Dividend stocks can be an attractive component of an investment portfolio, offering regular income streams. However, successful dividend investing demands careful analysis and strategy. While long-term dividend investing is common, some investors utilize a shorter-term approach known as dividend capture. This strategy involves purchasing shares just before the ex-dividend date to secure the dividend payout, and then potentially selling shortly after. The goal is to capitalize on dividend income and any potential stock price appreciation leading up to the dividend distribution.
In this article, we will analyze Accenture plc (NYSE:ACN) as a dividend stock, evaluating its merits for investors, especially in comparison to other dividend-paying stocks in the market.
Methodology:
This analysis is based on the dividend capture strategy, focusing on Accenture plc (NYSE:ACN) as a prominent dividend-paying stock with a January ex-dividend date. The ex-dividend date is crucial as it is the last day to purchase shares and be eligible for the upcoming dividend payment. We will also consider Accenture’s financial performance, dividend history, and hedge fund sentiment as indicators of its investment potential. Hedge fund sentiment is sourced from Insider Monkey’s data for Q3 2024, reflecting the collective wisdom of leading investment experts.
Why is hedge fund activity relevant? Research indicates that tracking the top stock picks of leading hedge funds can offer market-beating returns. Insider Monkey’s quarterly newsletter strategy, which selects a portfolio of stocks based on hedge fund consensus, has demonstrated significant outperformance since its inception in May 2014.
Accenture plc (NYSE:ACN)
Ex-Dividend Date: January 16
Accenture plc (NYSE:ACN) is a global professional services company specializing in information technology services and management consulting. The company plays a crucial role in helping businesses navigate the complexities of digital transformation and technological innovation. In the first quarter of fiscal year 2025, Accenture reported robust financial results, demonstrating its strong market position and growth trajectory. Revenue reached $17.7 billion, a 9% increase compared to the same quarter in the previous year, with consulting revenues contributing $9 billion.
Accenture has also revised its financial outlook for fiscal year 2025, increasing its full-year revenue growth forecast to 4% to 7% in local currency, reflecting confidence in its business momentum. The company anticipates a minor negative impact of 0.5% from foreign exchange fluctuations. Furthermore, Accenture has updated its GAAP EPS outlook to a range of $12.43 to $12.79, based on the revised revenue growth projections and updated foreign exchange assumptions.
Key highlights from Accenture’s Q1 2025 performance include substantial new bookings totaling $18.7 billion, with 30 client bookings exceeding $100 million each. Notably, $1.2 billion in bookings were attributed to generative artificial intelligence (AI), showcasing Accenture’s growing expertise and client demand in this rapidly evolving field. Investors are keenly observing Accenture plc (NYSE:ACN)’s expansion in AI services, which assist businesses with critical functions such as data analytics, intelligent chatbots, and enhanced customer support solutions.
Diamond Hill Capital, a prominent investment firm, highlighted Accenture (ACN) in its Q3 2024 investor letter, underscoring the stock’s attractiveness to institutional investors. They stated:
“We continue finding compelling new ideas, even as the bull market proceeds. In Q3, we initiated three new positions in Aon, Accenture plc (NYSE:ACN) and Builders FirstSource. Accenture is a leading global IT services and consultancy business. We think the services it provides — which are differentiated and in specialty areas relative to many of its peers — are critical and will be in high demand in the technology ecosystem for years to come. This should contribute to stable prices and margins. We believe the market is undervaluing Accenture relative to the opportunity ahead of it and, consequently, were able to initiate a position in the quarter at a discounted share price.”
Accenture plc (NYSE:ACN) also demonstrates a strong cash flow position. Operating cash flow for the quarter reached $1.02 billion, a significant increase from $499 million in the same period last year. Free cash flow also saw substantial growth, reaching $870 million, up from $430 million in the prior year’s quarter. Accenture remains committed to returning value to shareholders, distributing $926 million through dividends in the quarter.
Accenture plc (NYSE:ACN) has a consistent history of dividend payments, distributing dividends to shareholders regularly since 2005, making it a reliable dividend stock. Currently, Accenture offers a quarterly dividend of $1.48 per share, resulting in a dividend yield of 1.67% as of January 5.
Hedge fund interest in Accenture plc (NYSE:ACN) remains significant. According to Insider Monkey’s database, Accenture was held in 60 hedge fund portfolios at the end of Q3 2024, although this is a decrease from 68 in the previous quarter. The total value of these hedge fund holdings in Accenture exceeds $4.3 billion, indicating strong institutional confidence in the company.
ACN Compared to Industry Peers
When comparing NYSE:ACN to its industry peers in the IT services and consulting sector, several factors stand out. Accenture’s scale and global reach are unmatched by many competitors. Companies like Infosys (INFY) and Tata Consultancy Services (TCS) are also major players in IT services, but Accenture often competes at the higher end of the consulting spectrum, focusing on strategic and digital transformation projects. In terms of dividend yield, Accenture’s 1.67% is competitive within the tech sector, although some established dividend stocks in other sectors might offer higher yields.
Compared to other dividend stocks in the S&P 500, Accenture provides a blend of growth and income. While its dividend yield may not be the highest, it is coupled with consistent revenue growth and expansion into high-growth areas like AI. This positions ACN as potentially more attractive than purely high-yield, low-growth dividend stocks. For investors seeking dividend income with potential capital appreciation, Accenture presents a compelling case.
Conclusion
Accenture (ACN) ranks as a solid dividend stock, backed by strong financial performance, consistent dividend payouts, and significant hedge fund interest. While the original article notes that some AI stocks might offer more rapid returns, for investors seeking a balance of dividend income and growth in the IT services sector, Accenture remains a compelling option. Its established market leadership, expansion in AI, and commitment to shareholder returns through dividends make NYSE:ACN a noteworthy consideration for dividend investors.
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Disclosure: None. Originally published at Insider Monkey.
