15 Dividend Stocks With Low Payout Ratios and Strong Upside

Core Insights - The article discusses the importance of low payout ratios in dividend stocks and highlights companies with strong upside potential and sustainable dividends [1][2][3] Dividend Payout Ratios - A high payout ratio indicates that a large portion of earnings is distributed to shareholders, leaving less for reinvestment [1] - Historical data shows that companies in the second quintile of payout ratios (averaging 40%) have outperformed those in the first quintile (averaging 75%) over multiple decades [2] - Companies with lower payout ratios are less likely to cut dividends during earnings declines, as they have more margin for error [3] Investment Methodology - The selection process involved screening for companies with a 5-year average payout ratio below 60%, indicating a strong cash position [6] - Stocks were further filtered to include those with a minimum upside potential of 25% based on analysts' targets as of December 24 [6] - The final list included 15 companies favored by hedge funds, as per Insider Monkey's database for Q3 2025 [6][7] Company Highlights - Houlihan Lokey, Inc. (NYSE:HLI): - 5-Year Average Payout Ratio: 40.94% - Upside Potential: 26.3% - Recent revenue of $659 million, up from $575 million year-over-year, with net income rising to $112 million [9][10][11] - Weyerhaeuser Company (NYSE:WY): - 5-Year Average Payout Ratio: 59.1% - Upside Potential: 32.1% - Recent initiatives include a joint venture with Aymium to produce sustainable biocarbon, with plans to convert over 7 million tons of wood fiber annually [13][15][16][17] - Bunge Global SA (NYSE:BG): - 5-Year Average Payout Ratio: 22.6% - Upside Potential: 33.2% - Recent earnings per share reported at $0.86, with adjusted segment EBIT rising to $924 million [18][20][21]