In this article, we discuss 13 cash-rich dividend stocks to buy now. You can skip our detailed analysis of dividend stocks and their performance in the past, and go directly to read 5 Cash-Rich Dividend Stocks To Buy Now.
Uncertain economic circumstances have shifted investors’ focus towards stocks with substantial cash reserves, as these companies are more resilient in the face of economic downturns and unexpected obstacles. Furthermore, a healthy cash position can contribute to enhancing shareholder value through means like distributing dividends, executing share repurchases, or making strategic acquisitions. However, the weak economy, rising interest rates, and credit challenges have strained the financial health of numerous companies this year, highlighting the importance of prioritizing actions to boost cash flow. A recent Moody’s Investors Service report revealed that nonfinancial companies saw a 12% decrease in their corporate cash, which amounted to $2 trillion last year. This decline was primarily due to increased investor rewards, with share buybacks rising by 31% and dividend payments increasing by 10%. Additionally, there was a significant 18% uptick in long-term investments for business growth, reflecting increased capital expenditures.
Analysts are increasingly recommending that companies hold onto their cash in the current high-interest-rate environment. Emile El Nems, vice president for Moody’s Investors Service, spoke about this in CNN Business’ ‘Before the Bell’ newsletter. Here is what he said:
“One would argue that in a higher rate environment, it’s more beneficial to keep cash on the balance sheet … because you can generate a decent return on your cash rather than burning a hole that will require you to go out and borrow money at higher rates.”
Despite stock market fluctuations caused by high interest rates and geopolitical issues, corporate financial health remains solid and has demonstrated strength in the first half of the year. According to a report by The Carfang Group, U.S. corporations saw their cash reserves grow by $165 billion in the first half of 2023, reaching a historic high of $4.15 trillion. This level of corporate cash far surpasses the long-term trendline by an impressive $1.38 trillion. Following a brief pause in 2022, companies have continued to add to their substantial cash holdings, which were initially built up during the pandemic. The report also mentioned that corporate cash has been growing at a faster rate than the U.S. nominal GDP and currently represents 15.5% of the GDP, significantly surpassing the long-term trendline.
The increasing cash reserves on companies’ balance sheets are positive for dividend investors because businesses with robust cash generation are more likely to consistently meet their obligations to shareholders by paying dividends. McDonald’s Corporation (NYSE:MCD), The Procter & Gamble Company (NYSE:PG), and Merck & Co., Inc. (NYSE:MRK) have raised their dividends for years because of their cash position. In this article, we will further take a look at some of the best cash-rich dividend stocks to buy now.
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Our Methodology:
For this list, we screened for dividend stocks that have an operating cash flow (OCF) ratio of above 1.0. The OCF ratio of over 1 typically indicates that a company generates more cash from its operations than it spends to maintain and run those operations. This is generally considered a positive sign for a company because it suggests that it has a healthy cash flow from its core business activities.
Out of the stocks we found, we selected the 13 stocks that were most favored by hedge funds in the second quarter of 2023, as per Insider Monkey’s database. These stocks are ranked in ascending order of the number of hedge funds having stakes in them.
13. Atmos Energy Corporation (NYSE:ATO)
Number of Hedge Fund Holders: 18
Operating Cash Flow (TTM): $3.27 billion
Atmos Energy Corporation (NYSE:ATO) is a Texas-based company that primarily operates in the utility sector, specifically in the distribution of natural gas. On August 17, the company declared a quarterly dividend of $0.74 per share, which was in line with its previous dividend. It has been growing its dividends consistently for the past 38 years. The stock’s dividend yield on October 31 came in at 2.78%.
In the first nine months that ended June 2023, Atmos Energy Corporation (NYSE:ATO) generated over $3.22 billion in operating cash flow, up from $929.3 million in the prior year period. ATO is one of the best cash-rich stocks on our list.
At the end of Q2 2023, 18 hedge funds tracked by Insider Monkey reported having stakes in Atmos Energy Corporation (NYSE:ATO), compared with 21 in the previous quarter. The consolidated value of these stakes is over $124.8 million.
12. Realty Income Corporation (NYSE:O)
Number of Hedge Fund Holders: 24
Operating Cash Flow (TTM): $2.77 billion
Realty Income Corporation (NYSE:O) is an American real estate investment trust company that primarily focuses on owning and leasing retail and commercial properties. It is one of the best cash-rich stocks on our list as the company has been raising its payouts for 29 consecutive years. The company currently pays a quarterly dividend of $0.256 per share and has a dividend yield of 6.65%, as of October 31.
As of the end of Q2 2023, 24 hedge funds in Insider Monkey’s database reported having stakes in Realty Income Corporation (NYSE:O), up from 22 a quarter earlier. These stakes have a total value of over $243.6 million. Among these hedge funds, Marshall Wace LLP was the company’s leading stakeholder in Q2.
11. Extra Space Storage Inc. (NYSE:EXR)
Number of Hedge Fund Holders: 27
Operating Cash Flow (TTM): $1.23 billion
Extra Space Storage Inc. (NYSE:EXR) is a self-storage real estate investment trust that specializes in owning and operating self-storage facilities. The company pays a quarterly dividend of $0.61 per share and has a dividend yield of 2.35%, as of October 31. Its cash position also remained strong as the company ended the quarter with over $50.6 million available in cash and cash equivalents, which makes EXR one of the best cash-rich stocks on our list.
Insider Monkey’s database indicated growth in hedge funds having stakes in Extra Space Storage Inc. (NYSE:EXR) at the of Q2 2023 to 27, from 23 in the previous quarter. The collective value of stakes owned by these hedge funds is more than $482 million.
10. Expeditors International of Washington, Inc. (NASDAQ:EXPD)
Number of Hedge Fund Holders: 29
Operating Cash Flow (TTM): $1.86 billion
Expeditors International of Washington, Inc. (NASDAQ:EXPD) is a global logistics and freight forwarding company that provides a wide range of services related to the transportation and management of goods. The company offers a quarterly dividend of $0.69 per share, having raised it by 3% in May this year. Through this increase, the company took its dividend growth streak to 29 years. The stock has a dividend yield of 1.27%, as of October 31.
At the end of June 2023, 29 hedge funds tracked by Insider Monkey reported having stakes in Expeditors International of Washington, Inc. (NASDAQ:EXPD), compared with 31 in the previous quarter. These stakes are collectively worth over $250.8 million.
9. Nucor Corporation (NYSE:NUE)
Number of Hedge Fund Holders: 38
Operating Cash Flow (TTM): $8.13 billion
Nucor Corporation (NYSE:NUE) is one of the largest and most prominent steel producers in the US. In the third quarter of 2023, the company returned $672 million to shareholders through dividends and share repurchases, which makes NUE one of the best cash-rich stocks on the list.
On September 14, Nucor Corporation (NYSE:NUE) announced a quarterly dividend of $0.51 per share, which was consistent with its previous dividend. Overall, the company has raised its payouts for 50 years in a row. The stock’s dividend yield on October 31 came in at 1.37%.
As of the end of Q2 2023, 38 hedge funds in Insider Monkey’s database owned stakes in Nucor Corporation (NYSE:NUE), down from 39 in the previous quarter. These stakes have a total value of over $563.5 million. With over 1.5 million shares, Citadel Investment Group was the company’s leading stakeholder in Q2.
8. Waste Management, Inc. (NYSE:WM)
Number of Hedge Fund Holders: 39
Operating Cash Flow (TTM): $4.39 billion
Waste Management, Inc. (NYSE:WM) is an American environmental services company, based in Texas. The company collects various types of waste, including residential, commercial, and industrial waste. In the third quarter of 2023, the company generated over $1.26 billion in operating cash flow and its free cash flow for the quarter came in at $612 million. Due to its strong cash position, WM is one of the best cash-rich stocks on our list.
Waste Management, Inc. (NYSE:WM) has been rewarding shareholders with growing dividends for the past 20 years. The company pays a quarterly dividend of $0.70 per share and has a dividend yield of 1.72%, as of October 31.
Of the 910 hedge funds in Insider Monkey’s database at the end of Q2 2023, 39 funds held investments in Waste Management, Inc. (NYSE:WM). The collective value of stakes owned by these hedge funds is roughly $7 billion. With over 35 million shares, Bill & Melinda Gates Foundation Trust was the company’s leading stakeholder in Q2.
7. Texas Instruments Incorporated (NASDAQ:TXN)
Number of Hedge Fund Holders: 56
Operating Cash Flow (TTM): $6.54 billion
Texas Instruments Incorporated (NASDAQ:TXN) is an American multinational tech company that is known for its significant contributions to the electronics industry and plays a crucial role in providing semiconductor solutions for various applications. On October 19, the company raised its quarterly dividend by 5% to $1.30 per share. This was the company’s second dividend hike this year and it also maintains a 12-year streak of consistent dividend growth. The stock’s dividend yield on October 31 came in at 3.70%.
The number of hedge funds tracked by Insider Monkey owning stakes in Texas Instruments Incorporated (NASDAQ:TXN) grew to 56 in Q2 2023, from 52 in the previous quarter. The consolidated value of these stakes is more than $2.34 billion.
6. ConocoPhillips (NYSE:COP)
Number of Hedge Fund Holders: 62
Operating Cash Flow (TTM): $24.5 billion
ConocoPhillips (NYSE:COP) is a Texas-based independent exploration and production company in the oil and gas industry. The company currently pays a quarterly dividend of $0.51 per share and has raised its dividend every year since 2015. As of October 31, the stock has a dividend yield of 3.84%.
As per Insider Monkey’s database of the second quarter of 2023, 62 hedge funds owned stakes in ConocoPhillips (NYSE:COP), with a total value of over $2.6 billion.
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Disclosure. None. 13 Cash-Rich Dividend Stocks To Buy Now is originally published on Insider Monkey.