Dividend Aristocrats are companies in the S&P 500 Index that have increased their dividend payouts for at least 25 consecutive years. Meanwhile, "Dividend Champions" refers to companies that have increased their dividend payouts for at least 25 consecutive years but are not necessarily in the S&P 500 Index.
These companies are popular among investors as they typically have strong financials, stable earnings, and a proven track record of delivering value to their investors over time. Moreover, dividend stocks have also exhibited strong performance over the years, especially during market downturns. According to a report by Nuveen, companies that have raised their dividends perform well, compared with those that have high yields. The report mentioned that dividend growers with modest yields delivered a 26.8% return on equity in 2022, compared with a 20.4% return on stocks with yields above 3%. The report also referred to FactSet and mentioned that the MSCI World Index generated 5.5% dividend growth in 2022.
When investing in dividend stocks, investors also pay attention to dividend-focused exchange-traded funds. These funds offer investors a diversified portfolio of dividend-paying stocks, which makes them an easy and reliable investment option. In 2022, investors poured over $47 billion in dividend ETFs, as reported by State Street Global Advisors. The report also mentioned that more than 90% of these funds outperformed the market last year. The report mentioned that the low fundamental volatility of dividend stocks is one of the main drivers for the outperformance of these strategies. Some of the best dividend stocks that have raised their dividends over the years include PepsiCo, Inc. (NASDAQ:PEP), AbbVie Inc. (NYSE:ABBV), and Johnson & Johnson (NYSE:JNJ).
The S&P High-Yield Dividend Aristocrats tracks the performance of companies within the S&P Composite 1500 that have raised their dividends for at least 20 years. The index outperformed the S&P Composite 1500 by an average of 140 basis points from December 1999 to December 2022, according to a report by S&P Dow Jones Indices. Various other pieces of research have shown that dividend growers have outperformed historically. In one of our previous articles titled S&P 500 Dividend Aristocrats List, we reported that dividend aristocrats have delivered an annual average return of 12.13% between 1990 and 2018, compared with a 9.96% return of the broader market during the same period.
Dividend Champions vs Aristocrats: 12 Under-the-Radar Stocks to Consider
For this article, we scanned the list of Dividend Champions, companies that have raised their dividends for 25 years or more, and picked companies that are comparatively lesser known to investors but are reliable investment options. Next, the hedge fund sentiment was measured using data from 943 hedge funds tracked by Insider Monkey in Q4 2022. The list is ranked in ascending order of the number of hedge funds having stakes in the companies.
Dividend Champions vs Aristocrats: 12 Under-the-Radar Stocks to Consider
Norwood Financial Corp. (NASDAQ:NWFL) is an American bank holding company that offers a wide range of credit and other investment services to its consumers. On March 16, the company declared a quarterly dividend of $0.29 per share, which was in line with its previous dividend. In 2022, the company stretched its dividend growth streak to 31 years, which makes it one of the best dividend stocks on our list. The stock has a dividend yield of 4.59%, as of April 26.
PepsiCo, Inc. (NASDAQ:PEP), AbbVie Inc. (NYSE:ABBV), and Johnson & Johnson (NYSE:JNJ) are some other best dividend stocks to consider.
At the end of March 2023, Norwood Financial Corp. (NASDAQ:NWFL) reported total assets of over $2.1 billion, an increase of $26.7 million during the same period last year. In the first quarter of 2023, the company's net interest income came in at over $16 million and it generated over $18 million in revenues.
At the end of December 2022, 6 hedge funds tracked by Insider Monkey reported having stakes in Norwood Financial Corp. (NASDAQ:NWFL), up from 4 in the previous quarter. The collective value of these stakes is over $11.3 million. Among these hedge funds, Fourthstone LLC was the company's leading stakeholder in Q4.
MGE Energy, Inc. (NASDAQ:MGEE) is an American utility holding company that produces and distributes electricity and natural gas. In the fourth quarter of 2022, the company reported revenue of nearly $190 million, up from $163.4 million in the previous quarter. Its operating cash flow for the quarter came in at over $9.4 million.
MGE Energy, Inc. (NASDAQ:MGEE) currently pays a quarterly dividend of $0.4075 per share and has a dividend yield of 2.09%, as of April 26. It is one of the best dividend stocks on our list as it maintains a 47-year streak of consistent dividend growth.
As per Insider Monkey's Q4 2022 database, 12 hedge funds reported having stakes in MGE Energy, Inc. (NASDAQ:MGEE), down from 13 in the previous quarter. These stakes are collectively valued at over $16.4 million.
Brady Corporation (NYSE:BRC) is a Wisconsin-based manufacturing company that specializes in technical equipment. In its fiscal Q2 2023 earnings, the company reported an operating cash flow of $29.4 million, compared with a negative $3.2 million during the same period last year. During the quarter, the company returned over $22.8 million to shareholders through dividends, which makes it one of the best dividend stocks on our list.
Brady Corporation (NYSE:BRC) currently pays a quarterly dividend of $0.23 per share and has a dividend yield of 1.85%, as recorded on April 26. In 2022, the company raised its dividend for the 37th consecutive year.
At the end of Q4 2022, 14 hedge funds tracked by Insider Monkey owned investments in Brady Corporation (NYSE:BRC), up from 11 in the previous quarter. The stakes owned by these hedge funds have a total value of $95.7 million.
California Water Service Group (NYSE:CWT) is a California-based public utility company that provides drinking water and wastewater services. On January 25, the company declared a 4% hike in its quarterly dividend to $0.26 per share. This was the company's 51st consecutive year of dividend growth. Moreover, this best dividend stock on our list has been making regular dividend payments to shareholders for the past 73 years. As of April 26, the stock has a dividend yield of 1.82%.
In the fourth quarter of 2022, California Water Service Group (NYSE:CWT) reported revenue of $200.9 million, which showed a 16% growth from the same period last year. At the end of December 2022, the company had over $62.1 million available in cash and cash equivalents.
As per Insider Monkey's Q4 2022 database, 14 hedge funds owned stakes in California Water Service Group (NYSE:CWT), compared with 15 in the preceding quarter. The collective value of these stakes is over $114.5 million. With over 1.5 million shares, Impax Asset Management was the company's leading stakeholder in Q4.
Community Bank System, Inc. (NYSE:CBU) is a New York-based commercial banking company. In March, Janney Montogomery initiated its coverage on the stock with a Buy rating and a $66 price target, calling the company a 'diversified' bank. The firm also appreciated the company's growing non-interest revenue.
Community Bank System, Inc. (NYSE:CBU), one of the best dividend stocks, currently pays a quarterly dividend of $0.44 per share. The company has raised its payouts consistently for the past 30 years. The stock's dividend yield on April 25 came in at 3.78%.
As of the close of Q4 2022, 16 hedge funds tracked by Insider Monkey reported having stakes in Community Bank System, Inc. (NYSE:CBU), up from 14 in the previous quarter. These stakes have a total value of $44.7 million. Ken Griffin, Noam Gottesman, and D. E. Shaw were some of the company's leading stakeholders in Q4.
Donaldson Company, Inc. (NYSE:DCI) is a Minnesota-based filtration company that specializes in the marketing of air filters. Morgan Stanley raised its price target on the stock to $71 in April with an Overweight rating on the shares, ahead of the company's recent quarterly earnings.
Donaldson Company, Inc. (NYSE:DCI) is one of the best dividend stocks on our list as it has raised its payouts for 27 years in a row. It currently pays a quarterly dividend of $0.23 per share and has a dividend yield of 1.48%, as of April 25.
As of the close of Q4 2022, 17 hedge funds tracked by Insider Monkey owned stakes in Donaldson Company, Inc. (NYSE:DCI), worth roughly $210 million collectively. With over 1.6 million shares, Impax Asset Management was the company’s leading stakeholder in Q4.
RLI Corp. (NYSE:RLI) is an Illinois-based insurance company that specializes in property and casualty insurance. In April, RBC Capital raised its price target on the stock to $151 with a Sector Perform rating on the shares, following the company's recent quarterly earnings. The firm sees RLI Corp as a 'top company' which is also executing well in the current environment.
In the first quarter of 2023, RLI Corp. (NYSE:RLI) reported an operating cash flow of roughly $70 million, up from $39 million during the same period last year. The company's cash position remained strong as it distributed over $759 million in dividends to shareholders over the last five years. It is among the best dividend stocks on our list.
RLI Corp. (NYSE:RLI) has raised its dividends for 47 years in a row. The company currently pays a per-share dividend of $0.26 every quarter and has a dividend yield of 0.73%, as of April 26.
At the end of Q4 2022, 19 hedge funds tracked by Insider Monkey were long RLI Corp. (NYSE:RLI), owning stakes worth over $251.3 million collectively.
First Pacific Advisors mentioned RLI Corp. (NYSE:RLI) in its Q4 2022 investor letter. Here is what the firm has to say:
“RLI Corp. (NYSE:RLI) is a high-quality specialty insurer with a collection of niche and arcane lines across property & casualty (P&C). RLI has an attractive combined ratio and return on equity, 9 a conservative underwriting culture and growth opportunities. Despite its full price, we continue to hold RLI because of its high quality and our reluctance to trade in and out. The insurance sector as a whole performed well last year, but RLI got a boost from strong Q3 2022 earnings and the sale of its equity stake in sunglass manufacturer Maui Jim.”