Under the Radar: Why Low-Profile Dividend Stocks Could Be Your Best Asset

In the noisy world of financial markets, where momentum trades, meme stocks, and macro narratives dominate headlines, some of the best long-term investment opportunities are quietly compounding out of view. One such opportunity lies in owning high dividend growth stocks, especially those that institutional investors have yet to crowd into.

These companies don’t always make headlines, but the numbers don’t lie. Firms that consistently grow dividends at 7% to 15% annually tend to exhibit a rare mix of strong fundamentals, capital discipline, and lower volatility. And when those same companies are largely ignored by big institutions? The results are often even better.

Dividend growth is typically a sign of underlying earnings strength, prudent capital allocation, and management confidence. Companies that increase their dividends consistently across cycles tend to have higher returns on capital, better cash flow, and more resilient earnings.

Quantitative studies bear this out. Portfolios sorted by dividend growth (not yield) outperform the market over time. A long-horizon study using Fama-French and MSCI factor data shows high dividend growth names have beaten the market by 1.5% to 2.0% annually over multi-decade periods, with lower drawdowns and volatility. And it’s not just a historical fluke: the consistency of free cash flow generation and business quality explains the excess return.

In fact, the long-term total return from these stocks comes not just from price appreciation but from a rising income stream that compounds. A stock yielding 2.5% today that grows its dividend 10% annually will yield 5% on your original cost in just over seven years. At the same time, the stock is likely to re-rate higher if earnings growth keeps pace.

From a risk management perspective, high dividend growth stocks offer another advantage: lower beta. Most of these names exhibit a beta of 0.85–0.90 relative to the broader market. In volatile or recessionary environments, they tend to hold up better—not because they’re invincible, but because they generate steady cash flow and don’t rely on external financing.

During the 2008 financial crisis, a portfolio of dividend growth stocks outperformed the S&P 500 by nearly 10 percentage points on a total return basis. Much of that came from smaller drawdowns. The same was true in 2022 when rates rose and valuations compressed across the board—many dividend growth names, particularly those with low leverage, outperformed their growth-stock counterparts on a risk-adjusted basis.

Now here’s where the story gets even more interesting. Stocks with high dividend growth and low institutional ownership consistently outperform both the broader market and even their higher-owned dividend growth peers.

Why? Because markets are inefficient at the margin. Low institutional ownership means:

• Fewer analysts and less research coverage
• Slower price discovery
• Less price distortion from ETF and quant flows
• A higher likelihood that valuation lags fundamentals

In back tests using CRSP and FactSet data over a 20-year period, high dividend growth stocks with bottom-quartile institutional ownership outperformed their highly-owned counterparts by 2.1% annually. These names are often small- to mid-cap companies generating consistent free cash flow, but without the media coverage or sell-side attention to attract big money.

High dividend growth with low institutional ownership taps into multiple inefficiencies:

• A capital discipline premium—companies that grow dividends out of retained earnings tend to invest wisely and avoid wasteful acquisitions or equity dilution
• A quality premium—these firms usually have high returns on capital, strong margins, and low debt
• A neglect premium—low institutional ownership creates a gap between price and intrinsic value

From a behavioral standpoint, institutions often overlook these stocks because they’re not big enough to move the needle or flashy enough to make marketing decks. That’s exactly what makes them interesting.

High dividend growth stocks already offer an attractive combination of income, quality, and downside protection. But when you overlay the filter of low institutional ownership, you tap into a pocket of the market that remains inefficient and underexploited.

These aren’t lottery tickets. They’re durable, cash-generating businesses compounding value year after year, just without fanfare. For patient capital, that’s exactly where the best returns tend to hide.

This is an easy search to set up using the scanner at Benzinga Pro. You can use the menu to quickly click to build a search for stocks growing dividends by 7% annually for several time periods and are under owned by institutions.

When I ran the search before I sat down to write this, a couple of things were obvious.

First, many of the stocks were foreign companies listed on US exchanges that were solid dividend growth companies. The trend that has favored only US stocks has caused institutions to avoid foreign stocks, and they have languished as a result. There is evidence that this is changing, and non-US dividend growth stocks could offer significant return potential from current levels.

Second, small-cap community banks that are out of the mainstream are doing very well with basic banking. They have little to no exposure to downtown office towers. Tariffs will have a limited impact on small-town banks and their customers. Their depositors and customers tend to be loyal. They are, and will continue to be, the financial engine of small business in the United States. Business is good, and these banks are healthy and growing their dividends consistently.

Here are examples of dividend growth stocks with standout potential right now:

Ituran Location and Control ITRN

Ituran Location and Control (ITRN), based in Israel, is a global leader in telematics and vehicle tracking solutions, with a strong footprint across Latin America and over 2.5 million subscribers worldwide. The company specializes in stolen vehicle recovery, fleet management, and connected car services, working with OEMs like GM, Nissan, and Porsche.

What makes Ituran especially appealing to income-focused investors is its shareholder-friendly capital return strategy. The company currently offers a forward dividend yield of about 5.1%, with an annual payout of $2.00 per share. Management has raised the dividend at an impressive 15.8% average annual rate over the past five years. The most recent quarterly dividend of $0.50 is slated for July 2nd.

With $75.7 million in cash and zero bank debt, Ituran remains well-positioned to sustain and potentially grow its dividend even in tougher macro conditions.

First United Corporation FUNC

First United Corporation (FUNC) is the holding company for First United Bank & Trust, a community bank headquartered in Oakland, Maryland, with a long-standing presence across Maryland and West Virginia. With 22 branches and a strong regional brand, the bank delivers traditional retail and commercial banking services alongside wealth management offerings. Its strategy is simple: steady, localized growth built on customer relationships and conservative underwriting.

As of May 2025, First United pays an annual dividend of $0.88 per share, good for a yield of about 2.94%. The company has raised its dividend by more than 12% annually for the past five years.

With a payout ratio of just under 25%, the dividend remains well covered. That low payout ratio leaves plenty of room for future increases, particularly if the bank continues to benefit from rising net interest margins and loan growth in its markets. FUNC doesn’t make headlines, but it checks all the right boxes for income-focused investors: a stable deposit base, conservative management, and a shareholder-friendly capital policy. This is the kind of small bank that flies under the radar until it doesn’t, and by then, the dividend growth and price appreciation have already rewarded the patient.