We just covered the 10 Best Debt-Free Dividend Stocks to Buy Right Now, and Erie Indemnity Company (NASDAQ:ERIE) ranks 6th on this list.
Debt is increasingly common in the stock market, particularly as the technology companies use it to fund their AI spending. On November 2, Reuters reported that the world’s largest tech firms are turning to the debt markets and raising equity to fund their AI infrastructure. That’s a significant shift for the Valley firms that have traditionally funded their investments out of their own cash.
There’s very little sign that spending will abate. The major tech firms have said their combined AI spend will be well over $730 billion this year, up from around $700 billion previously. In February, Bridgewater Associates issued a warning that the AI boom had entered a “more dangerous phase” with firms increasingly throwing money at physical infrastructure and turning to external capital, according to a Reuters report. Against this backdrop, investors may also want to see which undervalued dividend stocks hedge funds are investing in.
That said, the increasing use of debt isn’t just an AI story. Some businesses are borrowing more simply because they’re not generating enough cash to fund their own operations. Private equity firms are also contributing to the problem by increasingly pushing their portfolio companies to take on debt so that they can return cash to their investors.
Erie Indemnity Stands Out for its Long Dividend Record and Strong Liquidity
The timing is important. Traditional routes out of private equity, such as going public or selling to another fund or buyer, have become increasingly difficult in recent years. The alternative is dividend recapitalization, whereby the company borrows money to make distributions to the owners. The investor gets their cash, and the company is left with more debt and less headroom in a difficult business environment.
For dividend investors, this is a problem. Every dollar spent on interest and debt service is a dollar that’s not available for dividends or for business investment. The harder it is to generate earnings or the higher the cost of borrowing, the more difficult it becomes to maintain those dividend payments.
Also read: 10 Best Dividend Stocks for Long Term Growth
The scale of corporate borrowing is also worth noting. The OECD’s Global Debt Report 2026 states that companies raised a record $13.7 trillion through capital markets in 2025, bringing total corporate debt to $59.5 trillion. The report also cautions that refinancing could become more costly as companies replace older debt, which has lower interest rates.
Story Continues
This puts companies with more cash than total debt in a tricky spot. They have fewer obligations and more headroom to fund operations, to invest in growth, and to return money to shareholders. That said, low debt in itself doesn’t make a company a good dividend investment. Free cash flow, payout ratios, and the ability to maintain or grow the dividend are just as important.
Insider Monkey tracks more than 1000 hedge funds, and 20 of these funds had a bullish long position in ERIE stock. Being a popular stock among hedge funds isn’t the only reason why ERIE made our list. ERIE is also on the list because of its low debt and consistent dividend policy.
Erie Indemnity Company (NASDAQ:ERIE) provides management services to the Erie Insurance Exchange, a policyholder-owned property and casualty insurer. The services provided include policy issuance and renewals, underwriting support, and administration. The company’s primary source of revenue is management fees, which are based on the premiums written by the Exchange.
Erie Indemnity pays a quarterly dividend of $1.4625 per Class A share, giving an annualized dividend of $5.85 per share. As of November 2, the yield on the share is 2.14%. The company has paid regular dividends to shareholders since 1942 and increased its quarterly dividend by 7.1% in December 2025. The dividend is funded by cash generated from operations. For the first 9 months of 2026, Erie generated $520.2 million in operating cash flow, up from $515.1 million in the same period last year, and paid out approximately $204.3 million in dividends to shareholders during that time.
The company also has a very solid liquidity position. Erie has $383.8 million in cash and $54.3 million in total debt, which is $329.5 million in net cash. That’s not all, though, as it has a very large investment portfolio. As of September 30, it had approximately $1.52 billion in available-for-sale and equity securities. The combination of positive net cash, recurring management fee income, and strong operating cash flow gives Erie a great deal of flexibility to maintain its dividend and to fund its business. The long track record of dividend payments and the level of cash flow coverage makes it an attractive proposition for the income investor looking for a company with a stable financial footing. ERIE is also included in our list of 13 High-Quality S&P 500 Financial Stocks According to Hedge Funds.
FREE REPORT: What are billionaires buying right now? While we acknowledge the potential of ERIE as an investment, you should take a look at these billionaire-backed stocks before making your next move. Insider Monkey just released an exclusive look into the hidden portfolios of the world’s top fund managers. Get instant, free access to the “7 Stocks Warren Buffett & Billionaires Are Quietly Hoarding” report and join 2.5 million monthly readers leveraging elite hedge fund data to build wealth. Get it NOW!
READ NEXT: 10 Best Mid-Cap US Stocks to Buy Now and 10 Best Performing AI Stocks of 2026
Disclosure: None. Follow Insider Monkey on Google News.