We recently Hedge funds recommend the 9 best dividend growth stocks to buyFederal Realty Investment Trust (NYSE:FRT) is on the list, so we’ll take a closer look at this stock, but first let’s see why analysts think investing in dividend stocks makes sense, especially in 2024, when interest rates are expected to remain elevated.
Dividend stocks are unlikely to go out of style, thanks to their appeal as a reliable dividend payout and a hedge against uncertainty, especially during economic downturns. Wisdom Tree’s latest report cites data from American economist Robert J. Shiller, who calculates in a research paper that since 1957, dividends have grown by an average of 5.7% per year, comfortably outpacing the 2% inflation rate each year. In the past 64 years, dividends have declined in only six years, while stock prices have declined in 18 years over the same period.
Should you invest in high-yield stocks or dividend growth stocks that have consistently increased their dividends for decades? This is a topic that has been debated on both Wall Street and academia for the past few decades. However, experts believe that in volatile times with high interest rates, investing in high-quality dividend stocks with a track record of high dividends and growth is the best and safest option for investors. Sterling Capital discussed this in the context of rising interest rates in its latest report.
“We have seen 11 rate hikes by the Federal Reserve and a period of uncertain macroeconomic conditions, but we believe companies that can pay stable and growing dividends demonstrate investment strength. As we have shared in recent months in our discussions of advantaged value, companies with these characteristics tend to be differentiated positions and can benefit from economies of scale and strong balance sheets to capture strong market share. As the economy navigates uncertain times, these companies are typically able to both attack and defend.”
Asked in a March interview with CNBC why he favors dividend growth companies over fast-growing software companies, David Bahnsen, chief information officer at Bahnsen Group, said there’s a “huge track record” that proves dividend growth companies do better over the long term and that “ultimately,” cash flow is “king.” The analyst cited the tech bull market, citing Tesla and Apple as examples of stocks that were underperforming at the time, saying “those kinds of things” don’t end well.
Asked if he would still allocate some of his portfolio to AI, Bahnsen said, “The margins are not sustainable with that kind of revenue growth,” noting the high valuations of companies in the space. He said he holds dividend growth stocks like Broadcom, which has a lot of exposure to AI, but also has a strong history of dividend growth and good cash flow.
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Nvidia Concerns
In an interview in March, Bernsen expressed concern over the company’s valuation, saying that NVDA continues to rise “vocally.” At the end of March, NVDA was trading around $903, but today it has reached $1,105. Many other analysts have also joined the group of Nvidia skeptics who believe the stock’s valuation is too high. Our latest research uncovers many AI stocks trading at attractive valuations. If you’re looking for AI stocks that are as promising as Microsoft, but trade at less than five times earnings, check out our report. Cheapest AI Stocks.
methodology
For this article, we first scanned Insider Monkey’s database of 919 hedge funds updated as of Q1 2024 to list dividend stocks with dividend yields above 4%, at least 10 years of stable dividend growth, and strong hedge fund sentiment. From the resulting long list of stocks, we selected the dividend stocks with the highest dividend yields and consecutive years of dividend growth. We further narrowed our selection to this group of stocks and selected the nine stocks with the highest number of hedge fund investors. Why are we interested in stocks that hedge funds are flooding with? The reason is simple: our research has shown that you can outperform the market by mimicking the top picks of the best hedge funds. Our quarterly newsletter strategy selects 14 small and large stocks every quarter and has returned 275% since May 2014, beating the benchmark by 150 percentage points. (Please see here for the detail).
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Federal Realty Investment Trust (NYSE:FRT)
Number of hedge fund investors: 22
Federal Realty Investment Trust (NYSE:FRT) is a Maryland-based REIT that’s one of the most popular dividend stocks among the 900+ hedge funds tracked by Insider Monkey. The company acquires and develops real estate in affluent neighborhoods where rents are high and tenant relationships last a long time.
Federal Realty Investment Trust (NYSE:FRT) has a 4.4% dividend yield and has increased its dividend for 56 consecutive years. Although the dividend yield is somewhat lower compared to its peers in the REIT industry, Federal Realty Investment Trust (NYSE:FRT)’s strong fundamentals and impeccable dividend growth track record make the company stand out. Wall Street analysts expect Federal Realty Investment Trust (NYSE:FRT)’s FFO to increase over the next five years. In 2024, FFO is expected to increase 3.7% year over year. This growth rate is expected to jump to 5.26% in fiscal year 2025 and 4.85% in fiscal year 2026.
Federal Realty Investment Trust (NYSE:FRT) No.5 It appears on Insider Monkey’s list of 9 High Dividend Growth Stocks to Buy Now.
If you’re looking for AI stocks that are as promising as Microsoft but trade at less than five times earnings, check out our report. Cheapest AI Stocks.
Read next: Michael Burry is selling these shares. and Jim Cramer recommends these stocks.
Disclosures: None. This article was originally published on Insider Monkey.
