15 Best Dividend Leaders to Buy According to Hedge Funds

Published on February 3, 2023 at 12:46 pm by Hamna Asim in Dividend Stocks, Hedge Funds, News

In this article, we discuss 15 best dividend leaders to buy according to hedge funds. If you want to see more stocks in this selection, check out 5 Best Dividend Leaders to Buy According to Hedge Funds.

First Trust Morningstar Dividend Leaders Index Fund (NYSE:FDL) is based on the 100 highest yielding stocks that have a history of consistently paying dividends and the ability to continue doing so in the future. The stocks in the Index are weighted based on the total dividends available to investors, and ESG criteria is not considered in the Index calculation.

In a world with higher and unpredictable interest rates and inflation, it is likely that investors will seek more stability and return on investment, making dividend-paying stocks more attractive. As a result, the appeal of dividends may increase as investors move away from riskier investments. This shift toward a focus on dividends could be driven by the desire for a steady and reliable source of income, given the uncertain economic conditions. Value stocks are typically associated with established industries, and the focus is on current cash flow and dividends rather than capital growth. Consequently, dividends can play a significant role in driving returns for value stocks, often more so than capital gains.

In mid-December, Jeffrey Kleintop, chief global investment strategist at Charles Schwab told Bloomberg TV that China reopening could lead to an influx in demand, which would raise the CPI globally and interest rates will continue to rise until inflation is controlled. This could be a bad indicator for stocks in 2023 too. He noted that while the US is experiencing a manufacturing recession, the service sector is going strong, which is different from the overall recessions faced in 2008 and 2020. Kleintop said that despite extreme volatility in 2022, high dividend paying stocks have been an effective strategy to protect investment portfolios, as they outperformed on the downside and in the fourth quarter. Even in a sector as battered as tech, the highest dividend payers are outperforming, and this trend has been observed in the United States, Asia, Canada, and Europe, as per Kleintop. He advised investors to follow the same dividend strategy to deal with a tumultuous 2023 as well.

Some of the best dividend leaders to buy according to hedge funds include Exxon Mobil Corporation (NYSE:XOM), AbbVie Inc. (NYSE:ABBV), and Citigroup Inc. (NYSE:C).

Our Methodology

We scoured the holdings of First Trust Morningstar Dividend Leaders Index Fund (NYSE:FDL) and selected the top 15 dividend stocks which were the most popular among Insider Monkey’s database of holdings of 920 elite hedge funds tracked as of the end of the third quarter of 2022. Basically, we listed the best dividend leaders according to hedge funds. The list is arranged in ascending order of the number of hedge fund holders in each firm.

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Best Dividend Leaders to Buy According to Hedge Funds

15. Cardinal Health, Inc. (NYSE:CAH)

Number of Hedge Fund Holders: 45

Dividend Yield as of February 3: 2.53%

Cardinal Health, Inc. (NYSE:CAH) is a company that offers comprehensive healthcare services and products globally, catering to various healthcare entities such as hospitals, healthcare systems, pharmacies, surgical centers, clinical labs, and even home-bound patients, by providing tailored solutions. Cardinal Health, Inc. (NYSE:CAH) is a reliable dividend leader, with 37 years of consistently increasing dividends under its belt.

On February 2, the company reported a more favorable than anticipated fourth quarter and increased its 2023 profit outlook, driven by expansion in its pharmaceutical division. Cardinal Health, Inc. (NYSE:CAH) now sees 2023 profit per share between $5.20 to $5.50, up from $5.05 to $5.40, versus a $5.31 consensus. Cardinal’s Q4 2022 revenue climbed 13.2% year-over-year to $51.47 billion, beating estimates by $1.44 billion, while non-GAAP EPS of $1.32 exceeded consensus by $0.18.

UBS analyst Kevin Caliendo on January 31 raised the price target on Cardinal Health, Inc. (NYSE:CAH) to $91 from $78 and kept a Buy rating on the shares as part of a broader research note on pharma distributors.

According to Insider Monkey’s third quarter database, 45 hedge funds were long Cardinal Health, Inc. (NYSE:CAH), compared to 44 funds in the prior quarter. Richard S. Pzena’s Pzena Investment Management is the largest position holder in the company, with 2.73 million shares worth $182 million.

Like Exxon Mobil Corporation (NYSE:XOM), AbbVie Inc. (NYSE:ABBV), and Citigroup Inc. (NYSE:C), Cardinal Health, Inc. (NYSE:CAH) is one of the best dividend leaders to invest in according to elite investors.

Ariel Investment made the following comment about Cardinal Health, Inc. (NYSE:CAH) in its Q3 2022 investor letter:

“Additionally, distributor of pharmaceutical and medical products Cardinal Health, Inc. (NYSE:CAH) advanced in the period as leadership changes were viewed to be positive for shares. Management provided a new profit outlook for Fiscal 2023 and announced an improvement plan for the medical segment. We are encouraged by these changes and think CAH’s underlying fundamentals and competitive advantages around preventative maintenance screenings and medication management will continue to improve. We believe valuations of healthcare companies like CAH that focus on cost optimization and promote technological efficiency across the supply chain will be rewarded over the long term.”

14. Altria Group, Inc. (NYSE:MO)

Number of Hedge Fund Holders: 47

Dividend Yield as of February 3: 8.07%

Altria Group, Inc. (NYSE:MO) manufactures and sells smokable and oral tobacco products in the United States. The company predicts that its 2023 full-year adjusted diluted earnings per share will be between $4.98 to $5.13, which indicates a growth rate of 3% to 6% based on the 2022 figure of $4.84. Altria Group, Inc. (NYSE:MO) also authorized a new $1 billion share repurchase program, which is expected to conclude by December 31, 2023. On February 1, the company also announced that it plans to pay off approximately $1.3 billion in outstanding notes due this month using its readily available cash. On January 10, Altria Group, Inc. (NYSE:MO) paid a $0.94 per share quarterly dividend, with a forward yield of 8.1%.

According to Insider Monkey’s data, 47 hedge funds were long Altria Group, Inc. (NYSE:MO) at the end of the third quarter of 2022, compared to 48 funds in the last quarter. Peter Rathjens, Bruce Clarke, and John Campbell’s Arrowstreet Capital held the largest stake in the company, with 9.5 million shares worth $382.6 million.

In its Q2 2021 investor letter, Broyhill Asset Management, an asset management firm, highlighted a few stocks and Altria Group, Inc. (NYSE:MO) was one of them. Here is what the fund said:

“Altria (MO) shook off the prospects of a ban on menthol and a potential cap on nicotine and gained 20%. We shared our thoughts on these regulations during the quarter, which are available here.

MO Valuation. MO is up ~ 18% YTD (even accounting for the recent sell-off). We expect MO to generate close to $5 in annual FCF per share over the next few years, putting the stock at ~ 10x, which is less than half the market’s multiple today. Over the last decade, shares have traded at an average multiple of 15x and within a range of ~ 10x – 20x (+/-1 standard deviation). The stock yields 7.2% at the current price, close to a 6% premium to treasuries. Historically, shares have traded closer to a 3% premium to the 10Y, which would imply a ~ $75 share price.”

13. 3M Company (NYSE:MMM)

Number of Hedge Fund Holders: 49

Dividend Yield as of February 3: 5.03%

3M Company (NYSE:MMM) is a global technology company that operates through four business divisions – Safety and Industrial, Transportation and Electronics, Health Care, and Consumer. It is one of the best dividend leaders to monitor. The Q4 2022 revenue of $8.1 billion exceeded Wall Street estimates by $10 million, but the non-GAAP EPS of $2.28 missed consensus by $0.11. The organic sales growth came in at 0.4% on a year-over-year basis.

On January 26, Mizuho analyst Brett Linzey maintained a Neutral rating on 3M Company (NYSE:MMM) and lowered the firm’s price target on the shares to $120 from $130. According to the analyst, 3M’s fourth quarter results failed to meet expectations and the start of 2023 is expected to be weak. The analyst also mentioned that 3M Company (NYSE:MMM) is taking a cautious approach, working to balance their inventory levels and adjusting production to match demand in preparation for a potentially unstable 2023.

According to Insider Monkey’s data, 3M Company (NYSE:MMM) was part of 49 public stock portfolios at the end of September 2022, compared to 54 in the prior quarter. Ken Fisher’s Fisher Asset Management is the largest stakeholder of the company, with 6.3 million shares worth $703 million.

Mayar Capital mentioned 3M Company (NYSE:MMM) in its Q2 2022 investor letter. Here is what the firm has to say:

“We also bought back into 3M (NYSE:MMM) as the stock reached attractive levels. We’d sold our shares in 3M last year when the price exceeded our estimated fair value, and as better opportunities to invest in presented themselves at the time. Nonetheless, we’ve always liked this business with its diversified revenues, its R&D leadership and its stable margins.

12. Pioneer Natural Resources Company (NYSE:PXD)

Number of Hedge Fund Holders: 49

Dividend Yield as of February 3: 11.71%

Pioneer Natural Resources Company (NYSE:PXD) is a Texas-based independent oil and gas exploration and production company that explores for, develops, and produces oil, natural gas liquids, and gas. On January 26, Pioneer Natural Resources Company (NYSE:PXD) announced that Winter Storm Elliott impacted its expected fourth quarter production in the Permian Basin, and it now anticipates reporting an average output of 351 thousand barrels of oil per day and 662 thousand barrels of oil equivalent per day for the fourth quarter, compared to the 355 thousand barrels of oil per day and 670 thousand barrels of oil equivalent per day that would have been produced without the adverse weather conditions.

On January 9, Mizuho analyst Nitin Kumar assumed coverage of Pioneer Natural Resources Company (NYSE:PXD) with a Buy rating and a $294 price target. He is optimistic about Pioneer as he believes the company will enhance its capital efficiency by prioritizing higher-return projects in 2023. According to the analyst, this shift should refocus investors’ attention on Pioneer Natural Resources Company (NYSE:PXD)’s robust cash return program, which is supported by “one of the largest reserve bases in U.S. shale.”

According to Insider Monkey’s Q3 data, 49 hedge funds were bullish on Pioneer Natural Resources Company (NYSE:PXD), compared to 56 funds in the prior quarter. Donald Yacktman’s Yacktman Asset Management is a significant position holder in the company, with 686,869 shares worth $148.7 million. It is one of the best dividend leaders to buy according to hedge funds.

Here is what Carillon Scout Mid Cap Fund has to say about Pioneer Natural Resources Company (NYSE:PXD) in its Q1 2022 investor letter:

“Pioneer Natural Resources (NYSE:PXD) performed well in a strong energy sector. Pioneer stood out recently with a pledge to return a large majority of free cash flow to share owners through dividends and stock buybacks, and ended hedging to give share owners more earnings and dividend potential should oil and gas prices continue to rise.”

11. Devon Energy Corporation (NYSE:DVN)

Number of Hedge Fund Holders: 51

Dividend Yield as of February 3: 8.35%

Devon Energy Corporation (NYSE:DVN) was incorporated in 1971 and is headquartered in Oklahoma City, Oklahoma. It is an independent energy company that specializes in the exploration, development, and production of oil, natural gas, and natural gas liquids. On January 10, Devon Energy Corporation (NYSE:DVN) announced that its fourth quarter production is expected to decline by 2%, or 15 thousand barrels of oil equivalent per day, as a result of the severe weather conditions that affected its operations in December, particularly in the Williston Basin.

On January 24, Wells Fargo analyst Roger Read initiated coverage of Devon Energy Corporation (NYSE:DVN) with an Equal Weight rating and a $70 price target. According to the analyst, Devon’s recent acquisitions and existing resources support its aim of achieving annual production growth of up to 5%, but the neutral rating reflects the market’s recognition of the stock’s recent performance.

According to hedge fund sentiment, Devon Energy Corporation (NYSE:DVN) is one of the best dividend leaders to invest in. In the third quarter of 2022, 51 hedge funds were long Devon Energy Corporation (NYSE:DVN), compared to 57 funds in the prior quarter. Rajiv Jain’s GQG Partners is the biggest stakeholder of the company, with 10.6 million shares worth $642 million.

In its Q2 2022 investor letter, GoodHeaven Capital Management, an asset management firm, highlighted a few stocks and Devon Energy Corporation (NYSE:DVN) was one of them. Here is what the fund said:

“Our biggest dollar gainer within this period was Devon Energy Corporation (NYSE:DVN), a position which emanated from a takeover in early 2021 of our long-time holding WPX Energy. We are sitting on a material (unrealized) gain from our cost and are now receiving material dividends thanks to Devon’s thoughtful fixed/variable dividend policy. Energy is now a hot sector for investors but we have had material exposure for a long time. We remember a bit too well $40 oil, NEGATIVELY PRICED front-month oil contract, and what it’s like to own a company with leverage and negative free cash flow during such periods. Our desire to have our biggest portfolio exposures be high-return, growing, reasonably predictable and moderately levered companies led us to reduce our Devon exposure in the past. When the recent facts and circumstances for the industry changed and appeared supportive of healthy oil prices, we decided to maintain a sizable holding and more recently added to the position. At Devon’s Q1 dividend rate, which is most variable in nature, the shares now yield approximately 10% and our yield on our average cost is materially higher. In addition, we maintain additional energy exposure through our long-term (and successful) holding in Hess Midstream and less directly through TerraVest and Berkshire Hathaway’s energy investments.”

10. U.S. Bancorp (NYSE:USB)

Number of Hedge Fund Holders: 52

Dividend Yield as of February 3: 3.87%

U.S. Bancorp (NYSE:USB) is a financial services holding company, offering various financial services to individuals, businesses, institutions, government entities, and other financial institutions in the United States. It operates through five segments – Corporate and Commercial Banking, Consumer and Business Banking, Wealth Management and Investment Services, Payment Services, and Treasury and Corporate Support. On January 25, U.S. Bancorp (NYSE:USB) reported a Q4 non-GAAP EPS of $1.20, beating estimates by $0.06. Revenue for the period increased 12.1% year-over-year to $6.37 billion, but fell short of Wall Street consensus by $240 million.

On January 10, UBS analyst Erika Najarian upgraded U.S. Bancorp (NYSE:USB) to Buy from Neutral with a price target of $55, up from $47. According to the analyst, with the Union Bank deal now completed, the uncertainty has been lifted and U.S. Bancorp is now attractively priced.

According to Insider Monkey’s data, 52 hedge funds were bullish on U.S. Bancorp (NYSE:USB) at the end of Q3 2022, compared to 43 funds in the prior quarter. Warren Buffett’s Berkshire Hathaway is the biggest position holder in the company, with 77.8 million shares worth $3 billion.

In its Q4 2021 investor letter, ClearBridge Investments, an asset management firm, highlighted a few stocks and U.S. Bancorp (NYSE:USB) was one of them. Here is what the fund said:

“Over the last year, we have repositioned our portfolio to navigate the course we see ahead. We have increased our exposure to interest-rate sensitive banks by adding to existing positions in U.S. Bancorp (NYSE:USB).”

9. United Parcel Service, Inc. (NYSE:UPS)

Number of Hedge Fund Holders: 55

Dividend Yield as of February 3: 3.38%

United Parcel Service, Inc. (NYSE:UPS) is a company that offers letter and package delivery, transportation, logistics, and related services. It operates through two main business segments – U.S. Domestic Package and International Package. On January 31, United Parcel Service, Inc. (NYSE:UPS) declared a $1.62 per share quarterly dividend, a 6.6% increase from its prior dividend of $1.52. The dividend is payable on March 10, to shareholders of record on February 21. In addition, the UPS board approved a new $5 billion share repurchase authorization, replacing the company’s existing authorization. United Parcel Service, Inc. (NYSE:UPS) is one of the best dividend leaders to consider.

On February 1, Cowen analyst Helane Becker raised the price target on United Parcel Service, Inc. (NYSE:UPS) to $195 from $187 and kept a Market Perform rating on the shares. According to the analyst, management anticipates a challenging first half of 2023, followed by a recovery in the second half as they address declining volumes. United Parcel Service, Inc. (NYSE:UPS) continues to move away from low-margin B2C business and towards higher-margin B2B and healthcare solutions, offering greater growth opportunities, the analyst told investors.

According to Insider Monkey’s data, 55 hedge funds were long United Parcel Service, Inc. (NYSE:UPS) at the end of Q3 2022, up from 38 funds in the prior quarter. Bill & Melinda Gates Foundation Trust is a prominent stakeholder of the company, with 740,689 shares worth $119.65 million.

Diamond Hill Capital made the following comment about United Parcel Service, Inc. (NYSE:UPS) in its Q3 2022 investor letter:

“United Parcel Service, Inc. (NYSE:UPS) is the world’s largest package deliverer, operating globally. The company and its share price had benefited from pandemic-related spikes in shipping demand while supply was constrained (grounding of airlines and their associated space), leading to increased pricing power. Our view is such conditions will not persist as the environment normalizes. In Q3, UPS reported weak results and a decline in volume in its US domestic business, pressuring the share price.”

8. Gilead Sciences, Inc. (NASDAQ:GILD)

Number of Hedge Fund Holders: 56

Dividend Yield as of February 3: 3.44%

Gilead Sciences, Inc. (NASDAQ:GILD) is a California-based biopharmaceutical company that discovers, develops, and commercializes medicines in the areas of unmet medical need in the United States, Europe, and internationally. On February 2, Gilead Sciences, Inc. (NASDAQ:GILD) declared a $0.75 per share quarterly dividend, a 2.7% increase from its prior dividend of $0.73. The dividend is distributable on March 30, to shareholders of record on March 15. Gilead Sciences also reported a significant increase in its Q4 2022 net income, which rose by 334% to approximately $1.6 billion, attributed partly to a reduction in cost of goods sold.

On January 19, Piper Sandler analyst Do Kim raised the price target on Gilead Sciences, Inc. (NASDAQ:GILD) to $111 from $104 and maintained an Overweight rating on the shares. The analyst sees potential for guidance to exceed expectations for both Trodelvy and Veklury. The analyst believes the robust Q4 sales of HIV drugs will support a return to pre-pandemic growth and provide confidence in low-to-mid single digit growth for HIV in the fiscal year 2023.

According to Insider Monkey’s third quarter database, 56 hedge funds were long Gilead Sciences, Inc. (NASDAQ:GILD), compared to 58 funds in the last quarter. Jim Simons’ Renaissance Technologies is the largest stakeholder of the company, with 10 million shares worth $618.2 million.

Ariel Investment made the following comment about Gilead Sciences, Inc. (NASDAQ:GILD) in its Q3 2022 investor letter:

“At the stock level, biopharmaceutical company Gilead Sciences, Inc. (NASDAQ:GILD) was the top contributor in the quarter based on positive data released in a study evaluating Trodelvy versus comparative chemotherapy in patients with metastatic breast cancer. The detailed findings increased investor confidence the drug would receive incremental approvals for a broader range of breast cancer treatments. Shares also received a boost on news the TAF patent portfolio for HIV drugs will be extended from the middle of this decade through the early 2030s, thereby lengthening the company’s long-term opportunity in the virology market.”

7. Blackstone Inc. (NYSE:BX)

Number of Hedge Fund Holders: 61

Dividend Yield as of February 3: 5.90%

Blackstone Inc. (NYSE:BX) is a New York-based alternative asset management firm specializing in real estate, private equity, hedge fund solutions, credit, secondary funds of funds, public debt and equity, and multi-asset class strategies. On January 26, Blackstone Inc. (NYSE:BX) declared a $0.91 per share quarterly dividend, a 1.1% increase from its prior dividend of $0.90. The dividend is payable on February 13, to shareholders of record on February 6. It is one of the best dividend leaders to buy according to hedge funds.

On January 27, Barclays analyst Benjamin Budish raised the price target on Blackstone Inc. (NYSE:BX) to $100 from $86 and reiterated an Equal Weight rating on the shares following the Q4 results. According to the analyst, Blackstone Inc. (NYSE:BX)’s management sees significant growth potential in the long-term with increased earnings from flagship fundraising, insurance, and perpetual strategies. Despite some short-term challenges, the analyst remains optimistic about the company’s growth prospects.

According to Insider Monkey’s Q3 data, 61 hedge funds were bullish on Blackstone Inc. (NYSE:BX), and Thomas Steyer’s Farallon Capital is the leading position holder in the company, with 3.11 million shares worth $260.7 million.

Baron Funds made the following comment about Blackstone Inc. (NYSE:BX) in its Q4 2022 investor letter:

“Blackstone Inc. (NYSE:BX) was a detractor in the fourth quarter as shares sold off sharply in December after the company announced that it received redemption requests above monthly and quarterly caps in its non-traded REIT fund (BREIT) and would be limiting investor withdrawals. BREIT was one of Blackstone’s fastest-growing flagship retail fund vehicles and hence received outsized investor attention and media coverage. While redemptions themselves aren’t surprising given the stark performance dispersion between BREIT and publicly listed real estate, investors grew concerned that the decision to limit withdrawals would create a cascading effect, eventually force BREIT to liquidate assets and perhaps impair the growth of additional retail fund vehicles. Subsequently, Blackstone increased liquidity through the sale of a JV interest in Las Vegas casino assets at attractive prices and received a $4 billion investment from the University of California. While acknowledging the step back and near-term headwinds, we believe BREIT has plenty of runway to meet redemptions without being forced to liquidate assets

We recently reduced the size of the Fund’s investment in Blackstone Inc. because of our expectation of a slowdown in its growth outlook. We remain bullish, however, about the company’s long-term prospects. Blackstone is the world’s largest alternative asset manager with $1 trillion in assets under management and the largest real estate manager in the world. Blackstone has a premier brand, a global franchise, loyal customers, an exceptional balance sheet, and an excellent management team.

Following a 36% correction in its shares in 2022, we believe Blackstone’s valuation has become more compelling and may look for opportunities to acquire additional shares in the future.”

6. Verizon Communications Inc. (NYSE:VZ)

Number of Hedge Fund Holders: 62

Dividend Yield as of February 3: 6.29%

Verizon Communications Inc. (NYSE:VZ) is a New York-based company that offers communications, technology, information, and entertainment products and services to consumers, businesses, and governmental entities worldwide. On January 24, Verizon Communications Inc. (NYSE:VZ) reported a Q4 non-GAAP EPS of $1.19, in-line with market estimates. The revenue of $35.3 billion climbed 3.5% year-over-year, beating Wall Street consensus by $160 million.

On January 25, Cowen analyst Gregory Williams reiterated an Outperform rating on Verizon Communications Inc. (NYSE:VZ) but lowered the price target on the shares to $49 from $55. According to the analyst, Verizon’s Q4 results were mixed and initial 2023 guidance was muted due to pressure from promotion amortization costs and interest expenses, which offset the benefits of price hikes, strong Fixed Wireless Access, and good Business Wireless performance.

According to Insider Monkey’s data, 62 hedge funds were bullish on Verizon Communications Inc. (NYSE:VZ) at the end of Q3 2022, compared to 58 funds in the prior quarter. Ken Griffin’s Citadel Investment Group is a significant position holder in the company, with 5.2 million shares worth $200.4 million.

In addition to Exxon Mobil Corporation (NYSE:XOM), AbbVie Inc. (NYSE:ABBV), and Citigroup Inc. (NYSE:C), Verizon Communications Inc. (NYSE:VZ) is one of the best dividend leaders to buy according to hedge funds.

Here is what Mawer Investment Management has to say about Verizon Communications Inc. (NYSE:VZ) in its Q3 2022 investor letter:

“There are a few other segments of our portfolios that displayed weakness in the quarter. Cable and telecommunication companies have been an area that has lagged the broader market as their worlds are increasingly colliding. Companies such as Verizon (NYSE:VZ) have been impacted as wireless operators are spending heavily to attract internet subscribers with fixed wired access and the cable companies are trying to build wireless businesses.”

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