In this article we will examine in detail 10 Dividend Stocks Insiders Are Buying in May. If you want to skip our detailed analysis and see the top 5 stocks on this list, click 5 Dividend Stock Insiders Buy in May.
Following the Federal Reserve’s clear indication that it is prepared to keep interest rates high, dividend stocks are returning to the spotlight as investors rush to defensive, safe stocks to hedge of increased volatility to come. After all, historical data shows that dividend stocks account for a considerable portion of market returns. From 1960 to 2016, dividend stocks generated about 29% of the S&P 500’s total returns. But what type of dividend stocks should investors prefer when interest rates are high?
Performance of dividend stocks when interest rates are high
According to a study published by ProShares, stocks with years of consistent dividend increases outperform those with high dividends but low dividend growth when interest rates are stable, high or low. From May 2005 to April 2015, the S&P 500 Dividend Aristocrats Index outperformed the Dow Jones US Select Dividend Index when rates were high, low and stable. The preference for dividend growth stocks over high-yielding stocks has produced phenomenal returns in recent years. The S&P 500 Dividend Aristocrats Index, which includes companies that have increased their distributions consistently for at least 25 years, is up about 48% over the past five years, while the Dow Jones US Select Dividend Index , which includes high-yielding utility dividend stocks, is up just 5% over the same period.
Dividend Stocks: Expectations in 2024
Analysts also believe that dividend stocks are expected to perform well in 2024, as the market looks beyond the Magnificent Seven stocks. Madison Funds, in its Q1 2024 investor letter, said that while its Madison Dividend Income Fund generated a 3.7% return in the first quarter, compared to a 10% gain for SPY, it could achieve better returns. results this year as sectors like energy, industry and finance take over. management positions, replacing technology. The letter states that 49% of the Madison Income Fund’s portfolio is invested in energy, industrials and financial services. Another reason the fund is bullish on dividend stocks is valuations:
“But the most important reason we think the performance of dividend stocks could improve in the future is that dividend stocks are attractively valued relative to the broader market… Some dividend funds are historically cheap relative to the S&P 500. The iShares Select Dividend exchange-traded fund (DVY) is almost two standard deviations below its long-term average relative valuation versus the S&P 500 over the past 20 years, which means that this level of relative valuation is well outside the norm To quote the BofA Global Research report: “Dividend yield is unloved and cheap: active fund managers massively underweight dividends.” 2023 credit fears. Valuations are attractive, with some dividend funds trading 2 standard deviations cheap to the S&P 500.” Another key valuation metric we use is the company’s relative dividend yield. Dividend Income strategy compared to the S&P 500 and Russell 1000 Value indices. This is our preferred valuation metric, and we discuss it in more detail below. a dividend yield of 2.84% and a relative dividend yield of 2.1 times that of the S&P 500 and 1.35 times that of the Russell 1000 Value indices, which were the highest levels in the last 20 years. Our conclusion is that dividend stocks are historically cheap relative to indexes. a large market which we believe presents an attractive investment opportunity.
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Dividend Growth Investing Shined in 2023 Despite AI Mania
In its 2023 investor letter, Fenimore Asset Management said its dividend-focused fund performed strongly this year despite volatility, the market’s focus on AI/growth stocks and banking crisis. The fund returned 19.70% for the year, beating its benchmark Russell Midcap Index return of 17.23%. This dividend fund invests in companies with a history of strong dividend growth. The letter states that the average annual growth rate of dividends paid by the fund’s holdings is 10.5%. Over the past year, the average dividend growth recorded by its holdings was 9.5%, outpacing inflation. The fund said the largest dividend increases in its portfolio came from Microchip Technology (MCHP), Cintas Corporation (CTAS) and Fastenal Company (FAST).
Methodology
For this article, we first used Insider Monkey’s Insider Stock Analyzer to find stocks that have recently seen strong insider buying activity. Among these stocks, we have selected 10 stocks that also pay dividends. Some big names on the list include Northwest Bancshares Inc (NASDAQ: NWBI), DT Midstream Inc (NYSE: DTM), and Ryman Hospitality Properties Inc (NYSE: RHP). Why should you pay attention to insider trading activity? Insider Monkey’s monthly newsletter and wallet which focuses on activist hedge funds, insider trading and stock picking in hedge fund investor newsletters and conferences, returned 199.2% between March 2017 and March 12, 2024 and has outperformed the S&P 500 ETFs’ 144.9% gain by more than 54 percentage points.
10. C&F Financial Corp (NASDAQ:CFFI)
Number of hedge fund investors: 2
On April 30, 2024, George R. Sisson III, Director of C&F Financial Corp (NASDAQ: CFFI), purchased 1,000 shares at a price of $39.47 per share. Since then, the stock has gained about 7%. The stock has a dividend yield of around 4.2%.
9. Penns Woods Bancorp, Inc. (NASDAQ:PWOD)
Number of hedge fund investors: 3
With a dividend yield of around 6.9%, Penns Woods Bancorp, Inc. (NASDAQ:PWOD) is one of the top dividend paying stocks that has seen insider buying activity recently. On May 2, Senior Vice President of Penns Woods Bancorp, Inc. (NASDAQ: PWOD) purchased 535 shares at a price of $18.66 per share.
8. Northern Citizens and Society (NASDAQ: CZNC)
Number of hedge fund investors: 3
Pennsylvania-based banking company Citizens & Northern Corporation (NASDAQ:CZNC) experienced insider buying activity on May 3 when Citizens & Northern Corporation (NASDAQ:CZNC) Director Frank G. Pellegrino purchased 282 shares at a price of $17.88 per share. . The stock’s dividend yield was over 6% as of May 7.
7. BCB Bancorp Inc (NASDAQ:BCBP)
Number of hedge fund investors: 4
With a dividend yield of over 6%, BCB Bancorp Inc (NASDAQ:BCBP) is a notable dividend stock with insider buying.
Mark Hogan, Director of BCB Bancorp Inc (NASDAQ: BCBP), purchased 1,422 shares of BCB Bancorp Inc (NASDAQ: BCBP) on May 3 at $9.79 per share. Since then, the stock has risen about 6%. On May 2, BCB Bancorp Inc (NASDAQ: BCBP) Chief Lending Officer David Roque Garcia purchased 1,700 shares of BCB Bancorp Inc (NASDAQ: BCBP) at $9.59 per share. The total value of this transaction was approximately $16,303. Since this transaction, the stock has increased slightly by 0.43%.
Besides BCBP, insiders are also buying Northwest Bancshares Inc (NASDAQ: NWBI), DT Midstream Inc (NYSE: DTM), and Ryman Hospitality Properties Inc (NYSE: RHP).
6. Meridian Corp (NASDAQ:MRBK)
Number of hedge fund investors: 8
Regional banking company Meridian Corp (NASDAQ:MRBK) ranks sixth in our list of dividend stocks with latest insider buying. On May 2, Christopher J. Annas, CEO of Meridian Corp (NASDAQ: MRBK), acquired 3,000 shares of Meridian Corp (NASDAQ: MRBK) at $9.15 per share. The net value of this transaction was $27,450. Meridian Executive Vice President and CFO Denise Lindsay also purchased 2,500 shares of Meridian Corp (NASDAQ:MRBK) on May 1 at a price of $8.98 per share. Since this transaction, the stock has gained approximately 2.5%.
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Disclosure. None. 10 Dividend Stocks Insiders Are Buying in May was originally published on Insider Monkey.
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