In this article, we discuss the 10 best Vanguard dividend stocks with high yields. If you want to skip our detailed analysis of dividend stocks and the latest market situation, go directly to 5 Best Vanguard Dividend Stocks with High Yields.
In the current macro environment fraught with uncertainty, dividend stocks offer investors a cozy shelter to park their money. Rising interest rates, soaring inflation and the continued volatility in global markets around the world has led investors to seek the safety that comes with holding a dividend-paying stock. Most often, companies that pay dividends have solid business fundamentals, and a proven portfolio of products/services that has stood the test of times. The Janus Henderson Global Dividend Index report notes that dividend payments posted underlying growth of 14.7% in 2021, reaching a record of $1.47 trillion. This was after many prominent firms had to cut or halt their yield payments in the pandemic year of 2020. In 2022, dividend payments around the globe are expected to soar to $1.52 trillion, registering an underlying growth of 5.7%.
The Vanguard High Dividend Yield ETF seeks to track the performance of the FTSE High Dividend Yield Index, which includes stocks boasting the highest dividend yields excluding real estate investment trusts (REITs). As of April 30, the Vanguard High Dividend Yield ETF owns 443 stocks in total, with total assets worth $55.8 billion. The top 10 holdings of the firm represent 22.60% of its total portfolio, and includes dividend giants such as The Coca-Cola Company (NYSE:KO), Pfizer Inc. (NYSE:PFE) and Johnson & Johnson (NYSE:JNJ), among others mentioned below.
Let’s now take a look at the best Vanguard dividend stocks with high yields.
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Our Methodology
We went through the portfolio of The Vanguard High Dividend Yield ETF, and picked its top 10 holdings. Analyst ratings, business fundamentals, and hedge fund sentiment around each stock has also been provided to give readers additional information to enable well-informed investment choices.
Best Vanguard Dividend Stocks with High Yields
10. The Coca-Cola Company (NYSE:KO)
Number of Hedge Fund Holders: 70
Dividend Yield (as of May 17): 2.69%
The Coca-Cola Company (NYSE:KO) is first up on our list of the 10 best Vanguard dividend stocks with high yields. The beverage maker boasts an impressive history of paying dividends, with 59 consecutive years of dividend growth. It offers a yield of 2.69% as of May 17.
On May 9, BofA added The Coca-Cola Company (NYSE:KO) to the firm’s “US 1” list, which is a collection of its best investment ideas drawn from the universe of Buy-rated, US-listed stocks covered by the firm’s fundamental equity research analysts. On April 26, Guggenheim analyst Laurent Grandet gave The Coca-Cola Company (NYSE:KO) a ‘Buy’ rating, and raised the price target to $71 from $68. The analyst noted that The Coca-Cola Company (NYSE:KO) is the best positioned firm in the food and beverage space to navigate high inflation owing to the pricing power of its various brands.
Reporting its first quarter earnings on April 25, The Coca-Cola Company (NYSE:KO) posted earnings per share of $0.64, outperforming estimates by $0.06. Quarterly revenue stood at $10.5 billion, showing an increase of 16.44% year-on-year and beating forecasts by $670.8 million.
Billionaire Warren Buffett has been building his position in The Coca-Cola Company (NYSE:KO) for decades, and currently stands as its largest shareholder. At the close of the first quarter of 2022, Berkshire Hathaway held 400 million shares of the beverage firm valued at $24.79 billion. In total, 70 hedge funds reported ownership of stakes in The Coca-Cola Company (NYSE:KO) at the end of Q4 2021, with an aggregate value of $28.6 billion.
ClearBridge Investments mentioned a variety of stocks in its Q4 2021 investor letter, and among those was The Coca-Cola Company (NYSE:KO). Here’s what the fund said:
“Over the last year, we have repositioned our portfolio to navigate the course we see ahead. We added to more defensive areas of the portfolio like consumer staples (Coca-Cola). While the next month or two will likely prove choppy on account of the Omicron variant, we believe that Omicron, like Delta, represents a speed bump on the way to recovery rather than a true change in course. We see strong economic momentum continuing in 2022 and we expect interest rates to rise. After a decade of remarkably low rates, we would not be surprised if this change in direction is accompanied by some fits and starts in the markets. With our emphasis on pricing power, purposeful sector exposure, valuation discipline, and a strong dividend profile, we believe we are well-positioned for the year ahead.”
In addition to The Coca-Cola Company (NYSE:KO), Pfizer Inc. (NYSE:PFE) and Johnson & Johnson (NYSE:JNJ) are some of the best dividend stocks to buy now.
9. Bank of America Corporation (NYSE:BAC)
Number of Hedge Fund Holders: 84
Dividend Yield (as of May 17): 2.35%
Bank of America Corporation (NYSE:BAC) is a bank holding company based in North Carolina, offering a range of financial services to clients across the United States. On April 27, it declared $0.21 per share quarterly dividend, in-line with previous. The company’s yield stands at 2.35% as of May 17. It has grown its dividend payments to shareholders for 8 years in a row.
Investors were seen grabbing up on Bank of America Corporation (NYSE:BAC) stock. At the end of December, 84 hedge funds held positions in the company with a collective price tag of $47.87 billion. Compare that to the end of September, where 72 hedge funds held $46.48 billion worth of stakes in the firm. Warren Buffett’s Berkshire Hathaway was the most prominent shareholder of Bank of America Corporation (NYSE:BAC) at the end of Q1 2022, with a stake worth $41.6 billion.
Oppenheimer analyst Chris Kotowski gave Bank of America Corporation (NYSE:BAC) an ‘Outperform’ rating on May 3, and revised the price target to $50 from $52. He noted that an uptick in loans and rising interest rates are good for the banking sector, which would handle a recession better than any other time in its history. Kotowski feels investors should benefit from the firm’s recent share price weakness.
For Q1 2022, Bank of America Corporation (NYSE:BAC) reported earnings per share of $0.80, beating estimates by $0.06. The company’s revenue for the quarter stood at $23.23 billion, outperforming estimates by $135.8 million.
Investment firm Miller Value Partners discussed Bank of America Corporation (NYSE:BAC) in its Q1 2022 investor letter. The fund said:
“There are many times when volatility and beta give false signals. Banks outperformed in the post-tech bubble bear market of the early 2000s. At the market peak prior to the financial crisis (when risk was the highest in those names!), Bank of America (NYSE:BAC) had a 0.9x beta (based on the trailing 5 years) suggesting its “risk” was below the market’s. Wrong! It massively underperformed in the financial crisis. Realized beta over the 5 years from the pre-crisis’ 2006 peak measured 2.3x.
A much better indicator of actual risk, both before and after the financial crisis, was the quality of the balance sheet and risk-taking appetite. Beta is backwards looking and non-stationary. Relying on it underestimated risk going into the financial crisis and overestimated coming out of it (its beta has continued to fall over the past decade).
We care greatly about risk. We spend a significant amount of time thinking about the risks to our investments. We measure risk as permanent impairment of capital, which means the prices and values don’t bounce back. Business fundamentals determine risk.”
8. AbbVie Inc. (NYSE:ABBV)
Number of Hedge Fund Holders: 82
Dividend Yield (as of May 17): 3.63%
Then there’s AbbVie Inc. (NYSE:ABBV), a biopharmaceutical firm based in Illinois which develops therapies for a range of diseases. It has increased its dividends for 9 years in a row, and offers a 3.63% yield as of May 17.
On May 2, Wells Fargo analyst Mohit Bansal kept an ‘Overweight’ rating on AbbVie Inc. (NYSE:ABBV) shares, rating it as his top pick in the sector. He forecasts sales/EPS compound annual growth rate (CAGR) at 5%-11% between 2023 and 2028, as compared to the consensus figures of 2%-4%. The analyst notes that now is the time to own AbbVie Inc. (NYSE:ABBV) shares given it is at least 35% undervalued considering the long-term growth potential. As of May 17, AbbVie Inc. (NYSE:ABBV) has gained 32.05% in the last 12 months, and 14.30% in the year to date.
AbbVie Inc. (NYSE:ABBV) reported an EPS of $3.16 for the first quarter, beating estimates by $0.02. Quarterly revenue increased 4.66% year-on-year, coming in at $13.5 billion which fell below estimates by $74.9 million.
82 hedge funds were long AbbVie Inc. (NYSE:ABBV) at the close of Q4 2021, as compared to 81 hedge funds a quarter ago. The combined value of Q4 hedge fund holdings stood at $3.74 billion. Arrowstreet Capital was the firm’s largest shareholder at the end of March, with a stake consisting of 4.65 million shares valued at $754.2 million.
Here is what Miller Howard Investments had to say about AbbVie Inc. (NYSE:ABBV) in its Q3 2021 investor letter:
“While optimistic about a recovery, we continue to balance our cyclical holdings with dividend-payers in stable, less economically-sensitive industries. We hold three pharmaceutical companies, (which includes) AbbVie (ABBV). All three have strong cash flows and balance sheets, making their high dividends reasonably safe. The investment controversy surrounding these pharma companies is whether they can develop or acquire new products to replace their current blockbuster drugs. The low valuations on these stocks reflects what we believe to be undue pessimism by investors on the prospects for new drugs.”
7. Pfizer Inc. (NYSE:PFE)
Number of Hedge Fund Holders: 83
Dividend Yield (as of May 17): 3.12%
Pfizer Inc. (NYSE:PFE) is the biopharmaceutical firm behind the popular Pfizer-BioNTech Covid-19 vaccine, and ranks next on the list of the best Vanguard dividend stocks with high yields. On April 28, the company declared $0.40 per share quarterly dividend, which was in-line with previous. This brings the company’s yield to 3.12% as of May 17.
On May 17, Pfizer Inc. (NYSE:PFE) and BioNTech (BNTX) received FDA (Food and Drug Administration) emergency use authorization for its booster vaccines in children aged 5 through 11. The firm generated $12.5 billion in revenue from its vaccines in 2021, and further expects a record-breaking $32 billion revenue from vaccine sales in 2022.
Wells Fargo analyst Mohit Bansal on May 4 maintained an ‘Overweight’ rating on Pfizer Inc. (NYSE:PFE) shares and revised the price target to $55 from $60. Pfizer Inc. (NYSE:PFE) on May 10 announced that it entered an agreement to acquire Biohaven Pharmaceutical (BHVN), a manufacturer of therapies for migraine. Under the deal, Pfizer will buy all shares of Biohaven that it doesn’t already own for $148.50 per share in cash.
For Q1 2022, Pfizer Inc. (NYSE:PFE) posted EPS of $1.62, exceeding analysts’ forecasts by $0.05. Revenue for the quarter was recorded at $25.7 billion, beating estimates by $927.1 million and showing an increase of 76% from the year-ago quarter. As of May 17, Pfizer Inc. (NYSE:PFE) has seen its share price jump 28.19% in the last 12 months.
At the close of the fourth quarter, 83 hedge funds reported ownership of stakes in Pfizer Inc. (NYSE:PFE), showing a positive trend from the quarter before where 74 hedge funds held the company shares.
Investment firm ClearBridge Investments discussed the prospects of Pfizer Inc. (NYSE:PFE) in its Q4 2021 investor letter. Here’s what the fund said:
“While the level of general turnover abated as we progressed through 2021, it remained high in one area: post-COVID-19 recovery plays. The concept behind this investment thesis was, and still is, straightforward: with the advent of effective vaccines, the path from pandemic to endemic is just a matter of time. As this transition occurs, the estimated excess savings of over $2 trillion built up on U.S. consumer balance sheets will unlock dramatic pent-up demand for experiences, especially global travel. This investment case seemed especially compelling when the Pfizer vaccine positively surprised markets in November 2020. As a result, we made post-COVID-19 stocks (which were trading well below our estimate of recovery value) a sizable theme within the portfolio. We understood this to be a more aggressive tilt in positioning because it required a major improvement in demand to catalyze fundamentals and drive price toward higher business values. While we accepted that recovery would not be smooth and that it would take time to deploy vaccines both domestically and globally, we decided that recovery was the logical path of least resistance and we were being well compensated for these risks.
What we did not account for, however, was vaccine hesitancy and the risk of further infection waves. As a result, the first variant wave, Delta, was a negative surprise to both the market and our team. When the risk surfaced, we immediately updated our probability-driven models and debated how we should react. The resulting conclusion was that the recovery would be delayed and that we should reduce our exposure quickly, subsequently targeting the most aggressive recovery stocks such as cruise lines. We again acted swiftly and decisively to the positive surprise that Pfizer had delivered a high-efficacy antiviral COVID-19 pill. This pill should greatly reduce COVID-19 severity risks globally, increasing the probability of a global travel recovery in 2022. While this is still true, the emergence of the highly mutated Omicron variant set off another infection wave which spurred us to again act quickly and further reduce our risk exposure. This back-and-forth may sound exhausting, but it highlights our compulsion to act if we determine a surprise has a large enough impact on the probabilities that power our valuation-driven investment cases.
6. Chevron Corporation (NYSE:CVX)
Number of Hedge Fund Holders: 53
Dividend Yield (as of May 17): 3.26%
Chevron Corporation (NYSE:CVX) deals in the exploration, development and production of natural gas and crude oil products around the world. On the back of soaring energy prices, the company has gained 45.92% in the year to date, and 63.90% in the last 12 months as of May 17.
On April 27, Chevron Corporation (NYSE:CVX) declared a quarterly dividend of $1.42 per share, which was in-line with previous. The dividend yield stands at 3.26% as of May 17. On April 5, UBS analyst Luiz Carvalho raised the firm’s price target on Chevron Corporation (NYSE:CVX) to $192 from $150 and reiterated a ‘Buy’ rating on the company shares. He attributed this rating to the firm’s lower exposure to Russia in comparison to peers, along with an increase in crude oil prices.
Out of all the hedge funds tracked by Insider Monkey, 53 held positions in Chevron Corporation (NYSE:CVX) at the end of the fourth quarter. The combined value of these stakes stood at $6.5 billion. In contrast, 51 hedge funds held stakes in the firm a quarter ago. Berkshire Hathaway increased its Chevron Corporation (NYSE:CVX) stake by 317% in the first quarter of 2022, standing at 159 million shares valued at more than $25.9 billion. This made Warren Buffett the largest shareholder of the energy firm.
For Q1 2022, Chevron Corporation (NYSE:CVX) recorded an EPS of $3.36, which missed estimates by $0.08. Revenue of $54.4 billion for the quarter beat estimates by $812.7 million, and recorded an increase of 69.76% in comparison to the year-ago quarter.
ClearBridge Investments mentioned Chevron Corporation (NYSE:CVX) in its Q1 2022 investor letter. The fund said:
“The energy sector, which led a strong market in 2021, generated even more dramatic relative performance in the quarter, advancing 39% and leading the benchmark Russell 1000 Value Index. Years of restrained investment in the energy sector, combined with a strong post-pandemic recovery, contributed to the higher commodity prices. The upward pressure escalated with the Russian invasion of Ukraine. Our energy holding Chevron (NYSE:CVX) benefited from higher commodity prices and was among the top contributors to first-quarter performance.”
Just like The Coca-Cola Company (NYSE:KO), Pfizer Inc. (NYSE:PFE) and Johnson & Johnson (NYSE:JNJ), Chevron Corporation (NYSE:CVX) is an attractive dividend stock to hold.
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