In this article, we discuss the 10 dividend aristocrats that hedge funds love. If you want to skip our detailed analysis of dividend stocks, go directly to 5 Dividend Aristocrats Hedge Funds Love.
Dividend paying stocks have a history of outperforming stocks that don’t offer dividend payments to shareholders. J.P. Morgan Asset Management found in a 2013 report that companies which initiated and increased their dividend payments between 1972 and 2012 generated annualized gains of 9.5% over this period. In comparison, companies that didn’t offer any dividends posted returns of 1.6% over these four decades.
After the Covid pandemic disturbed dividend payments in 2020, the global dividend payments in 2021 recorded a 14.7% jump in underlying growth to reach a record amount of $1.47 trillion, as told by the Janus Henderson Global Dividend Index report. According to this report, global dividend payments are expected to reach $1.52 trillion in FY22, with underlying growth of 5.7%.
In order to pick stocks that offer good dividend yields, and offer them sustainably, we take a look at the S&P 500’s list of Dividend Aristocrats. These stocks have been increasing their dividend yields for the last 25 years in a row, and trade with a minimum market cap of $3 billion. Some of the best dividend-paying stocks include Walmart Inc. (NYSE:WMT), The Coca-Cola Company (NYSE:KO) and Johnson & Johnson (NYSE:JNJ), along with others mentioned below.
Photo by Dan Dennis on Unsplash
Our Methodology
To compile the following list, we picked 10 stocks from the S&P 500 Dividend Aristocrat Index with the highest number of hedge funds holding stakes in them. Hedge fund sentiment around each stock was derived from Insider Monkey’s database of 924 elite hedge funds.
10 Dividend Aristocrats Hedge Funds Love
10. PepsiCo, Inc. (NYSE:PEP)
Number of Hedge Fund Holders: 60
PepsiCo, Inc. (NYSE:PEP) is first up on our list of the dividend aristocrats hedge funds love. The firm has been increasing its dividend payout to shareholders for 49 consecutive years, offering a 2.70% yield as of March 16. PepsiCo, Inc. (NYSE:PEP) has seen its share price gain 19.52% in the last 12 months, and 3.61% in the last 6 months.
Based in New York, PepsiCo, Inc. (NYSE:PEP) manufactures and sells beverages and convenience foods around the world. On February 14, analyst Lauren Lieberman of research firm Barclays maintained an ‘Overweight’ rating on PepsiCo, Inc. (NYSE:PEP) shares, and revised the price target to $180 from $186, noting that the company’s growth estimates are towards the higher end of its long-term sales growth algorithm for 2022.
In the fourth quarter of 2021, 60 out of 924 elite hedge funds tracked by Insider Monkey were bullish on PepsiCo, Inc. (NYSE:PEP) shares, with aggregate positions worth $4.64 billion. In comparison, 61 hedge funds held combined positions worth $4.43 billion in the firm in Q3 2021. Fundsmith LLP was the top shareholder in PepsiCo, Inc. (NYSE:PEP) at the end of the fourth quarter, with 10.41 million shares valued at $1.80 billion, which was a 4% increase in its holding from the previous quarter.
In addition to Walmart Inc. (NYSE:WMT), The Coca-Cola Company (NYSE:KO) and Johnson & Johnson (NYSE:JNJ); PepsiCo, Inc. (NYSE:PEP) is a dividend aristocrat hedge funds are buying in 2022.
9. Walmart Inc. (NYSE:WMT)
Number of Hedge Fund Holders: 63
Walmart Inc. (NYSE:WMT) is a wholesale and retail supermarket giant in the United States. Jefferies analyst Stephanie Wissink kept a ‘Buy’ rating on the company shares on February 18, noting that it was positioned strongly to gain further market share in the current inflationary macro environment. On March 16, Morgan Stanley analyst Simeon Gutman gave Walmart an ‘Overweight’ rating, and sees its fintech startup ONE as a $1.6 billion revenue opportunity, which could drive greater customer engagement and brand affinity to the firm’s core business.
Walmart Inc. (NYSE:WMT) has upped its dividend payment to shareholders for 48 consecutive years, and on February 17 posted a $0.56 per share quarterly dividend, which was a 1.8% increase from its previous dividend of $0.55. As of March 16, Walmart Inc. (NYSE:WMT) offers a 1.54% yield to shareholders. The firm’s EPS for Q4 2021 stood at $1.53, which exceeded analysts’ expectations by $0.03. The revenue for the fourth quarter was recorded at $151.53 billion, which was also above consensus estimates by $1.49 billion.
GQG Partners was the largest shareholder of Walmart Inc. (NYSE:WMT) in the fourth quarter, holding 10.42 million shares worth $1.5 billion. Out of all the hedge funds tracked by Insider Monkey, 63 hedge funds were long Walmart Inc. (NYSE:WMT) at the end of the fourth quarter, with combined positions worth $7.13 billion. This is in comparison to 71 hedge funds in the preceding quarter.
8. Abbott Laboratories (NYSE:ABT)
Number of Hedge Fund Holders: 64
Abbott Laboratories (NYSE:ABT) deals in the provision of healthcare products around the globe. On February 18,
the firm declared a $0.47 per share quarterly dividend, which was in-line with previous. As of March 16, Abbott Laboratories (NYSE:ABT) pays a dividend yield of 1.60% to shareholders.
On March 1, BofA analyst Travis Steed reinstated coverage of Abbott Laboratories (NYSE:ABT) with a ‘Buy’ rating and price target of $140. The analyst noted that the firm was offering a sustainable top-quartile organic growth profile, best-in-class pipeline, a balance sheet bolstered with profits from Covid testing, and a diversified business that can outperform in many different environments.
Fisher Asset Management of billionaire Ken Fisher was the largest shareholder of Abbott Laboratories (NYSE:ABT) in Q4 2021, with 8.76 million shares worth $1.23 billion, showing an increase of 5% in holding from the previous quarter. 64 hedge funds in total were bullish on Abbott Laboratories (NYSE:ABT) shares in the fourth quarter, up from 63 in the preceding quarter.
Reporting its fourth quarter earnings on January 26, Abbott Laboratories (NYSE:ABT) posted earnings per share of $1.32, which beat analysts’ estimates by $0.11. The firm’s revenue for the quarter stood at $11.47 billion, which outperformed analysts’ forecasts by $760.41 million.
Investment firm Richie Capital Group discussed Abbott Laboratories (NYSE:ABT) in its Q4 2021 investor letter, stating:
“Abbott Labs (ABT – up 20.08%) – Abbot Labs continues to benefit from resurging demand for Covid testing kits. The company is planning to increase their monthly production of BinaxNOW athome rapid tests to 100M a month, a 43% increase from current levels.”
7. The Procter & Gamble Company (NYSE:PG)
Number of Hedge Fund Holders: 67
The Procter & Gamble Company (NYSE:PG) makes and sells branded consumer products, which include healthcare, beauty, grooming, baby care and feminine products. In January, The Procter & Gamble Company (NYSE:PG) declared a $0.8698 per share quarterly dividend, which was in-line with previous. As of March 16, the firm pays a dividend yield of 2.32%, and has grown its dividend payout for 65 consecutive years, making it a popular dividend aristocrat among hedge funds.
The Procter & Gamble Company (NYSE:PG) reported earnings per share of $1.66 for Q4 2021, beating estimates by $0.01. Quarterly revenue was up 6.12% compared to the year-ago quarter, standing at $20.95 billion and exceeding analysts’ forecasts by $617.36 million.
On January 20, Morgan Stanley analyst Dara Mohsenian reiterated an ‘Overweight’ rating on The Procter & Gamble Company (NYSE:PG) stock, and upped the price target to $177 from $161. The Procter & Gamble Company (NYSE:PG) is the analyst’s favorite name in the Household Products segment, who sees sustained revenue growth after the firm’s recent reinvestment and strategy changes over the last few years.
67 hedge funds held stakes in The Procter & Gamble Company (NYSE:PG) at the close of the fourth quarter, with a combined value of $6.61 billion. This is in comparison to 69 hedge funds with combined holdings worth $6.41 billion in the firm in Q3 2021. GQG Partners was the top shareholder of The Procter & Gamble Company (NYSE:PG) in the fourth quarter, with a stake comprising of 7.53 million shares worth $1.23 billion.
6. The Coca-Cola Company (NYSE:KO)
Number of Hedge Fund Holders: 70
The Coca-Cola Company (NYSE:KO) is up next on our list of dividend aristocrats hedge funds are buying. It was reported in the portfolio of 70 hedge funds in the fourth quarter, with combined holdings worth $28.61 billion. This shows an upward trend from the previous quarter where 61 hedge funds held stakes in The Coca-Cola Company (NYSE:KO). Warren Buffett’s Berkshire Hathaway was the top shareholder of the beverage firm in the fourth quarter of 2021, holding 400 million shares with a worth of $23.68 billion.
On February 17, The Coca-Cola Company (NYSE:KO) posted a quarterly dividend of $0.44 per share, up 5% from its previous dividend of $0.42. The firm has raised its dividend yield for the 60th year in a row. As of March 16, it offers a 2.95% yield to shareholders.
Evercore ISI analyst Robert Ottenstein on February 15 maintained an ‘Outperform’ rating on The Coca-Cola Company (NYSE:KO) shares, and raised the price target to $70 from $63. Ottenstein sees the firm continuing to improve its long-term outlook and business model, and notes potential for continued sales growth of around 5-6% as well as steady dividend increases.
The Coca-Cola Company (NYSE:KO) reported an EPS of $0.45 for the fourth quarter, outperforming estimates by $0.04. Revenue for Q4 came in at $9.47 billion, which exceeded analysts’ forecasts by $579.32 million, and was up 10.08% year-over-year.
Along with Walmart Inc. (NYSE:WMT) and Johnson & Johnson (NYSE:JNJ), The Coca-Cola Company (NYSE:KO) is a top dividend stock for income investors.
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Disclosure. None. 10 Dividend Aristocrats Hedge Funds Love is originally published on Insider Monkey.
