In this article, we will be taking a look at 10 extreme dividend stocks with upside potential. To skip our detailed analysis of dividend investing, you can go directly to see the 5 Extreme Dividend Stocks with Upside Potential.
Dividend investing has been an attractive prospect for individual investors and hedge funds alike for many years. In 2022, this trend is continuing to hold true, according to an RBC Wealth Management report from this February. It is indicated that dividends per share can be expected to accelerate in 2022, due to the economic strength of dividend-yielding companies and the uncertainty surrounding the receding pandemic. Additionally, the report mentions that the Federal Reserve’s current monetary policy shift has also led to a boost in dividend stock popularity relative to the market. This is in light of the fact that a tighter monetary policy is pressuring corporate bond prices and discouraging investors from picking bonds as their preferred securities.
As such, it is forecasted that incremental asset flows will be redirected into dividend stocks such as PepsiCo, Inc. (NASDAQ:PEP), The Coca-Cola Company (NYSE:KO), and Altria Group, Inc. (NYSE:MO) this year. This is in light of the fact that S&P 500 dividends per share grew by 5% in 2021 according to RBC Wealth Management. The consensus forecast for 2022 on the matter of dividend growth shows an even greater increase of 8%. The above is also evidenced by a record amount of money being poured into exchange-traded funds, or ETFs, that are dedicated to big dividend payouts, according to a Bloomberg report this June. So far this year, ETFs tracking the highest-yielding dividend stocks have brought in $25 billion in assets. It is also expected that this inflow would reach about $50 billion by the end of 2022, according to Eric Balchunas, a Bloomberg Intelligence senior ETF analyst.
Investors are steadily beginning to prefer high-dividend ETFs over bonds. Mr. Balchunas has noted that since investors are wary of the bond market in light of the Federal Reserve’s plans to raise interest rates, most investors are flocking to dividend ETFs. Energy companies are also becoming a target for these investors as they often offer high yields. The energy sector has also proven to be the only sector in the S&P 500 Index that has managed to remain unscathed in 2022 in light of the Russia-Ukraine conflict which has damaged most sectors. The energy sector has risen by 29% in comparison, as of this June, while the broader benchmark has gone down by 18%. Since quite a few of the high-dividend ETFs investors are pouring into this year are tracking energy companies with stakes approaching 20%, the performance of these ETFs is also steadily improving, making them attractive investment options.
Photo by Dan Dennis on Unsplash
Our Methodology
We have selected dividend stocks with high yields that also harbor the potential for stock price appreciation for our list below. These stocks are among the most popular dividend stocks among hedge funds today as well, according to Insider Monkey’s hedge fund data for the first quarter of 2022, when we tracked 912 hedge funds.
Extreme Dividend Stocks with Upside Potential
10. Realty Income Corporation (NYSE:O)
Number of Hedge Fund Holders: 22
Dividend Yield: 4.3%
Realty Income Corporation (NYSE:O), also known as the Monthly Dividend Company, is a component of the S&P 500 that vows to provide its stakeholders with a reliable source of monthly income through its dividends. The company is a high-quality retail real estate investment trust. With the ability to increase its share prices through portfolio rationalization and reinvestments that can enhance share value according to Credit Suisse analysts, the company is one of the top extreme dividend stocks with upside potential.
This June, Credit Suisse’s Tayo Okusanya placed an Outperform rating on shares of Realty Income Corporation (NYSE:O), alongside a price target of $75, indicating promising upside potential.
In the fiscal first quarter of 2022, Realty Income Corporation (NYSE:O) had an EPS of $1.01, beating estimates by $0.04. Its revenue was $807.3 million, also beating estimates by $58.7 million.
In the first quarter of 2022, 22 hedge funds were long Realty Income Corporation (NYSE:O), with a total stake value of $304 million. Of these funds, Glendon Capital Management was the largest stakeholder in the company, holding 1,856,884 shares worth approximately $128 million.
Like PepsiCo, Inc. (NASDAQ:PEP), The Coca-Cola Company (NYSE:KO), and Altria Group, Inc. (NYSE:MO), Realty Income Corporation (NYSE:O) is a dividend stock investors are piling into today.
9. Citigroup Inc. (NYSE:C)
Number of Hedge Fund Holders: 88
Dividend Yield: 4.3%
Citigroup Inc. (NYSE:C) is a diversified financial services holding company. It is among America’s largest banks on the basis of assets, and demonstrated an upside of 66% as of this May, according to Wells Fargo analyst Mike Mayo. As such, the company is among the top extreme dividend stocks with upside potential.
RBC Capital’s Gerard Cassidy holds an Outperform rating on shares of Citigroup Inc. (NYSE:C) as of this June.
The company’s EPS in the fiscal first quarter of 2022 was $2.02, beating estimates by $0.6. Citigroup Inc. (NYSE:C) also brought in revenue of $19.2 billion, which beat estimates by $1.1 billion.
Out of 912 hedge funds, 88 hedge funds were long Citigroup Inc. (NYSE:C) in the first quarter of 2022. Their total stake value was $8.1 billion. In comparison, 97 hedge funds were long the stock in the previous quarter, with a total stake value of $6.6 billion.
8. Walgreens Boots Alliance, Inc. (NASDAQ:WBA)
Number of Hedge Fund Holders: 38
Dividend Yield: 4.6%
Walgreens Boots Alliance, Inc. (NASDAQ:WBA) is among the largest retail pharmacy companies operating globally. The company operates through the United States and International segments to sell prescription drugs and various retail products including products for health, wellness, beauty, and personal care. With a dividend yield above 4.5%, it is among the best extreme dividend stocks with upside potential to invest in this year.
Steve Valiquette, an analyst at Barclays, holds an Equal Weight rating on shares of Walgreens Boots Alliance, Inc. (NASDAQ:WBA) as of this June, with a price target of $45.
Walgreens Boots Alliance, Inc. (NASDAQ:WBA) had 38 hedge funds long the stock in the first quarter of 2022, with a total stake value of $736 million. Citadel Investment Group was the largest stakeholder in the company, with 2,665,200 shares worth $119 million.
Aristotle Capital Management, an independent/employee-owned investment management organization, mentioned Walgreens Boots Alliance, Inc. (NASDAQ:WBA) in its first quarter of 2022 investor letter. Here’s what they said:
“We first invested in Walgreens Boots Alliance in early 2013. Over our holding period, Walgreens merged with U.K.-based Boots Alliance, establishing itself as a global leading retail pharmacy chain. CEO Stefano Pessina set the company on a path of pursuing strategic partnerships (as opposed to vertical integration deals) to increase store traffic and to, over time, transform the business into a neighborhood health destination around a more modern pharmacy. Using its strong FREE cash flow generation, the company ramped up its investments in technology, aiming to accelerate the digitalization of health information. Mr. Pessina was not successful, however, at turning around the firm’s U.S. retail segment and had to deal with increasing prescription drug reimbursement pressures. He stepped down as CEO in 2020, and in 2021, Roz Brewer took the reins of the firm. We admire Ms. Brewer’s impressive track record at companies that include Starbucks (NASDAQ:SBUX) and Walmart (Sam’s Club). However, given management’s decision to divest core cash-generative businesses and redeploy capital to embryonic healthcare startups, we prefer to step aside while we follow the company’s progress.”
PepsiCo, Inc. (NASDAQ:PEP), The Coca-Cola Company (NYSE:KO), and Altria Group, Inc. (NYSE:MO) are among the top dividend stocks today, a category Walgreens Boots Alliance, Inc. (NASDAQ:WBA) can be expected to join in the foreseeable future as well.
7. Leggett & Platt, Inc. (NYSE:LEG)
Number of Hedge Fund Holders: 15
Dividend Yield: 4.8%
Leggett & Platt, Inc. (NYSE:LEG) is a consumer discretionary home furnishings company. It designs and manufactures products for homes, offices, and vehicles. The company has had a streak of dividend increases for 51 years, making it one of the most reliable extreme dividend stocks with upside potential on our list.
Raymond James analyst Bobby Griffin holds a Market Perform rating on Leggett & Platt, Inc. (NYSE:LEG) shares as of this May.
The same month, the company raised its dividend by a whopping 4.8% to $0.44 per share.
Our hedge fund data for the first quarter of 2022 shows 15 hedge funds holding stakes in Leggett & Platt, Inc. (NYSE:LEG) in that quarter, with a total stake value of $101 million. In the previous quarter, 21 hedge funds were long the stock with a total stake value of $136 million.
6. Prudential Financial, Inc. (NYSE:PRU)
Number of Hedge Fund Holders: 26
Dividend Yield: 4.9%
Prudential Financial, Inc. (NYSE:PRU), a financial services company, offers financial products and services such as life insurance, annuities, and investment management among much more. The company has high price targets placed on its share price by analysts at Piper Sandler, Citigroup, and others, making it one of the best extreme dividend stocks with upside potential.
Piper Sandler analyst John Barnidge holds a Neutral rating on Prudential Financial, Inc. (NYSE:PRU) shares, alongside a price target of $110 as of this May.
Prudential Financial, Inc. (NYSE:PRU) had an EPS of $3.2 in the fiscal second quarter of 2022. It beat analyst estimates by $0.5.
Citadel Investment Group was the largest stakeholder in Prudential Financial, Inc. (NYSE:PRU) in the first quarter of 2022, holding 607,300 shares worth about $71.8 million. There were 26 hedge funds holding stakes in the company in total in that quarter, with a total stake value of $172 million.
Just like PepsiCo, Inc. (NASDAQ:PEP), The Coca-Cola Company (NYSE:KO), and Altria Group, Inc. (NYSE:MO), Prudential Financial, Inc. (NYSE:PRU) is proving to be a reliable dividend stock in 2022.
Click to continue reading and see the 5 Extreme Dividend Stocks with Upside Potential.
Suggested articles:
- 15 Best Security Stocks to Buy Now
- Aquamarine Capital’s Top 10 Stock Picks
- 15 Largest Distribution Companies In The World
Disclaimer: None. 10 Extreme Dividend Stocks with Upside Potential is originally published on Insider Monkey.
