10 Most Undervalued Dividend Growth Stocks According to Hedge Funds

7. McDonald’s Corporation (NYSE:MCD)

Number of Hedge Fund Holders: 79

Dividend Yield as of October 27: 3.1%

McDonald’s Corporation operates the fast food restaurant chain worldwide, with over 45,000 locations in more than 100 countries. Around 95% of the restaurants are operated by independent franchisees. The company pays a quarterly dividend and has increased its annual dividend for 50 consecutive years, thus qualifying as a Dividend King.

On 17th September, McDonald’s announced a 4% increase in its quarterly dividend to $1.93 per share, up from $1.86. That works out to $7.72 per share on an annualized basis. Based on the current share price, the stock’s dividend yield sits at 3.1%. McDonald’s dividend growth has beaten inflation over the last few years. The annual dividend has gone from $5.66 in 2022 to $7.17 in 2025, which is a 27% increase. Read the valuation and dividend analysis here. 

The most recent increase is in line with that trend. The important thing for shareholders to bear in mind is that dividend growth is not the same as total return. Total return is also a function of the change in the share price. The company’s capital allocation policy is to reinvest in the business, pay dividends, and repurchase shares with residual free cash flow. Future dividends are still subject to board approval and will be determined by the level of profitability that we expect and the level of financing required. It has a very long track record of dividend increases, but as with any company, you have to look at the cash flow, the debt, and the valuation you’ve paid for the shares in order to assess the sustainability of the dividend.

6. NextEra Energy, Inc. (NYSE:NEE)

Number of Hedge Fund Holders: 80

Dividend Yield as of October 27: 3.04%

NextEra Energy, Inc. (NYSE:NEE) is an electric power and energy infrastructure company. It operates Florida Power & Light, which serves around 12 million people in Florida, and develops renewable energy projects via NextEra Energy Resources. Its power generation mix is natural gas, nuclear, and renewables, such as wind and solar.

As of October 2026, the quarterly dividend is $0.6232, giving an annualized dividend of $2.4928 per share. At the recent share price, the dividend yield was about 3.04%. The company has rewarded shareholders with growing dividends for 31 consecutive years. In Q1 2026, NextEra Energy increased its quarterly dividend 10% year over year, from $0.5665 to $0.6232 per share. This was in line with its plan to grow its annual dividend by around 10% per year from 2024 through to 2026. Management expects the rate of dividend growth to slow to 6% per annum from the end of 2026 through to 2028.

The latest increase is in keeping with the company’s track record of sustained dividend growth, and its regulated utility business provides a reliable source of electricity revenue. It’s important to separate the current yield from the potential for future income growth. NEE’s current yield of around 3% reflects income that will be distributed to shareholders. The dividend growth targets are subject to board approval and the company’s performance.

Read the full analysis here: NextEra Energy (NEE) vs. DUK and AEP: Can Its Dividend Moat and Earnings Growth Close the Valuation Gap?