plc (NYSE:AMCR)
Dividend Yield as of December 23: 5.43%
Number of Hedge Fund Holders: 18
P/E Ratio: 17.67
Amcor plc (NYSE:AMCR) is a global leader in packaging solutions, serving markets in Europe, North America, Latin America, and the Asia Pacific. The company operates through two main divisions – Flexibles, which specializes in film and flexible packaging for industries like food, beverages, healthcare, and personal care, and Rigid Packaging, offering durable containers and plastic caps for beverages, sauces, spreads, and personal care products. It is one of the best dividend aristocrat stocks to invest in, with 41 consecutive years of dividend increases under its belt.
Amcor plc (NYSE:AMCR) kicked off fiscal 2025 with solid financial performance, maintaining the momentum built earlier this year. The company’s results align with its August projections, allowing it to reaffirm its full-year guidance. Safety remains a top priority, with a 13% reduction in injuries compared to last year and 73% of sites injury-free for over a year, reflecting a deeply ingrained safety culture. The company is also emphasizing sustainable packaging solutions, leveraging its innovation centers, and expanding into high-growth categories like healthcare, dairy, and liquid applications.
In Q1, Amcor plc (NYSE:AMCR) saw a 2% volume increase overall, with stronger demand in most markets despite challenges in healthcare and North American beverages. The Flexibles segment grew volumes by 3%, driven by strong demand in emerging markets and across product categories like meat, dairy, and ready meals, though healthcare destocking weighed on performance. Meanwhile, the Rigid Packaging segment faced declines in North America but grew in Latin America and specialty containers, aided by cost reductions and productivity measures.
Amcor plc (NYSE:AMCR) continues to focus on financial stability, using proceeds from a joint venture sale to reduce debt and returning $180 million to shareholders through dividends. The company reaffirmed its fiscal 2025 guidance, expecting adjusted EPS between $0.72 and $0.76 and strong free cash flow of $900 million to $1 billion. Amcor remains committed to delivering sustainable growth, innovation, and value for its customers and shareholders while staying on track to reduce leverage by year-end.
According to Insider Monkey’s Q3 data, 18 hedge funds held long positions in Amcor plc (NYSE:AMCR), down from 21 in the previous quarter. Cliff Asness’ AQR Capital Management is the company’s leading stakeholder, with a stake worth $49 million.
9. T. Rowe Price Group, Inc. (NASDAQ:TROW)
Dividend Yield as of December 23: 4.27%
Number of Hedge Fund Holders: 26
P/E Ratio: 12.72
T. Rowe Price Group, Inc. (NASDAQ:TROW) is a global investment management firm that works with individuals, institutions, retirement plans, and financial advisors. They manage equity and fixed-income mutual funds, investing in markets worldwide. Founded in 1937 in Baltimore, Maryland, T. Rowe Price Group, Inc. (NASDAQ:TROW) has grown into a worldwide presence, with offices across the United States, Europe, Asia, Australia, and the Middle East. TROW ranks 9th on our list of the best dividend aristocrat stocks list, with a history of raising its dividends for the last 38 years.
T. Rowe Price Group, Inc. (NASDAQ:TROW) had a solid third quarter, ending with $1.63 trillion in assets under management (AUM), which is a 3.9% increase since June. This growth is impressive, especially considering $12.2 billion in net outflows during the same period. While those outflows were disappointing, there are plenty of reasons to be optimistic.
T. Rowe Price Group, Inc. (NASDAQ:TROW) is making strides in alternative investments. Their senior private lending fund saw its first close this quarter, contributing to a $3 billion increase in unfunded capital commitments. On the financial side, the company delivered strong results as well. Adjusted net revenue rose 7% year-over-year to $1.8 billion, and operating income jumped 13%. Adjusted earnings per share (EPS) came in at $2.57, an 18% increase from the same time last year. T. Rowe Price Group, Inc. (NASDAQ:TROW) is committed to returning value to shareholders, with over $1.1 billion returned through dividends and share buybacks so far this year.
That said, there are challenges on the horizon. A large variable annuity (VA) termination expected in Q4 will lead to higher outflows for the year, but T. Rowe Price Group, Inc. (NASDAQ:TROW) remains optimistic. The company expects 2024 outflows to be less than half of 2023 levels, even with this setback.
Insider Monkey’s Q3 data suggested that T. Rowe Price Group, Inc. (NASDAQ:TROW) was part of 26 hedge fund portfolios, compared to 28 in the earlier quarter. Ken Fisher’s Fisher Asset Management is the largest stakeholder of the company, with 1.86 million shares valued at roughly $203 million.
