In this article, we discuss 10 best value dividend stocks billionaires are crazy about.
Growth investing and value investing represent distinct approaches in the world of investments. Growth investing aims at identifying stocks that show promising potential for higher-than-average earnings growth. On the other hand, value investing centers on stocks perceived to be priced lower than their true or intrinsic value. After underperforming in 2022, growth shares have surged impressively this year, reclaiming attention with remarkable gains, whereas value shares have struggled to maintain momentum. This significant market fluctuation has made it difficult for investors to maintain confidence in long-term investment strategies, given the notable volatility experienced. The iShares S&P 500 Value ETF, which provides exposure to large U.S. companies that are potentially undervalued relative to comparable companies, gained 16.25% this year so far, compared with a 25.58% return of the iShares S&P 500 Growth ETF.
Despite the recent underperformance of value stocks, analysts remain unfazed and hold an optimistic outlook on this investment style. Their confidence is rooted in the historically strong performance of value stocks in the past. Aaron Dunn, co-head of value equity at Eaton Vance, spoke with Bloomberg about the outlook of value stocks this year. Here are some comments from the analyst:
“Over the last three years, value investing has kept up and actually beaten its growth peers. So, value investing is very interesting in a market like this, because we believe active management and looking for undervalued securities is the key to long-term success. Last year was a great example of the benefits of diversification through value investing. We have a view that inflation and interest rates are going to be structurally higher and what that means is if you go back to prior decades of the 1940s and the 1970s, value investing actually did extremely well over that period.”
Analysts believe that value stocks tend to fare relatively well during economic downturns. During recessions, investors tend to become more risk-averse and cautious about their investments. As a result, they often turn to stocks that are considered more resilient or stable, which often includes value stocks. A GMO report analyzed how cheaper stocks performed during U.S. recessions since 1969 using various valuation models like price/book, price/earnings, Composite Value, and a blend of value models for their Opportunistic Value strategies. The report suggests that building portfolios solely based on standard price/book or price/earnings ratios isn’t recommended by the firm. However, even if an investor insisted on using these ratios, they generally performed reasonably well during recessions over the past 55 years. Surprisingly, all value models, except for price/book, showed better performance during recession months (including the COVID period) compared to non-recession months since the late 1960s.
When delving into value investing, investors often pay attention not only to value stocks but also to value dividend stocks. This dual characteristic of undervaluation and dividend payouts makes them appealing to investors seeking both potential capital appreciation and regular income streams. Verizon Communications Inc. (NYSE:VZ), Altria Group, Inc. (NYSE:MO), and Pfizer Inc. (NYSE:PFE) are some of the best dividend stocks that are undervalued and we will discuss some more stocks in this article.
Our Methodology:
For this article, we first scanned the database of billionaire-owned stocks maintained by Insider Monkey as of Q3 2023. From this list, we picked the top 10 dividend companies with a price-to-earnings ratio of below 15, as of December 8. These companies possess a track record of consistently providing reliable dividends to their shareholders over time, demonstrating their stability and commitment to rewarding investors with a portion of their profits.
We also measured hedge fund sentiment around each stock from our database of 910 hedge funds at the end of Q3. The stocks are ranked in ascending order of the number of billionaire investors having stakes in them.
10. HP Inc. (NYSE:HPQ)
Number of Billionaire Investors: 15
P/E Ratio as of December 8: 9.02
HP Inc. (NYSE:HPQ) is a multinational technology company known for its extensive range of hardware, software, and services. The company declared a 5% hike in its quarterly dividend to $0.2756 per share on November 7. This was the company’s second dividend growth this year and overall, it has been raising its payouts for 12 consecutive years. The stock has a dividend yield of 3.75% as of December 8.
In fiscal Q4 2023, HP Inc. reported revenue of $13.8 billion, which showed a 6.6% decline from the same period last year. The company’s operating cash flow for FY23 came in at $3.6 billion and it generated $3.1 billion in free cash flow. During the year, it returned over $1.1 billion to shareholders through dividends and share repurchases, which makes HPQ one of the best dividend stocks on our list.
At the end of Q3 2023, 44 hedge funds in Insider Monkey’s database reported having stakes in HP Inc., compared with 46 in the previous quarter. The collective value of these stakes is over $3.27 billion. Billionaires Warren Buffett and Israel Englander were some of the company’s most prominent stakeholders in Q3.
9. American Express Company (NYSE:AXP)
Number of Billionaire Investors: 15
P/E Ratio as of December 8: 14.80
American Express Company (NYSE:AXP) is a global financial services corporation primarily known for its credit card, charge card, and traveler’s cheque businesses. In the third quarter of 2023, the company reported revenue of $15.3 billion, up 13.4% from the same period last year. During the quarter, the company returned $14 million to shareholders through dividends, which makes AXP one of the best dividend stocks.
American Express Company has been paying uninterrupted dividends to shareholders for the past 34 years. The company offers a quarterly dividend of $0.60 per share and has a dividend yield of 1.42%, as of December 8.
As of the close of Q3 2023, 74 hedge funds tracked by Insider Monkey reported having stakes in American Express Company, up from 73 in the preceding quarter. The consolidated value of these stakes is over $25.6 billion. The company also attracted the attention of 15 billionaires, including Warren Buffett and Ken Fisher.
8. ConocoPhillips (NYSE:COP)
Number of Billionaire Investors: 16
P/E Ratio as of December 8: 12.08
ConocoPhillips (NYSE:COP) is a Texas-based multinational company that is engaged in hydrocarbon exploration and production. The company operates globally and has a diversified portfolio of assets across various regions. The company’s cash position remained strong in the third quarter of 2023 as it generated $5.4 billion in operating cash flow. It also distributed $1.3 billion among shareholders through dividends.
ConocoPhillips currently offers a quarterly dividend of $0.58 per share, having raised it by 14% on November 2. Through this increase, the company stretched its dividend growth streak to nine years, which makes COP one of the best dividend stocks on our list. The stock has a dividend yield of 4.13%, as of December 8.
In the third quarter of 2023, 16 billionaires owned stakes in ConocoPhillips, including Ken Fisher and Israel Englander. Overall, the company ended the quarter with 62 hedge fund positions, which remained the same as in the previous quarter, according to Insider Monkey’s database. These stakes have a collective value of over $3.68 billion.
7. Exxon Mobil Corporation (NYSE:XOM)
Number of Billionaire Investors: 17
P/E Ratio as of December 8: 9.77
An American energy company, Exxon Mobil Corporation (NYSE:XOM) is next on our list of the best dividend stocks. The company’s dividend growth streak currently stands at 41 years and it offers a quarterly dividend of $0.95 per share. As of December 8, the stock has a dividend yield of 3.83%.
Though Exxon Mobil Corporation reported a 19% year-over-year decline in its Q3 revenue, the company’s cash flow remained strong. The company generated $16 billion in operating cash flow and $11.7 billion in free cash flow. This cash was sufficient to fulfill shareholders’ dividend payments worth over $3.7 billion.
Of the 910 hedge funds in Insider Monkey’s database, 79 hedge funds owned stakes in Exxon Mobil Corporation, up from 71 in the preceding quarter. These stakes are worth nearly $4.5 billion in total. Ken Fisher, Ken Griffin, and Israel Englander were some of the most prominent billionaires having stakes in the company.
6. Citigroup Inc. (NYSE:C)
Number of Billionaire Investors: 17
P/E Ratio as of December 8: 7.70
Citigroup Inc. (NYSE:C) is an American multinational financial services company that operates in various sectors within the finance industry. The company currently offers a quarterly dividend of $0.53 per share and has a dividend yield of 4.34%, as of December 8. It is one of the best dividend stocks on our list.
In the third quarter of 2023, Citigroup Inc. generated $20.1 billion in revenues, which saw an 8.8% growth from the same period last year. The company’s net income came in at $3.5 billion. During the quarter, the company returned $1.5 billion to shareholders through dividends and share repurchases.
The number of hedge funds tracked by Insider Monkey owning stakes in Citigroup Inc. grew to 79 in Q3 2023, from 75 in the previous quarter. The total value of these stakes is roughly $7 billion. The company was also popular among billionaires, with Warren Buffett holding the largest C stake in Q3.
Silver Beech Capital mentioned Citigroup Inc. in its Q3 2023 investor letter. Here is what the firm has to say:
“Citigroup (“Citi”) is a large-capitalization global diversified financial services holding company that primarily serves multinational institutional and high net worth consumer clients. Citi is one of three large American banks to be designated in “bucket 3 or 4” of the “global systemically important bank” (“G-SIB”) framework by The Basel Committee on Banking Supervision. The other banks in this group are J.P. Morgan and Bank of America.
As a G-SIB, Citi is subjected to increased regulatory supervision by global bank regulators and central banks. Enhanced regulatory supervision was an important post-crisis reform to strengthen the global financial system by increasing bank capital ratios, transparency, and decreasing risk-taking. These reforms resulted in the largest G-SIBs moving away from risk-oriented banking activities such as advisory, high-yield lending, and trading, towards lower-risk activities. Indeed, Citi’s most valuable, high-growth segment, Treasury and Trade Solutions, is in lower-risk and entrenched activities such as liquidity and cash management, payments, trade solutions, and automated receivables processing. In our view, somewhat unintuitively, Citi’s increased regulatory supervision contributes to the company’s less risky banking business model, and thus its attractiveness as a downside-oriented investment opportunity. (Click here to see the full text)
5. Bank of America Corporation (NYSE:BAC)
Number of Billionaire Investors: 17
P/E Ratio as of December 8: 8.59
Bank of America Corporation (NYSE:BAC) is one of the largest financial institutions in the US, offering a broad range of banking and financial services to individual consumers, small businesses, corporations, and institutional clients globally. The company has been paying uninterrupted dividends to shareholders for the past 24 years and it offers a quarterly dividend of $0.24 per share. The stock has a dividend yield of 3.11%, as of December 8.
At the end of Q3 2023, 88 hedge funds in Insider Monkey’s database reported having stakes in Bank of America Corporation, compared with 90 in the preceding quarter. The consolidated value of these stakes is more than $31.3 billion. Warren Buffett and Ken Fisher were the most notable billionaires who invested in the company in Q3.
4. Bristol-Myers Squibb Company (NYSE:BMY)
Number of Billionaire Investors: 18
P/E Ratio as of December 8: 12.73
Bristol-Myers Squibb Company (NYSE:BMY) is an American pharmaceutical industry company that operates in various therapeutic areas, including oncology, immunology, cardiovascular diseases, and fibrosis. On December 6, the company announced a 5.3% hike in its quarterly dividend to $0.60 per share. This marked the company’s 18th consecutive year of dividend growth, which makes BMY one of the best dividend stocks on our list. The stock has a dividend yield of 4.54%, as of December 8.
Insider Monkey’s database of Q3 2023 showed that 65 hedge funds owned stakes in Bristol-Myers Squibb Company, compared with 66 in the previous quarter. The consolidated value of stakes owned by these hedge funds is over $1.8 billion. D. E. Shaw and Israel Englander were some of the most prominent billionaires owning stakes in the company.
3. Cisco Systems, Inc. (NASDAQ:CSCO)
Number of Billionaire Investors: 19
P/E Ratio as of December 8: 14.58
An American multinational tech company, Cisco Systems, Inc. (NASDAQ:CSCO) is next on our list of the best dividend stocks. The company offers a quarterly dividend of $0.39 per share and has a dividend yield of 3.23%, as of December 8. It holds a 16-year track record of consistent dividend growth.
The number of hedge funds tracked by Insider Monkey owning stakes in Cisco Systems, Inc. grew to 64 in Q3 2023, from 55 in the preceding quarter. The collective value of these stakes is over $1.6 billion. Billionaires Cliff Asness and Ken Griffin were the company’s most prominent stakeholders in Q3.
2. The Cigna Group (NYSE:CI)
Number of Billionaire Investors: 19
P/E Ratio as of December 8: 14.56
The Cigna Group (NYSE:CI) is a global health services company that operates across various segments of the healthcare industry. The company has been growing its dividends consistently for the past three years and currently offers a quarterly dividend of $1.23 per share. The stock’s dividend yield on December 8 came in at 1.92%.
At the end of September 2023, 74 hedge funds tracked by Insider Monkey owned investments in The Cigna Group, the same as in the previous quarter. The total value of these stakes is over $2.84 billion. Ray Dalio and Cliff Asness were the most prominent billionaires owning stakes in the company.
1. Chevron Corporation (NYSE:CVX)
Number of Billionaire Investors: 19
P/E Ratio as of December 8: 10.57
Chevron Corporation (NYSE:CVX) tops our list of the best dividend stocks. The American energy company has raised its dividends for 36 years in a row and offers a quarterly dividend of $1.51 per share. As of December 8, the stock has a dividend yield of 4.19%.
At the end of the September quarter of 2023, 72 hedge funds held stakes in Chevron Corporation, compared with 73 in the previous quarter. The overall value of these stakes is over $21.4 billion. Billionaire Warren Buffett remained the company’s most prominent stakeholder in Q3.
You can also take a look at 10 Cheap Dividend Stocks with High Yields and 11 Cash-Rich Stocks to Buy According to Hedge Funds
Suggested articles:
- Cliff Asness Stock Portfolio: 10 Top Stock Picks
- 15 Best Falling Stocks To Buy Now
- Billionaires Are Betting On These 10 Energy Stocks
This article is originally published at Insider Monkey.
Hedge Fund Resource Center