The sustained high inflation over the past two years has resulted in increased borrowing costs, posing difficulties for both businesses and consumers. Additionally, uncertainty surrounding potential interest rate cuts by central banks, regulatory changes under the new US administration, and ongoing geopolitical tensions have further dampened economic activity. In this challenging landscape, competition for capital has intensified, with companies focusing on their competitive advantages and adjusting their strategies for both short-term stability and long-term growth to secure essential resources amid rising economic uncertainty.
Dividends are becoming increasingly attractive in the current market environment. A report from S&P Global indicates that global dividend growth saw a significant boost in 2024, rising by 8.5%. This growth was especially notable in the Asia-Pacific region, where government policies encouraged companies to shift from annual to semiannual dividend distributions. Meanwhile, the US market experienced a surge in new and reinstated dividends, with the technology, media, and telecommunications (TMT) sector playing a key role in driving this trend. The report also pointed out that over the past decade, companies across the broader market—excluding real estate investment trusts (REITs)—have, on average, distributed 85% of their discretionary cash flow (DCF), which is calculated as operating cash flow minus capital expenditures. On average, this distribution has been divided between dividends and share buybacks, with 47% allocated to dividends and 38% directed toward buybacks.
Global dividend growth had been slowing since the post-COVID recovery, but that trend reversed last year, with the growth rate accelerating to 8%. Shareholders received approximately $180 billion more in payouts than in 2024, which came as a surprise given the prevailing geopolitical and economic uncertainties, according to an S&P Global report. The firm projects that total global dividend payments will remain at $2.3 trillion in 2025.
Analysts point out that earnings growth has traditionally been the key driver of dividend increases. With strong earnings growth recorded last year, expectations for 2025 are even higher. Goldman projects an 11% rise in earnings per share this year, up from an estimated 8% in 2024, which is expected to drive a 7% increase in dividends, compared to a 6% rise last year. Meanwhile, Ohsung Kwon, a US equity strategist at BofA Securities, holds an even more optimistic view, forecasting a 12% dividend boost this year, supported by accelerating earnings growth.
Historically, dividends accounted for 40% of the market’s total returns from 1936 to 2012, but their contribution has dropped to just 16% over the past decade, according to a BofA Securities research note published late last year. However, Kwon expects dividends to play a more substantial role in overall market returns moving forward. In view of this, we will take a look at some of the best dividend stocks according to hedge funds.
For this article, we scanned Insider Monkey’s database of over 1,000 hedge funds and identified the top 10 companies that pay regular dividends to shareholders and have dividend yields of at least 1%, as of February 25. This means the stocks mentioned in this list are the most popular dividend stocks among the elite hedge funds in America. The list is ranked in ascending order of the number of hedge funds having stakes in the companies.
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. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
Is Johnson & Johnson (JNJ) the Best Retirement Stock to Buy According to Hedge Funds?
A smiling baby with an array of baby care products in the foreground.
Number of Hedge Fund Holders: 98
An American multinational pharmaceutical company, Johnson & Johnson (NYSE:JNJ) ranks eighth on our list of the best dividend stocks according to hedge funds. The company has a diverse portfolio that includes over 10 high-performing drugs across multiple therapeutic areas, such as infectious diseases and oncology. In addition to its pharmaceutical business, the company is a major player in the medical device industry, providing further diversification. Its financial performance remains stable and reliable. Since the start of 2025, the stock has surged by nearly 15%.
In the fourth quarter of 2024, Johnson & Johnson (NYSE:JNJ) reported $22.5 billion in revenue, marking a 5.2% increase from the prior year. As a prominent healthcare company, it remains focused on developing treatments for diseases with substantial unmet needs, including multiple myeloma, lung cancer, inflammatory bowel disease, and heart failure. The MedTech division recorded a 6.2% rise in global operational sales, with acquisitions and divestitures contributing 1.5% to this growth. Strong demand for electrophysiology products and Abiomed supported growth in the Cardiovascular segment, while the General Surgery unit saw increased sales of wound closure products.
Johnson & Johnson (NYSE:JNJ)’s quarterly dividend currently comes in at $1.24 per share and has a dividend yield of 3.00%, as of February 25. The company maintains one of the longest dividend growth streaks in the market, spanning 62 years.
Overall JNJ ranks 8th on our list of the dividend stocks according to hedge funds. While we acknowledge the potential for JNJ as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than JNJ but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
