Debt is increasingly common in the stock market, particularly as the technology companies use it to fund their AI spending. On November 2, Reuters reported that the world’s largest tech firms are turning to the debt markets and raising equity to fund their AI infrastructure. That’s a significant shift for the Valley firms that have traditionally funded their investments out of their own cash.
There’s very little sign that spending will abate. The major tech firms have said their combined AI spend will be well over $730 billion this year, up from around $700 billion previously. In February, Bridgewater Associates issued a warning that the AI boom had entered a “more dangerous phase” with firms increasingly throwing money at physical infrastructure and turning to external capital, according to a Reuters report.
But the increasing use of debt isn’t just an AI story. Some businesses are borrowing more simply because they’re not generating enough cash to fund their own operations. Private equity firms are also contributing to the problem by increasingly pushing their portfolio companies to take on debt so that they can return cash to their investors.
The timing is important. Traditional routes out of private equity, such as going public or selling to another fund or buyer, have become increasingly difficult in recent years. The alternative is dividend recapitalization, whereby the company borrows money to make distributions to the owners. The investor gets their cash, and the company is left with more debt and less headroom in a difficult business environment.
For dividend investors, this is a problem. Every dollar spent on interest and debt service is a dollar that’s not available for dividends or for business investment. The harder it is to generate earnings or the higher the cost of borrowing, the more difficult it becomes to maintain those dividend payments.
The scale of corporate borrowing is also worth noting. The OECD’s Global Debt Report 2026 states that companies raised a record $13.7 trillion through capital markets in 2025, bringing total corporate debt to $59.5 trillion. The report also cautions that refinancing could become more costly as companies replace older debt, which has lower interest rates.
This puts companies with more cash than total debt in a tricky spot. They have fewer obligations and more headroom to fund operations, to invest in growth, and to return money to shareholders. That said, low debt in itself doesn’t make a company a good dividend investment. Free cash flow, payout ratios, and the ability to maintain or grow the dividend are just as important. Given this backdrop, we will take a look at some of the best debt-free dividend stocks.
Our Methodology:
To identify the 10 best debt-free dividend stocks, we started with dividend-paying companies that have a market capitalization of at least $500 million and a dividend yield of 1.5% or higher. We considered a company debt-free if it either had zero total debt or held more cash than its total debt, resulting in a positive net cash position. We then ranked the shortlisted companies in ascending order based on the number of hedge funds holding their shares, using Insider Monkey’s database of hedge fund ownership for Q2 2026.
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. Insider Monkey’s quarterly newsletter strategy selects 14 small-cap and large-cap stocks every quarter and has returned 612% since May 2014, beating its benchmark by 375 percentage points (see more details here).
10. RPC, Inc. (NYSE:RES)
Number of Hedge Fund Holders: 20
Dividend Yield as of November 2: 2.70%
Total Cash (mrq): $177.1 Million
Total Debt (mrq): $51.74 Million
RPC, Inc. (NYSE:RES) is a provider of specialized oilfield services and equipment to oil and gas companies engaged in exploration, drilling, production, and well maintenance. The company’s Technical Services segment provides pressure pumping, wireline, coiled tubing, cementing, and downhole tools. Its Support Services segment provides rental tools and other equipment.
RPC currently pays a quarterly dividend of $0.04 per share, which is $0.16 on an annualized basis. As of November 2, the yield is 2.70%. The dividend policy is underpinned by a solid balance sheet, although cash flow coverage is something that we would still need to keep an eye on. For the first 9 months of 2026, RPC produced $115.7 million in operating cash flow but only $5 million in free cash flow after capital expenditure. That was well below the $26.6 million in dividends it paid out over that period.
The balance sheet is a significant source of strength. In the most recent quarter, RPC had $ 177.1 million in cash and $125.36 million in total debt, giving it a net cash position of around $125.36 million. It also had no borrowings outstanding under its $100 million revolving credit facility. That gives it a considerable degree of flexibility as it moves through a period of weaker oilfield conditions without having to rely on external financing.
That said, it’s important to remember that a strong cash position is not necessarily the same as sustainable dividend coverage. With CapEx taking up the vast majority of its operating cash flow, an improvement in free cash flow will be key to being able to sustain the dividend over the longer term.
Gabelli Investment Management Firm highlighted RES in its Q2 2026 investor letter. Read here.
9. Cincinnati Financial Corporation (NASDAQ:CINF)
Number of Hedge Fund Holders: 25
Dividend Yield as of November 2: 2.05%
Total Cash (mrq): $1.38 Billion
Total Debt (mrq): $875 Million
Cincinnati Financial Corporation (NASDAQ:CINF) is an insurance holding company that provides property and casualty insurance, life insurance, and related financial services through its subsidiaries. Its insurance operations are the primary source of premium income, and its large investment portfolio is another significant source of earnings.
The company pays a $0.94 per share quarterly dividend, which works out to $3.76 per share annually and a 2.05% dividend yield as of November 2. Cincinnati Financial has increased its dividend for 65 consecutive years and is thus a member of the Dividend Kings club. The most recent quarterly dividend was up from the $0.87 per share paid last year.
The dividend is also well supported by earnings. For Q3 2026, the company reported non-GAAP operating income of $443 million or $2.86 per share compared to $449 million or $2.85 per share for the same period in the prior year. So underlying operating earnings have been quite stable. Read the full dividend analysis here.
Cincinnati Financial also has a very strong liquidity position. In the most recent quarter, it had $1.38 billion in cash against $875 million of total debt, giving it a net cash position of around $505 million. Its investment portfolio is also very substantial, with $33.14 billion in total investments, as of September 30, of which $18.93 billion was in fixed maturities and $13.15 billion in equities. Its debt-to-total-capital ratio was 4.8% as of September, down from 4.9% at the end of 2025.
For an insurer, liquidity is of course a very important thing to have, as it has to meet policyholder claims and other obligations. The company’s strong net cash position, very large investment portfolio, and low level of leverage provide a very solid basis for the dividend. Whilst the value of the investment portfolio can be volatile and will impact reported earnings and book value, the company’s consistent operating income and long track record of dividend growth are a very strong point in its favor for the long-term income investor.
8. The Bank of N.T. Butterfield & Son Limited (NYSE:NTB)
Number of Hedge Fund Holders: 25
Dividend Yield as of November 2: 3.55%
Total Cash (mrq): $3.11 Billion
Total Debt (mrq): $38.62 Million
The Bank of N.T. Butterfield & Son Limited is a leading Bermuda-based financial institution offering retail and commercial banking, private banking, and wealth management services. The bank operates across several prominent international financial centers, including Bermuda, the Cayman Islands, and the Channel Islands.
Butterfield pays a quarterly dividend of $0.50 per share, amounting to $2.00 per share on an annualized basis. With a 3.55% dividend yield as of November 2, this represents an attractive return for shareholders, and the results indicate that the dividend is well covered by earnings. In the third quarter of 2026, Butterfield reported net income of $61 million, or $1.50 per diluted share. Core earnings reached $1.58 per share, resulting in a quarterly dividend payout ratio of approximately 32% of core earnings.
This healthy payout ratio leaves substantial earnings available for reinvestment, capital preservation, and other strategic initiatives. The bank also achieved a net interest margin of 2.76% in Q3 2026, up from 2.73% in the same period of 2025, as higher reinvestment yields helped offset pressures on loan yields and deposit costs.
Butterfield’s balance sheet further underscores its robust financial health. In the most recent quarter, the company reported $3.11 billion in total cash and just $38.62 million in total debt, providing a substantial liquidity cushion relative to its obligations. Within the context of its core banking business, this strong cash position is especially significant given the importance of deposits and liquidity.
As of September 30, 2026, Butterfield held $12.9 billion in customer deposits and $9.4 billion in cash, bank deposits, reverse repurchase agreements, and liquid investments, representing 65.6% of total assets. The bank’s total regulatory capital ratio also improved to 29.6%, up from 27.8% at the end of 2025. With its strong liquidity, minimal debt, and prudent earnings payout ratio, Butterfield is well positioned to sustain its dividend. Nevertheless, close attention will be required with respect to loan quality, deposit costs, and interest margins, particularly as the bank finalizes its planned acquisition of CIBC Caribbean.
First Pacific Advisors mentioned NTB in its Q2 2026 investor letter. Read here.
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