In this article, we discuss the 11 best debt-free dividend paying stocks to buy. You can skip our detailed analysis of dividend stocks and their previous performance, and jump straight to reading 5 Best Debt-Free Dividend-Paying Stocks to Buy.
Debt financing isn’t always a bad thing; its impact depends largely on how companies exploit it. When used wisely, it can generate significant cash flow for businesses and ultimately help improve shareholder returns. On the other hand, debt can have a negative impact on a company’s overall financial situation. This is evident today as with higher interest rates, companies with an excessive amount of debt on their balance sheets could face a tough time as Fed rates are expected to remain high throughout 2024 According to a report from S&P Global Ratings, last year saw a significant increase in corporate defaults, a trend that could also persist in 2024. In 2023, the number of companies failing to meet their debt obligations. debt stood at 153, compared to 85 the previous year. This is the highest default rate recorded in seven years, not including the peak observed during the COVID-19 pandemic in 2020.
The difficult situation for American companies could become even worse this year, which, according to the Federal Reserve, carries a debt of 13.7 trillion dollars. According to S&P, corporate debt has increased by 18.3% since 2020, which is primarily attributed to companies taking advantage of the Fed’s decision to cut interest rates during the early stages of the pandemic. Here are some comments from the firm:
“In 2024, we expect further credit deterioration globally, primarily at the lower end of the rating scale (rated ‘B-‘ or lower), where almost 40% of issuers are at risk of ‘be degraded. We expect funding costs to remain high despite the prospect of rate cuts. And even though borrowers have reduced their maturities to 2024, much of the speculative debt is expected to mature in 2025 and 2026.
Debt is generally not considered a favorable choice from a dividend perspective. This was evident during the 2020 pandemic, when many private companies engaged in dividend recapitalization, a practice of taking on new debt in order to finance dividend payments. According to a report from S&P Global Market Intelligence’s Leveraged Commentary and Data, during the second half of 2020, private equity-backed companies borrowed approximately $27 billion to fund dividends and restructure debt. However, corporate balance sheets are currently showing strength, with companies around the world paying record dividends to their shareholders. New York Times Company (NYSE:NYT), Cincinnati Financial Corporation (NASDAQ:CINF), and AO Smith Corporation (NYSE:AOS) are some of the best debt-free stocks that pay dividends, among others, discussed below in this article . .
Our methodology:
For our list of the best debt-free stocks that pay dividends, we used a Finviz stock screener and selected stocks with a debt-to-equity ratio less than 1, showing that these companies rely more on financing by shares. Among these companies, we selected 11 stocks with the most hedge fund investors, using the Insider Monkey database of 933 hedge funds and their holdings as of Q4 2023. The Top 10 Consensus Hedge Fund Stocks outperformed the S&P 500 by more than 140%. points over the last 10 years (see details here).
11. Piper Sandler Companies (NYSE: PIPR)
Number of hedge fund holders: 9
Piper Sandler Companies (NYSE: PIPR) is a Minnesota-based investment banking firm that provides a broad range of financial services to institutions and individual investors. The company currently offers a quarterly dividend of $0.60 per share and a dividend yield of 1.14% as of May 8. It is one of the best debt-free stocks on our list.
In the first quarter of 2024, Piper Sandler Companies (NYSE: PIPR) returned $88 million to shareholders in the form of dividends and share repurchases. The company also paid a special cash dividend of $1.00 per common share, for a total of $35.7 million.
At the end of the fourth quarter of 2023, 9 hedge funds tracked by Insider Monkey held stakes in Piper Sandler Companies (NYSE:PIPR), up from 8 in the previous quarter. The collective value of these holdings exceeds $106.5 million. Among these hedge funds, North Reef Capital was the company’s largest shareholder in the fourth quarter.
10. The Bank of NT Butterfield & Son Limited (NYSE: NTB)
Number of hedge fund holders: 16
Bank of NT Butterfield & Son Limited (NYSE: NTB) is a Bermuda-based financial services company. The company offers various banking and financial services to its consumers. The company began paying dividends in 2016 and has been paying uninterrupted dividends to shareholders since then. It currently offers a quarterly dividend of $0.44 per share and a dividend yield of 4.98% as of May 8. NTB is one of the best debt-free stocks to buy right now.
The number of hedge funds tracked by Insider Monkey with stakes in The Bank of NT Butterfield & Son Limited (NYSE:NTB) increased to 16 in the fourth quarter of 2023, up from 12 in the previous quarter. These holdings have a total value of more than $106 million.
9. RLI Corp.
Number of hedge fund holders: 18
An American insurance company, RLI Corp. (NYSE: RLI) is next on our list of best debt-free stocks to buy. The company has been steadily increasing its dividends for 49 years and currently offers a quarterly dividend of $0.29 per share. As of May 8, the stock had a dividend yield of 0.79%.
RLI Corp. (NYSE: RLI) reported a strong cash position in the first quarter of 2024. The company generated approximately $71 million in operating cash flow, compared to $70 million during the same period last year . Over the past five years, the company has returned approximately $816 million to shareholders in the form of dividends.
As of the end of the fourth quarter of 2023, 18 hedge funds in the Insider Monkey database held stakes in RLI Corp. (NYSE: RLI), which remained unchanged from the previous quarter. The consolidated value of these holdings amounts to more than $368.2 million. With approximately 1.2 million shares, Markel Gayner Asset Management was the company’s largest stakeholder in the fourth quarter.
8. Kulicke and Soffa Industries, Inc. (NASDAQ: KLIC)
Number of hedge fund holders: 23
Kulicke and Soffa Industries, Inc. (NASDAQ: KLIC) specializes in semiconductor packaging and electronic assembly equipment. On March 14, the company declared a quarterly dividend of $0.20 per share, consistent with its previous dividend. Its payments have increased steadily over the past four years. With a dividend yield of 1.67% as of May 8, KLIC is one of the best debt-free stocks to buy right now.
According to Insider Monkey’s Q4 2023 database, 23 hedge funds, up from 19 in the previous quarter, had investments in Kulicke and Soffa Industries, Inc. (NASDAQ: KLIC). These stakes are worth a total of more than $190 million.
Diamond Hill Capital mentioned Kulicke and Soffa Industries in its Q3 2023 investor letter. Here’s what the company had to say:
“We have also initiated short positions on Mueller Industries, Inc. (NYSE:MLI), Bank of Hawaii, Alarm.com Holdings and Garmin in the third quarter. Mueller Industries is a leading producer of copper tube and pipe for plumbing and HVAC systems – a cyclical industry with largely commoditized products that has seen significant margin gains in recent years linked to tailwinds that, in our opinion, will probably reverse in the years to come. Additionally, we anticipate that long-term volume trends will likely remain slow as copper pipes continue to lose market share to plastic over time. Given that we expect earnings power to return to historic levels over time, we initiated a short position during the quarter.
7. Mueller Industries, Inc. (NYSE: MLI)
Number of hedge fund holders: 24
Mueller Industries, Inc. (NYSE: MLI) is a Tennessee-based industrial machinery company that manufactures a wide range of products for industrial markets. On February 23, the company announced a 33% increase in its quarterly dividend, to $0.20 per share. This marks the company’s fourth consecutive year of double-digit dividend growth. The stock’s dividend yield stood at 1.37% on May 8. MLI is one of the best debt-free stocks on our list.
In the first quarter of 2024, Mueller Industries, Inc. (NYSE: MLI) reported operating cash flow of $173.6 million and its cash balance was $1.36 billion. During the quarter, the company returned more than $22 million to shareholders in the form of dividends.
Mueller Industries, Inc. (NYSE:MLI) was in 24 hedge funds’ portfolios at the end of the fourth quarter of 2023, up from 21 in the previous quarter, according to Insider Monkey’s database. The stakes held by these hedge funds have a total value of more than $403.3 million. Among these hedge funds, GAMCO Investors was the company’s largest shareholder in the fourth quarter.
6. Janus Henderson Group plc (NYSE:JHG)
Number of hedge fund holders: 26
Janus Henderson Group plc (NYSE: JHG) ranks sixth on our list of best debt-free stocks to buy. The UK-based asset management company has been steadily paying dividends to its shareholders since starting its dividend policy in 2017. Additionally, it paid out $145 million to shareholders as dividends in the first quarter of 2024 The company offers a quarterly dividend. of $0.39 per share and has an impressive dividend yield of 4.73%.
According to Insider Monkey’s Q4 2023 database, 26 hedge funds held stakes in Janus Henderson Group plc (NYSE:JHG), up from 27 in the previous quarter. These issues are collectively valued at more than $1.3 billion.
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Disclosure. None. 11 Best Debt-Free Dividend-Paying Stocks to Buy is originally published on Insider Monkey.
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