Investors who once crowded into large-cap technology stocks are increasingly rotating into dividend-paying companies with steady cash flows and rising payouts. Concerns about artificial intelligence disruption and stretched technology valuations are helping drive this shift.
Jenny Harrington recently said that dividend stocks are performing well as investors rebalance portfolios. Market performance appears to support that view.
The iShares Select Dividend ETF has gained nearly 11% year to date, while the Schwab US Dividend Equity ETF is up roughly 15%. In contrast, the S&P 500 has remained largely flat during the same period.
Harrington described the valuation gap between large technology companies and traditional sectors as irrationally wide. She also pointed to rising disruption risks after Anthropic introduced a new AI model capable of performing legal tasks and building software.
In her view, companies tied to essential goods and services may offer greater stability even during periods of economic stress.
Against this backdrop, the following six dividend stocks stand out based on clear financial filters. Each company:
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Has a market capitalization above $2 billion
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Has raised dividends for at least 10 consecutive years
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Maintains a trailing 12-month payout ratio below 60%
The companies are ranked by hedge fund ownership as of Q3 2025.
Linde plc Shows Record Profitability and $10B Backlog
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Hedge fund holders: 76
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Payout ratio: 39.42%
On February 10, BMO Capital raised its price target to $507 from $501 while maintaining an Outperform rating.
During the fourth-quarter 2025 earnings call, CEO Sanjiv Lamba said global economic conditions remain uneven. Despite slower activity in traditional industrial sectors, Linde reported record annual EPS, operating cash flow, and operating margins. Return on capital reached 24.2%, and the company returned more than $7 billion to shareholders during the year.
Project backlog climbed to a record $10 billion, excluding more than $0.5 billion tied to rocket propellant projects for space-launch customers. This backlog provides strong earnings visibility heading into 2026.
McDonald’s Gains Support on Value and Digital Growth
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Hedge fund holders: 83
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Payout ratio: 59.4%
On February 13, Argus upgraded the stock to Buy and set a $380 price target, citing strength in value menus and digital initiatives.
Following fourth-quarter 2025 results, analysts broadly maintained a positive outlook. JPMorgan said the company is regaining customer attention, while Morgan Stanley maintained an Equal Weight rating. Deutsche Bank reiterated a Buy rating.
McDonald’s continues to leverage its global restaurant network, while expanding digital engagement and promotional strategies to drive comparable sales growth.
Costco Wholesale Delivers Strong Sales and Membership Growth
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Hedge fund holders: 88
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Payout ratio: 27.10%
On February 10, Evercore ISI raised its price target to $1,050 from $1,025 while maintaining an Outperform rating. On February 20, Citi lifted its target to $1,000 from $990 and maintained a Neutral rating.
January 2026 net sales reached $21.33 billion, representing a 9.3% year-over-year increase. Comparable sales rose 7.5% after adjustments. E-commerce sales surged more than 34% during the holiday period.
Membership income remains central to Costco’s business model. In fiscal Q1 2026:
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Membership fee income rose 14% to $1.329 billion
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Paid memberships reached 81.4 million, up 5.2%
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Executive memberships increased 9.1% to 39.7 million
Merck & Co. Faces Patent Pressure With $67B Revenue Outlook
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Hedge fund holders: 92
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Payout ratio: 42.86%
On February 13, Deutsche Bank upgraded the stock to Buy and raised its price target to $150 from $115, noting that concerns surrounding Keytruda’s future patent expiration may be overstated. On February 3, the company issued 2026 revenue guidance between $65.5 billion and $67 billion, slightly below the $67.6 billion analyst estimate, according to LSEG data.
The outlook includes a projected $2.5 billion headwind from generic competition, Medicare price negotiations, and lower sales of the COVID treatment Lagevrio. Despite these challenges, Merck reported strong fourth-quarter results, supported by continued demand for its blockbuster cancer drug Keytruda.
Walmart Expands Digital Sales and Profit Margins
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Hedge fund holders: 104
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Payout ratio: 31.9%
On February 17, Rothschild & Co Redburn raised its price target to $150 from $110 and reiterated a Buy rating, projecting 14% annual earnings growth through 2028.
In the fourth quarter of 2025:
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Revenue rose 4.9% in constant currency
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Online sales increased 24%
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Adjusted operating income grew 10.5%
Inventory rose 2.6%, remaining below the pace of sales growth. Customers choosing delivery within three hours increased more than 60% year over year.
Walmart’s AI-powered shopping assistant Sparky also contributed to higher engagement. Users interacting with the tool recorded average order values roughly 35% higher than other customers.
Eli Lilly Builds $1.5B Inventory Ahead of Regulatory Decision
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Hedge fund holders: 114
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Payout ratio: 28.42%
On February 18, Reuters reported that CSL Limited granted Eli Lilly rights to develop and commercialize the drug clazakizumab in certain markets in exchange for a $100 million upfront payment, along with potential milestone payments and royalties.
Earlier reports indicated Lilly had built $1.5 billion in pre-launch inventory for its oral weight-loss drug orforglipron, up from a previously disclosed $550 million. The inventory build comes ahead of a possible U.S. Food and Drug Administration decision expected in April.
Bottom Line
Dividend stocks with disciplined payout ratios, consistent dividend growth, and strong institutional ownership are drawing renewed attention as investors reassess risk.
Across these six companies, several common themes stand out:
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Strong sales growth
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Expanding profit margins
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Record project backlogs
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Rising digital engagement
These factors provide tangible support for companies that combine operational strength with rising shareholder returns.
For investors seeking income and relative stability, businesses that generate predictable cash flow while steadily increasing dividends are once again moving to the center of market attention.
