In this article, we will take a look at some of the best dividend stocks with low payout ratios and strong upside.
The payout ratio is one of the simplest ways to assess whether a dividend can sustain itself over time. It shows how much of a company’s earnings are being paid out to shareholders. When the ratio runs high, most of the profits are already spoken for. That leaves less room to invest back into the business.
A report by Hartford Funds looked at long-term payout trends within the Russell 1000 Index. Since 1979, first-quintile dividend payers averaged a payout ratio of 75%. The second quintile averaged closer to 40%. Over time, that difference mattered. The report showed the second quintile outperformed the first across multiple decades, from 1930 through December 2024.
A 75% payout ratio can become a problem when earnings slip. There is little margin for error. If profits fall, management may have no choice but to cut the dividend. Morningstar columnist Dan Lefkovitz made the following comment:
“Companies with economic moats tend to sustain their dividend payments better than companies without moats. And we should say about the payout ratio, companies with lower payout ratios. Or let’s just say companies with high payout ratios tend to cut their dividends more frequently.”
Dividend cuts tend to send a clear signal to the market. Investors often see them as a sign of stress. Share prices usually react fast, and not in a good way.
Given this, we will take a look at some of the best dividend stocks to invest in.
Our Methodology:
For this article, we screened for companies that consistently distribute dividends to their shareholders. From this initial selection, we narrowed down the list to include only those companies with a 5-year average payout ratio below 60%, indicating a robust cash position. From that list, we identified stocks with a minimum upside potential of 25% based on analysts’ targets, as of December 24. Finally, we picked 15 companies that were most popular among hedge funds, as per Insider Monkey’s database of Q3 2025, and arranged them accordingly.
Why are we interested in 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 427.7% since May 2014, beating its benchmark by 264 percentage points (see more details here).
15. Houlihan Lokey, Inc. (NYSE:HLI)
Number of Hedge Fund Holders: 26
5-Year Average Payout Ratio: 40.94%
Upside Potential as of December 24: 26.3%
Houlihan Lokey, Inc. (NYSE:HLI) is among the best dividend stocks to invest in.
On December 17, Keefe Bruyette lowered its price target on Houlihan Lokey, Inc. (NYSE:HLI) to $228 from $230 and kept an Outperform rating. In a research note, the firm said it still expects a constructive economic backdrop in 2026.
Results from fiscal Q2 2026 supported that view. Revenue reached $659 million, up from $575 million in the second quarter ended September 30, 2024. Net income rose to $112 million, or $1.63 per diluted share, compared with $94 million, or $1.37 per diluted share, a year earlier.
Growth was spread across the platform. Corporate Finance revenue increased 21% year over year. Financial Restructuring revenue rose 2% and Financial and Valuation Advisory revenue climbed 10%. Each segment contributed, even as activity levels varied by market.
The balance sheet remains a clear strength. As of September 30, 2025, the firm held $1.11 billion in unrestricted cash, cash equivalents, and investment securities. That liquidity gives the company flexibility across cycles.
Houlihan Lokey, Inc. (NYSE:HLI) operates as a global investment bank with core strengths in mergers and acquisitions, capital solutions, financial restructuring, and valuation and advisory services.
14. Weyerhaeuser Company (NYSE:WY)
Number of Hedge Fund Holders: 29
5-Year Average Payout Ratio: 59.1%
Upside Potential as of December 24: 32.1%
Weyerhaeuser Company (NYSE:WY) is among the best dividend stocks to invest in.
On December 15, DA Davidson kept a Buy rating and a $31 price target on Weyerhaeuser Company (NYSE:WY). The firm said it was encouraged by the medium-term goals management laid out at its Investor Day last week. DA Davidson pointed to the expected $380 million uplift from Timberlands and Strategic Land Solutions, noting that even in a downside case, it would reinforce confidence in per-acre values used in current net asset value estimates. More likely, the firm said, those initiatives support upside through better yield accretion.
Separately, Weyerhaeuser Company (NYSE:WY) and Aymium announced they signed a memorandum of understanding to work together on producing and selling 1.5 million tons of sustainable biocarbon each year for use in metals manufacturing. As a first step, the companies formed a joint venture called TerraForge Biocarbon Solutions.
The venture plans to build a jointly owned facility next to Weyerhaeuser’s lumber mill in McComb, Mississippi. At that site, wood fiber will be converted into biocarbon using a low-emissions, combustion-free process. Under the agreement, the partners intend to secure long-term sales contracts and identify sites for additional production facilities across Weyerhaeuser’s footprint over the next five years. The expansion brings together Weyerhaeuser’s large timberland base and manufacturing network with Aymium’s proprietary technology and experience producing biocarbon products.
Once fully scaled, the network could convert more than 7 million tons of wood fiber supplied exclusively by Weyerhaeuser and produce 1.5 million tons of metallurgical-grade biocarbon annually.
Weyerhaeuser Company (NYSE:WY) is one of the world’s largest private owners of timberlands. Founded in 1900, the company owns or controls about 10.4 million acres of timberlands across the US.
13. Bunge Global SA (NYSE:BG)
Number of Hedge Fund Holders: 33
5-Year Average Payout Ratio: 22.6%
Upside Potential as of December 24: 33.2%
Bunge Global SA (NYSE:BG) is among the best dividend stocks to invest in.
On December 16, Morgan Stanley upgraded Bunge Global SA (NYSE:BG) to Overweight from Equal Weight and raised its price target to $120 from $95. The firm said synergy optionality improves the risk and reward profile for the stock. In particular, synergies tied to Viterra could come in better than expected, according to the analyst’s research note.
During the third-quarter 2025 earnings call, management pointed to strong results in soybean and softseed processing and refining. Performance benefited from a more balanced global footprint and early progress in capturing commercial synergies.
Reported earnings per share for the quarter were $0.86, down from $1.56 in the third quarter of 2024. On an adjusted basis, EPS came in at $2.27, compared with $2.29 a year earlier. Adjusted segment EBIT rose sharply to $924 million, up from $559 million last year.
Year to date, the company generated about $1.2 billion in adjusted funds from operations. It also repurchased 6.7 million shares for $545 million, leaving $386 million in retained cash flow. Higher processing volumes reflected the combined company’s larger production footprint, particularly in Argentina.
Bunge Global SA (NYSE:BG) operates as a global agribusiness and food company. It connects farmers to end markets by handling agricultural commodities tied to food, feed, and fuel.
