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.
12. Canadian National Railway Company (NYSE:CNI)
Number of Hedge Fund Holders: 34
5-Year Average Payout Ratio: 41.29%
Upside Potential as of December 24: 28.04%
Canadian National Railway Company (NYSE:CNI) is among the best dividend stocks to invest in.
On December 18, RBC Capital lowered its price target on Canadian National Railway Company (NYSE:CNI)to C$153 from C$158 and kept an Outperform rating. The change came as part of a broader note previewing fourth-quarter results for Class I railroads. The firm said it refreshed its models using updated carload trends, management commentary from conferences, and its own channel checks.
Trade uncertainty between Canada and the US has weighed on visibility. That backdrop pushed Canadian National Railway Company (NYSE:CNI) to cut its 2025 guidance and step away from its original 2026 outlook. Management had initially expected adjusted earnings growth of 10% to 15% in 2025 versus the prior year. Current expectations point to earnings growth that is still positive, but likely below that 10% mark.
This is not a near-term story. Investors will need patience, as over time, the setup remains appealing. Canadian National Railway Company (NYSE:CNI) benefits from long-term economic growth and rising trade volumes. Its scale, network density, and steady earnings profile make it the kind of business that can be held through multiple cycles. The company remains highly profitable and operates a rail network that is difficult to replicate. Its lines connect Canada’s Atlantic and Pacific ports with the US Gulf Coast, giving it strategic relevance across North American trade routes. At some point, Canada and the US will reach a new trade framework. When that happens, CN should see renewed momentum.
Canadian National Railway Company (NYSE:CNI) provides transportation and logistics services across rail, intermodal, trucking, and supply chain operations.
11. AECOM (NYSE:ACM)
Number of Hedge Fund Holders: 37
5-Year Average Payout Ratio: 28.14%
Upside Potential as of December 24: 42.24%
AECOM (NYSE:ACM) is among the best dividend stocks to invest in.
On December 19, Barclays analyst Adam Seiden downgraded AECOM (NYSE:ACM) to Equal Weight from Overweight and lowered the price target to $100 from $135. The change came as part of the firm’s 2026 outlook for the machinery and construction space.
Barclays remains constructive on the broader sector heading into 2026 and expects modest share gains after several strong years. Within that view, the firm favors machinery and rental companies, citing cyclical and macro factors. The downgrade of AECOM reflects its exposure to artificial intelligence-driven targets, which adds “complexity” and could weigh on the stock’s valuation multiple, the analyst said in a research note.
Earlier in November, AECOM (NYSE:ACM) raised its segment-adjusted operating margin target to 20%+ by the end of fiscal 2028. Management tied that move to faster operating leverage from higher-return investments in proprietary AECOM AI tools and its Advisory services business.
The company also lifted its expected adjusted EPS CAGR for fiscal 2026 through 2029 to 15%+. That update points to confidence in earnings power as those investments scale. At the same time, AECOM (NYSE:ACM) launched a review of strategic alternatives for its construction management business, including a potential sale. The decision reflects a focus on directing time and capital toward faster-growing, higher-return opportunities. Starting with first-quarter results, the construction management unit is expected to be classified as held for sale on the balance sheet and reported as discontinued operations under GAAP.
AECOM (NYSE:ACM) designs and engineers transportation systems, buildings, water networks, energy infrastructure, and environmental projects. It also provides consulting and construction management, helping clients plan, build, and manage large, complex developments from start to finish.
10. Pool Corporation (NASDAQ:POOL)
Number of Hedge Fund Holders: 41
5-Year Average Payout Ratio: 31.9%
Upside Potential as of December 24: 38.9%
Pool Corporation (NASDAQ:POOL) is one of the best dividend stocks to invest in.
On December 23, CFRA upgraded Pool Corporation (NASDAQ:POOL) to Buy from Hold and set a $304 price target.
That followed a more cautious note a week earlier. On December 16, Stifel analyst W. Andrew Carter lowered his price target on POOL to $240 from $295 and kept a Hold rating. In a year-ahead outlook, the firm said it carries “a positive overall bias” toward building products in 2026, including home improvement retailers. The view rests on compressed valuations, reset near-term expectations, and long-term confidence in US residential investment.
Pool’s business mix explains the mixed outlook. About one-third of revenue comes from new pool installations. That part of the business surged during the pandemic, then cooled as lockdown-driven demand faded. Since most new pools are built alongside new homes, higher interest rates and a slower housing market have weighed on growth.
The other two-thirds of revenue comes from maintaining and repairing existing pools. That stream is steadier. Even homeowners who rarely swim still have to keep their pools clean and functional. Skipping maintenance is not really an option, unless someone wants to deal with a green, unusable pool later on.
Pool Corporation (NASDAQ:POOL), also known as POOLCORP, is the world’s largest wholesale distributor of swimming pool equipment, parts, supplies, and outdoor living products.
9. CNH Industrial N.V. (NYSE:CNH)
Number of Hedge Fund Holders: 42
5-Year Average Payout Ratio: 27.3%
Upside Potential as of December 24: 32.04%
CNH Industrial N.V. (NYSE:CNH) is among the best dividend stocks to invest in.
On December 22, Barclays lowered its price target on CNH Industrial N.V. (NYSE:CNH) to $11 from $14 and kept an Overweight rating. The change came as part of the firm’s 2026 outlook for the machinery and construction group. Barclays said it continues to favor machinery heading into next year, pointing to macro and cyclical factors that support the space.
Earlier in November, CNH announced plans to invest nearly $5 billion over the next five years in manufacturing and research and development facilities across the US. That commitment signals a longer-term focus on domestic production and technology. At the same time, the company said it will stop production at its Burlington, Iowa, assembly plant by the second quarter of 2026. Management cited weaker demand and underutilization. The closure is expected to affect about 200 employees. It is a difficult decision, but one tied to aligning capacity with current market conditions.
During the third-quarter 2025 earnings call, management discussed ongoing changes to CNH Industrial N.V. (NYSE:CNH)’s global supply chain and dealer network. The goal is to reduce exposure to volatility that can surface in the industry. Production levels remain intentionally low to manage steel inventories and clear older products.
The company is also investing in technology, including Agentic AI for FieldOps, while continuing to focus on quality. Year to date, management said quality-related costs have been reduced by more than $60 million. That kind of progress tends to show up gradually, but it matters over time.
CNH Industrial N.V. (NYSE:CNH) operates as a global provider of agricultural and construction equipment. Its portfolio includes well-known brands such as Case IH and New Holland, offering tractors, harvesters, excavators, and technology used across farming and construction markets.
8. Cognex Corporation (NASDAQ:CGNX)
Number of Hedge Fund Holders: 43
5-Year Average Payout Ratio: 32.6%
Upside Potential as of December 24: 34.7%
Cognex Corporation (NASDAQ:CGNX) is among the best dividend stocks to invest in.
On December 18, Truist lowered its price target on Cognex Corporation (NASDAQ:CGNX) to $42 from $45 and kept a Hold rating. The move came in a broader preview of machinery, infrastructure services, and multi-industry industrial names heading into 2026.
The firm said it still favors power-related markets, including transmission, distribution, and power generation tied to data centers and AI. At the same time, investors are starting to look for signs that demand may be peaking. Backlog growth is likely to be watched closely, especially as new capacity comes online and risks around hyperscalers remain in focus. Construction stands out as a brighter area. Channel destocking appears largely finished, and early signs of recovery are showing. Truist pointed to Deere guiding for Construction & Forestry growth of about 10% in 2026. North American truck orders remain weak, but they appear to be at a cyclical low. The firm expects improvement through 2026 as EPA 2027 approaches and pre-buy activity begins.
Cognex Corporation (NASDAQ:CGNX)’s own results show improving momentum. In the third quarter of 2025, revenue reached $277 million, up 18% from a year earlier. Operating margin came in at 20.9%, while adjusted EBITDA margin rose to 24.9%. That marked a 730 basis point improvement year over year and the highest level since the second quarter of 2023.
Net income per diluted share was $0.10. Adjusted diluted EPS reached $0.33, up 69% from last year. That was the fifth straight quarter of earnings growth. Cash generation also improved as operating cash flow totaled $87 million, compared with $56 million in the third quarter of 2024.
The company returned $37 million to shareholders during the quarter and more than 100% of free cash flow over the past twelve months. During the period, Cognex also launched its Solutions Experience, or SLX, product portfolio in Logistics. The platform brings AI-enabled vision applications to a logistics market that continues to grow.
Cognex Corporation (NASDAQ:CGNX) is a leading provider of machine vision systems, software, sensors, and industrial barcode readers used in manufacturing and automation worldwide.
7. The Mosaic Company (NYSE:MOS)
Number of Hedge Fund Holders: 47
5-Year Average Payout Ratio: 30.69%
Upside Potential as of December 24: 42.1%
The Mosaic Company (NYSE:MOS) is among the best dividend stocks to invest in.
On December 18, Mizuho analyst Edlain Rodriguez lowered the price target on The Mosaic Company (NYSE:MOS) to $28 from $31 and kept a Neutral rating. The move came as part of the firm’s 2026 outlook for chemicals, agriculture, and packaging. Mizuho pointed to higher exports from China, which are weighing on most basic chemical markets. The firm also expects the March quarter to open as weakly as the December quarter closed for many companies in the group.
A few days later, on December 22, The Mosaic Company (NYSE:MOS) announced a definitive agreement to sell Mosaic Potash Carlsbad, Inc. The deal includes the mine’s operations, assets, and liabilities in Carlsbad, New Mexico. The buyer is International Minerals Carlsbad, and the total value of the transaction is $30 million. The agreement calls for an initial cash payment of $20M at closing, subject to customary adjustments. The remaining $10 million will be paid in three equal annual installments starting in 2029.
International Minerals Carlsbad will also assume responsibility for the asset retirement obligations tied to the Carlsbad operations. Mosaic expects the transaction to close in the first half of 2026 and plans to record a non-cash asset impairment in the fourth quarter of 2025.
Mosaic Executive Vice President, Operations, Karen Swager, made the following statement:
“This transaction is a win for all parties. We are pleased that International Minerals Carlsbad will provide continuity for our Carlsbad employees at the site, and that Mosaic has taken another step to focus on core assets. Our potash production is now entirely focused on our operations in Saskatchewan, Canada which are expected to continue to generate strong returns.”
As part of the sale, International Minerals Carlsbad will take over Mosaic’s potash and water business in New Mexico, along with related intellectual property. That includes the K-Mag and Dynamate brands.
The Mosaic Company (NYSE:MOS) remains one of the world’s largest producers and marketers of phosphate and potash fertilizers. The company continues to focus on supplying essential crop nutrients to global agricultural markets.
6. Zoetis Inc. (NYSE:ZTS)
Number of Hedge Fund Holders: 72
5-Year Average Payout Ratio: 28.17%
Upside Potential as of December 24: 31.7%
Zoetis Inc. (NYSE:ZTS) is among the best dividend stocks to invest in.
On December 18, Morgan Stanley lowered its price target on Zoetis Inc. (NYSE:ZTS) to $160 from $175 and kept an Overweight rating. In its year-ahead outlook, the firm said healthcare technology and providers offer an “attractive backdrop for alpha-generation opportunities” in 2026. Managed care is a different story. Those stocks lagged in 2025 and now face “another year of unprecedented policy, reimbursement, and utilization headwinds,” according to the analyst.
Earlier in the month, on December 5, Zoetis Inc. (NYSE:ZTS) shared a meaningful regulatory update. Health Canada approved Portela™ (relfovetmab injection) for the relief of osteoarthritis pain in cats. The treatment is designed to provide three months of pain relief with a single injection. It works by targeting anti-nerve growth factor, or NGF, a key driver of pain and inflammation in osteoarthritis.
Clinical data helped support the approval. In a nine-month field study conducted in Europe, Portela reduced OA pain and was well tolerated. That included cats with early-stage kidney disease, classified as IRIS stage 1, 2, or 3. Portela is already approved in the European Union, and Zoetis expects to launch the product commercially in both Canada and the EU in 2026.
Zoetis Inc. (NYSE:ZTS) operates as the world’s largest animal health company. Its work centers on advancing care for animals, with the broader goal of supporting animal well-being across companion and livestock markets.
5. Cheniere Energy, Inc. (NYSE:LNG)
Number of Hedge Fund Holders: 76
5-Year Average Payout Ratio: 13.10%
Upside Potential as of December 24: 42.98%
Cheniere Energy, Inc. (NYSE:LNG) is among the best dividend stocks to invest in.
On December 11, BofA lowered its price target on Cheniere Energy, Inc. (NYSE:LNG) to $271 from $274 and kept a Buy rating on the stock.
Cheniere sells most of its LNG through long-term, fixed-rate contracts. That structure supports steady, predictable cash flow. It is the kind of setup many investors look for in a volatile energy market. Management plans to direct that cash flow across several priorities. Dividends remain a focus after being introduced in late 2021. The company is also buying back shares, reducing debt, and funding the Corpus Christi Stage 3 expansion.
The approach reflects balance rather than chasing a single outcome. Over time, that discipline should support shareholder value. Cheniere Energy, Inc. (NYSE:LNG)’s scale is another advantage. The company operates one of the largest LNG platforms globally. By early 2025, it owned interests in and ran two liquefaction and export facilities along the US Gulf Coast.
Cheniere Energy, Inc. (NYSE:LNG) stands as the largest LNG producer in the US and the second-largest worldwide. It runs a fully integrated model, handling sourcing, transportation, liquefaction, and delivery of natural gas. Vessel chartering is also part of the business, adding flexibility across its supply chain.
4. PG&E Corporation (NYSE:PCG)
Number of Hedge Fund Holders: 79
5-Year Average Payout Ratio: 2.11%
Upside Potential as of December 24: 33.6%
PG&E Corporation (NYSE:PCG) is among the best dividend stocks to invest in.
On December 16, Morgan Stanley lowered the firm’s price target on PG&E Corporation (NYSE:PCG) to $20 from $21 and kept an Equal Weight rating on the shares. Utility performance will be heavily driven by data centers and growth upside in 2026, the analyst told investors in a year-ahead note.
Around the same time, the company shared an operational update. On December 11, Pacific Gas and Electric Company, a subsidiary of PG&E Corporation (NYSE:PCG), announced the successful launch of its Dynamic Line Rating (DLR) and Asset Health Monitoring (AHM) technology demonstration. The project combines advanced sensors, real-time analytics, and partner solutions to enhance the utilization and monitoring of transmission lines.
PG&E and its partners recently completed hardware field installations and vendor dashboard setups. That work moved the project into trial deployment across all technologies. This step fits into a broader strategy. The company is working to expand and upgrade substations and transmission lines, ease congestion, and maintain reliable service during extreme weather events like heat waves and high winds.
DLR technology changes how line capacity is calculated. It uses live weather data, including temperature and wind, to determine how much electricity a power line can safely carry. Instead of fixed limits, capacity adjusts as conditions change. That allows more power to move through existing lines without building new ones.
By testing and validating DLR and AHM tools, PG&E is looking to modernize the grid in practical ways. The goal is to unlock unused capacity, improve reliability, and support more renewable energy. Doing so can also lower costs for customers by making better use of existing infrastructure rather than relying on more expensive upgrades.
PG&E Corporation (NYSE:PCG) is a holding company based in Oakland, California. It is the parent of Pacific Gas and Electric Company, which provides energy service to about 16 million people across a 70,000-square-mile area in Northern and Central California.
3. Costco Wholesale Corporation (NASDAQ:COST)
Number of Hedge Fund Holders: 88
5-Year Average Payout Ratio: 26.7%
Upside Potential as of December 24: 32.1%
Costco Wholesale Corporation (NASDAQ:COST) is among the best dividend stocks to invest in.
On December 24, Northcoast upgraded Costco Wholesale Corporation (NASDAQ:COST) to Buy from Neutral and set a $1,100 price target. Analyst Chuck Cerankosky pointed to Costco’s strong competitive position in the US, along with clear room to expand overseas. He said the company’s international growth, from South Korea to Sweden, has been “consistently successful.”
“Developed economies contain consumers who love to save money and in turn spend it on discretionary merchandise. Members can do both inside a Costco club,” Cerankosky adds. For existing shareholders, the balance sheet matters just as much. Cerankosky highlighted Costco’s cash reserves, noting they give the company flexibility to pay another special dividend, potentially as high as $20 per share.
The stock is down more than 4% since the start of 2025. Management addressed some near-term concerns during the first-quarter earnings call. Membership sign-ups slowed, largely because younger customers tend to sign up online and renew at a slower pace. It’s a shift in behavior, not necessarily a loss of interest.
Costco Wholesale Corporation (NASDAQ:COST)’s sales trends tell a different story. The company posted record Black Friday non-food orders, topping $250 million. Digital sales rose 20.5% for the quarter. Website traffic increased 24%, while mobile app traffic jumped 48%. Those numbers stand out.
Costco Wholesale Corporation (NASDAQ:COST) runs membership-only warehouse clubs. It sells bulk, brand-name, and private-label products, including Kirkland Signature, at low prices to both businesses and individual shoppers.
2. Vistra Corp. (NYSE:VST)
Number of Hedge Fund Holders: 112
5-Year Average Payout Ratio: 27.29%
Upside Potential as of December 24: 48.2%
Vistra Corp. (NYSE:VST) is among the best dividend stocks to invest in.
On December 16, Morgan Stanley analyst David Arcaro raised the firm’s price target on Vistra Corp. (NYSE:VST) to $228 from $225 and kept an Overweight rating on the shares. In a year-ahead note, he told investors that utility performance will be heavily driven by data centers, with added growth potential showing up in 2026.
A few days earlier, on December 3, Vistra Corp. (NYSE:VST) picked up an important win. S&P Global Ratings upgraded the company to investment grade. Vistra came together nearly a decade ago as a spinoff from the bankrupt Energy Future Holdings Corp., and the rating change marks a clear shift in how the business is viewed.
Roughly 35% of Vistra’s generation capacity sits within the PJM Interconnection grid, which stretches from Chicago to Washington, DC. S&P sees strong tailwinds in that region, driven largely by accelerating data-center demand. The firm made the following remark:
“The company’s exposure to fluctuating wholesale power prices is modest. About 96% of the expected generation for 2026 is hedged.”
Investor interest has followed that theme. Companies that own power plants capable of supporting energy-intensive data centers have drawn steady attention this year. Vistra Corp. (NYSE:VST)’s shares have more than quadrupled since the start of last year, a move that reflects the demand.
Vistra operates as an integrated retail electricity and power generation company, supplying essential power resources to customers.
1. Oracle Corporation (NYSE:ORCL)
Number of Hedge Fund Holders: 122
5-Year Average Payout Ratio: 30.69%
Upside Potential as of December 24: 42.1%
Oracle Corporation (NYSE:ORCL) is among the best dividend stocks to invest in.
The stock has failed to meet expectations. Shares are down 32% this quarter alone. According to a report by CNBC, Oracle Corporation (NYSE:ORCL) is on pace for its steepest decline since 2001 and the dot-com bust.
Investor confidence has weakened. Many now question whether the database software vendor can scale up enough server farms to support ChatGPT operator OpenAI, which agreed in September to spend more than $300 billion with Oracle.
Earlier this month, Oracle Corporation (NYSE:ORCL) posted quarterly revenue and free cash flow that came in below expectations. During the earnings call, newly appointed finance chief Doug Kehring laid out plans for $50 billion in fiscal 2026 capital expenditures. That figure is 43% higher than the September plan and roughly double what the company spent a year ago. The company is also lining up $248 billion in leases to expand cloud capacity, on top of new data center construction.
That level of expansion will require heavy borrowing. In September, Oracle Corporation (NYSE:ORCL) raised $18 billion through a jumbo bond sale, one of the largest tech debt offerings on record. Kehring said on the call that management remains committed to maintaining Oracle’s investment-grade rating. Some investors remain unconvinced. Credit default swap prices tied to the company’s debt have moved higher.
Analysts at D.A. Davidson wrote the following note to clients on December 12:
“Considering Oracle is already barely hanging on to an investment grade rating, we would be concerned about Oracle’s ability to live up to these obligations without restructuring its OpenAI contract.”
Oracle provides a fully integrated suite of cloud applications and cloud platform services, spanning infrastructure, databases, and enterprise software.
While we acknowledge the potential of ORCL to grow, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and have limited downside risk. If you are looking for an AI stock that is more promising than ORCL and that has 100x upside potential, check out our report about this cheapest AI stock.
READ NEXT: 13 Highest Paying Monthly Dividend Stocks to Buy and 10 Best Debt Free Dividend Stocks to Buy Now.
Disclosure: None. Insider Monkey focuses on uncovering the best investment ideas of hedge funds and insiders. Please subscribe to our free daily e-newsletter to get the latest investment ideas from hedge funds’ investor letters by entering your email address below.
