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.
7. Dolby Laboratories, Inc. (NYSE:DLB)
Number of Hedge Fund Holders: 28
Dividend Yield as of November 2: 2.28%
Total Cash (mrq): $670.05 Million
Total Debt (mrq): $47.4 Million
Dolby Laboratories, Inc. (NYSE:DLB) is a developer of audio, imaging, and entertainment technologies for cinema, TV, smartphones, and streaming. The bulk of its revenue comes from its licensing business, where companies pay to incorporate its technologies, such as Atmos and Vision, into their own products and services.
Dolby pays a $0.36 per share quarterly dividend, which works out at $1.44 per share on an annualized basis. At a 2.28% dividend yield as of November 2, the stock provides both a steady stream of income and exposure to the entertainment technology sector. The company has a history of increasing its dividend, having raised it from $0.33 to $0.36 in 2025. The dividend has been in place since 2015. The cash generation is clearly sufficient to support the dividend.
In the first nine months of fiscal 2026, the company generated $314.8 million in operating cash flow; this is down from the $349.4 million generated in the same period last year. The annualized dividend is a very manageable level in relation to the cash generation. Dolby’s balance sheet is another key component of its dividend profile. The company had $670.05 million in cash and only $47.4 million in total debt in the most recent quarter, giving it a net cash position of around $622.65 million.
Its debt-to-equity ratio was a very low 1.83%, so it doesn’t rely heavily on debt. In addition to its cash position, it had around $87.1 million in short- and long-term investments. The company also returned capital through share repurchases, buying back approximately $65 million worth of shares in the third quarter of fiscal 2026.
The combination of net cash, recurring licensing revenue, and operating cash flow gives it a very good amount of flexibility to fund R&D, to invest in new technology, and to maintain its dividend. While the level of operating cash flow is somewhat lower than would be ideal, the low level of debt and the significant amount of liquidity provide a very solid platform for the dividend.
Aristotle/Saul Global Equity Fund mentioned DLB in its Q2 2026 investor letter. Read here.
6. Erie Indemnity Company (NASDAQ:ERIE)
Number of Hedge Fund Holders: 29
Dividend Yield as of November 2: 2.14%
Total Cash (mrq): $383.8 Million
Total Debt (mrq): $54.3 Million
Erie Indemnity Company (NASDAQ:ERIE) provides management services to the Erie Insurance Exchange, a policyholder-owned property and casualty insurer. The services provided include policy issuance and renewals, underwriting support, and administration. The company’s primary source of revenue is management fees, which are based on the premiums written by the Exchange.
Erie Indemnity pays a quarterly dividend of $1.4625 per Class A share, giving an annualized dividend of $5.85 per share. As of November 2, the yield on the share is 2.14%. The company has paid regular dividends to shareholders since 1942 and increased its quarterly dividend by 7.1% in December 2025. The dividend is funded by cash generated from operations. For the first 9 months of 2026, Erie generated $520.2 million in operating cash flow, up from $515.1 million in the same period last year, and paid out approximately $204.3 million in dividends to shareholders during that time.
The company also has a very solid liquidity position. Erie has $383.8 million in cash and $54.3 million in total debt, which is $329.5 million in net cash. That’s not all, though, as it has a very large investment portfolio. As of September 30, it had approximately $1.52 billion in available-for-sale and equity securities. The combination of positive net cash, recurring management fee income, and strong operating cash flow gives Erie a great deal of flexibility to maintain its dividend and to fund its business. The long track record of dividend payments and the level of cash flow coverage makes it an attractive proposition for the income investor looking for a company with a stable financial footing. ERIE is also included in our list of 13 High-Quality S&P 500 Financial Stocks According to Hedge Funds.
5. Janus Living, Inc. (NYSE:JAN)
Number of Hedge Fund Holders: 34
Dividend Yield as of November 2: 2.01%
Total Cash (mrq): $1.56 Billion
Total Debt (mrq): $54.3 Million
Janus Living, Inc. (NYSE:JAN) is a real estate investment trust (REIT) dedicated to creating vibrant senior housing communities across the United States. The company owns and operates properties that offer both comfortable living environments and essential care services for seniors, generating revenue through resident fees and a range of supportive offerings.
Janus Living offers shareholders a steady stream of income, paying a monthly dividend of $0.0475 per share, amounting to $0.57 annually. As of November 2, this translates to a 2.01% yield, providing investors with consistent returns. The company has already declared its monthly dividend for October, November, and December 2026, underscoring its commitment to regular payouts.
Notably, dividend coverage has improved alongside operational performance: in Q3 2026, Janus reported adjusted FFO of $0.25 per share, a 46% year-over-year increase, while the quarterly dividend totaled $0.1425 per share, resulting in a payout ratio of about 57%. This conservative approach leaves room to sustain the distribution while also investing in property growth.
Janus Living’s strong cash position is another highlight. In the most recent quarter, the company reported $1.56 billion in cash and just $54.3 million in total debt, resulting in a robust net cash balance of around $1.51 billion. After a period of significant acquisitions, the September 2026 results showed $338 million in unrestricted cash and no debt, while by October 30, total liquidity stood at approximately $1.2 billion, including available credit.
Operating cash flow for the first nine months of 2026 reached $224.7 million, more than doubling the $94 million recorded in the same period of 2025. The scale of Janus’s portfolio and growing cash flows both strengthen the outlook for its dividend. Of course, as the company continues to expand its senior housing business, it will be important to keep an eye on acquisition spending, occupancy rates, and integration costs.
WestEnd Capital Management mentioned JAN in its Q2 2026 investor letter. Here is what it said.
4. Garmin Ltd. (NYSE:GRMN)
Number of Hedge Fund Holders: 37
Dividend Yield as of November 2: 1.53%
Total Cash (mrq): $2.34 Billion
Total Debt (mrq): $224.4 Million
Garmin Ltd. (NYSE:GRMN) is a developer of GPS-enabled devices and technologies for the fitness, outdoor recreation, aviation, marine, and automotive markets. Products include smartwatches, fitness trackers, navigation systems, and aviation equipment.
Garmin pays an annual dividend of $4.20 per share, which is $1.05 quarterly. At a yield of 1.53% as of November 2, this is a fairly modest income stream, although it is clearly underpinned by strong cash generation rather than any kind of borrowing. For the first 9 months of 2026, the company produced $1.33 billion in operating cash flow and $1.04 billion in free cash flow, compared to $933.3 million in free cash flow for the same period in 2025. It paid out approximately $578.5 million in dividends during this period, so there is a very substantial amount of cash left on the table. That’s a very clear signal that the dividend is well funded and the company can comfortably pay it whilst still having plenty of cash to reinvest in the business.
Garmin also has a very strong balance sheet. In the most recent quarter, it reported $2.34 billion in cash and just $224.4 million in total debt, so around $2.12 billion of net cash. When you look at its broader liquidity position and include marketable securities, it’s even better. As of September 2026, the company had around $4.1 billion in cash and marketable securities. It also generated $293.3 million in free cash flow in Q3 and paid out $202 million in dividends. The combination of its strong liquidity, very low debt, and growing free cash flow gives it a huge amount of flexibility to continue to pay out dividends without having to compromise on its business.
For income investors, the 1.53% yield may not be the highest, but with the level of dividend coverage and the strength of the balance sheet, it is a very attractive proposition for those who are looking at dividend sustainability and long-term growth. Read GRMN’s full analysis here.
3. T. Rowe Price Group, Inc. (NASDAQ:TROW)
Number of Hedge Fund Holders: 38
Dividend Yield as of November 2: 4.91%
Total Cash (mrq): $3.77 Billion
Total Debt (mrq): $841.8 Million
T. Rowe Price Group, Inc. (NASDAQ:TROW) is a global asset management company providing investment advisory services, retirement solutions and mutual funds to individual and institutional investors. The bulk of its revenue is derived from investment advisory fees, which are in turn a function of assets under management and market performance.
T. Rowe pays a $1.30 per share quarterly dividend, which works out at $5.20 per share annually. The stock’s dividend yield comes at 4.91%, as of November 2. In addition to such a solid yield, the company has a very long track record of increasing its regular dividend and has also returned capital via special dividends and share buybacks. The cash generation is clearly sufficient to support the dividend policy. For the first 9 months of 2026, operating cash flow attributable to the company was $2.75 billion, up from $2.38 billion for the same period last year. The company returned $1.14 billion to shareholders in the last 12 months via dividends, so the regular dividend is very much within the bounds of what the company can afford.
The balance sheet provides further support for the dividend policy. T. Rowe Price had $3.77 billion in cash and $841.8 million in total debt in the most recent quarter, giving it $2.93 billion in net cash. Its overall liquidity is considerably better when you include its discretionary investments. As of September 20, it had $4.93 billion in cash and discretionary investments. That gives it the flexibility to continue to pay dividends, to invest in the business, and to weather periods of market volatility. That said, investors would still want to keep an eye on AUM and client flows, as prolonged market weakness and continued outflows would be a threat to advisory fee revenue. In Q3 2026, the firm reported $28.3 billion in net client outflows, so that is a risk that the business is exposed to. Read the company’s full analysis here: T. Rowe Price Stock Has Fallen Out of Favor. Could That Create an Opportunity?
2. Gentex Corporation (NASDAQ:GNTX)
Number of Hedge Fund Holders: 39
Dividend Yield as of November 2: 2.33%
Total Cash (mrq): $145.6 Million
Total Debt (mrq): $0
Gentex Corporation (NASDAQ:GNTX) is a developer of digital vision, connected car, dimmable glass, and fire protection technologies. The majority of its products are automotive in nature, such as auto-dimming mirrors, camera-based driver assistance systems, etc.
Gentex pays a $0.12 per share quarterly dividend, which works out at $0.48 per share on an annualized basis. At the 2.33% yield as of November 2, that’s a very modest income stream. The company has kept its quarterly dividend at this level, with $0.36 per share paid out in the first 9 months of 2026. The dividend is also very manageable in terms of earnings. For the third quarter of 2026, the company reported adjusted earnings of $0.47 per share, which means the quarterly dividend is at approximately 26% of adjusted earnings. There is therefore scope to continue to pay out to shareholders whilst also funding product development and growth.
The balance sheet is another positive for the income investor. Gentex had $145.6 million in cash and no debt in the most recent quarter, which is a very solid debt-free position. It also has short- and long-term investments of approximately $242.9 million as of September 30. For the first nine months of 2026, Gentex generated $405.2 million in operating cash flow, which is a very healthy amount of internal cash to fund the business and the dividend. The company also repurchased $270.2 million of shares during that period.
The debt-free balance sheet, the investment portfolio, and the low payout ratio all provide a very good degree of flexibility to maintain the dividend without having to resort to debt. While automotive demand and production will clearly affect revenue, the company’s debt-free position and low payout ratio give it a solid platform for dividend sustainability.
Palm Valley Capital Management mentioned GNTX in its Q3 2026 investor letter. Read here.
1. Watsco, Inc. (NYSE:WSO)
Number of Hedge Fund Holders: 40
Dividend Yield as of November 2: 4.17%
Total Cash (mrq): $648.7 Million
Total Debt (mrq): $553.7 Million
Watsco, Inc. (NYSE:WSO) is the largest distributor of HVAC products in the Americas. The company supplies HVAC equipment, parts, and related products to contractors who in turn serve the residential and commercial markets.
Watsco pays a quarterly dividend of $3.30 per share, which works out to an annual dividend of $13.20 per share. As of November 2, the dividend yield is 4.17%. The company increased its annual dividend by 10% in April 2026 and has a history of paying dividends for 52 consecutive years. The dividend policy is underpinned by strong, consistent cash generation, though the latest results point to some pressure on coverage.
For the first nine months of 2026, Watsco generated $303.7 million in operating cash flow, up 79% from $169.8 million for the same period in 2025. It paid $392 million in common dividends during that period, so operating cash flow alone did not cover the distributions. That gap is due to the seasonal working capital requirements of the distribution business, with the bulk of the investment being in inventory in the run-up to the peak seasons.
Watsco reported $648.7 million in cash versus $553.7 million in total debt according to the balance sheet metrics provided, giving it around $95 million of net cash. The September 2026 balance sheet showed $498.7 million in cash and cash equivalents and an additional $150 million in short-term cash investments. The company has just entered into a new $750 million unsecured revolving credit facility, which will provide it with further liquidity and flexibility for acquisitions and to meet its seasonal working capital needs.
Watsco’s strength in its distribution network, improving operating cash flow and access to credit all underpin its ability to continue to return value to shareholders. That said, working capital needs and dividend coverage should still be watched, particularly as the company continues to grow through acquisitions and invests in inventory to support that growth. Read the full analysis here.
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