In this article, we discuss the 10 best dividend stocks to buy according to David Harding’s Winton Capital Management.
David Harding, a British billionaire and hedge fund manager, was one of the very first persons to speak about the ‘emotionless systematic approach’ back in 2014. He highlighted the importance and benefits of computers and technology in the financial world. His hedge fund, Winton Capital Management, though founded in 1997, transitions to the contemporary world in its technological approach. David Harding is currently serving as the Chief Executive Officer of Winton Capital Management. According to Forbes, his real-time net worth stands at $1 billion, as of January 2022.
During his education, Harding realized the significance of modern computing techniques for trading. Taking this hypothesis into practice, he founded AHL, an investment management firm in 1987, which was later on acquired by the Man Group. His next venture, the London-based Winton Capital Management utilizes quantitative trading strategies, which are used to study future market trends. The firm also pays due importance to research, which, according to Harding is crucial while studying the markets. Through its research team, the firm uses statistical and mathematical modeling to predict market trends.
The hedge fund has remained successful in the past, but its recent performance was not up to scratch. According to a report published by Financial Times, the firm’s assets recently stood at $7.3 billion, down 80% in the past five years from $33.7 billion. However, the fund’s returns were stable back in the day. Since its inception through 2005, Winton Capital’s compound annual average returns stood at 21.47%, as reported by The Hedge Fund Journal.
As of Q3 2021, Winton Capital Management holds a 13F portfolio value of $1.78 billion. Some of his biggest holdings in the third quarter are McDonald’s Corporation (NYSE:MCD), Meta Platforms, Inc. (NASDAQ:FB), and Amazon.com, Inc. (NASDAQ:AMZN).
David Harding of Winton Capital Management
Our Methodology:
In this article, we will focus on the dividend stocks in David Harding’s portfolio as of Q3. We considered Winton Capital Management’s 13F portfolio for the third quarter.
10 Best Dividend Paying Stocks According to David Harding’s Winton Capital Management
10. State Street Corporation (NYSE:STT)
Number of Hedge Fund Holders: 42
Dividend Yield as of January 27: 2.47%
Winton Capital Management’s Stake Value: $10,941,000
State Street Corporation (NYSE:STT), an American financial and bank holding company, currently pays a quarterly dividend of $0.57 per share, a 10% increase from its previous dividend. The stock’s annual dividend yield stands at 2.47%.
Winton Capital Management made its first investment in State Street Corporation during the first quarter of 2012, worth only $1.7 million. In Q3 2021, the hedge fund increased its position in the company significantly by 3,422% and held a stake worth roughly $11 million. The hedge fund also increased its stakes significantly in some of the major companies, like McDonald’s Corporation, Meta Platforms, Inc., and Amazon.com, Inc.. State Street Corporation made up 0.61% of David Harding’s portfolio. Jason Goldberg, an analyst at Barclays, presented a positive stance on bank stocks in 2022. Considering this, the analyst raised his price target on State Street Corporation to $130, with an Outperform rating on the shares.
Insider Monkey’s Q3 shows that the number of hedge funds having stakes in State Street Corporation increased to 42 in Q3, from 37 in the previous quarter. The total value of these stakes is over $1.47 billion, up from $1.1 billion in Q2.
9. PepsiCo, Inc. (NASDAQ:PEP)
Number of Hedge Fund Holders: 61
Dividend Yield as of January 27: 2.54%
Winton Capital Management’s Stake Value: $3,146,000
PepsiCo, Inc. (NASDAQ:PEP) is an American leading food and beverage company with services in over 200 countries. In Q3 2021, Winton Capital Management increased its stake in the company by 132% and now holds a stake worth over $3.1 million. PepsiCo, Inc. accounted for 0.17% of David Harding’s portfolio in Q3.
According to Insider Monkey’s data for Q3, 61 hedge funds held stakes in PepsiCo, Inc., down from 66 in the previous quarter. These stakes hold a consolidated value of over $4.43 billion. Among these hedge funds, Fundsmith LLP held the largest stake in the company, worth $1.53 billion.
PepsiCo, Inc. has been paying dividends to shareholders for the past 49 years and is on track to become Dividend King this year due to its strong balance sheet. The company currently pays a quarterly dividend of $1.075 per share, with a dividend yield of 2.47%. PepsiCo, Inc.’s payout ratio is 69%, which is considered safe by analysts in the consumer staples industry. Moreover, the company’s 5-year dividend CAGR stands at 7.5%. In January, Argus lifted its price target on PepsiCo, Inc. to $195, while maintaining a Buy rating on the shares.
8. The Allstate Corporation (NYSE:ALL)
Number of Hedge Fund Holders: 27
Dividend Yield as of January 27: 2.73%
Winton Capital Management’s Stake Value: $9,683,000
In January, Barclays set a $119 price target on The Allstate Corporation (NYSE:ALL), an American insurance company, with an Equal Weight rating on the shares, appreciating the company’s efforts to advance its growth.
AQR Capital Management was the largest shareholder of The Allstate Corporation in Q3, owning stakes worth over $377 million. Overall, 27 hedge funds tracked by Insider Monkey held stakes in the company in Q3, down from 33 in the preceding quarter. The total worth of these stakes is more than $821 million.
In 2021, The Allstate Corporation increased its quarterly dividend by 50% at $0.80 per share. The stock’s current dividend yield stands at 2.73%. The company falls into the category of Dividend Contender as it has raised its dividend for the past 11 years consecutively. The Allstate Corporation is the latest acquisition of Winton Capital Management in Q3, holding a stake worth over $9.6 million. The company represented 0.54% of David Harding’s portfolio.
Appleseed Fund mentioned The Allstate Corporation in its Q3 2021 investor letter. Here is what the firm has to say:
“Allstate is the second-largest personal insurance company in the United States with a 9.3% share in auto insurance (4th largest) and an 8.0% share in homeowner’s insurance (2nd largest). The company sells products primarily through its captive agents though this business line is shrinking as the company’s direct (Esurance.com and, more recently, Allstate.com) and independent agent businesses grow more quickly. The personal insurance industry is relatively consolidated, and competition has historically been rational, allowing Allstate to earn attractive mid-teen returns on equity in this business over the past decade. Allstate also recently announced plans to divest their low-growth, low-return life and annuity businesses. This will free up capital to reinvest into the more attractive personal insurance segment and result in improvements on consolidated returns on equity of approximately 2.5%.
Despite the attractive industry dynamics of the personal insurance business and the steps that Allstate has taken to dispose of lower return businesses, the company’s stock currently trades as if Allstate will never be able to grow its earnings. At our purchase price, Allstate’s stock was trading for less than 10.0x forward earnings estimates. While Allstate does face tough competition in the auto insurance business from GEICO and Progressive, their market position, strong brand, and increased investment into the direct insurance business should allow them to grow earnings. Overall, we believe this entry price is attractive for an industry leader in a high-return, consolidating industry. Further, downside risk management should be positively impacted by the dividend yield, a strong balance sheet, and a management team that has historically increased share repurchases when they view the stock to be trading below its intrinsic value.”
7. Evergy, Inc. (NYSE:EVRG)
Number of Hedge Fund Holders: 25
Dividend Yield as of January 27: 3.62%
Winton Capital Management’s Stake Value: $3,131,000
Evergy, Inc. (NYSE:EVRG) is an American electric services company that utilizes clean, safe, and reliable sources of energy. Winton Capital Management started investing in the company during the third quarter of 2019. In Q3 2021, the hedge fund increased its stake in Evergy, Inc. by 19%, which accounted for 0.17% of its 13F portfolio.
At the end of Q3 2021, the number of hedge funds tracked by Insider Monkey having stakes in Evergy, Inc. grew to 25, from 21 in the previous quarter. These stakes are valued at over $908 million.
On November 17, 2021, Evergy, Inc. announced a quarterly dividend of $0.5725 per share, a 7% increase from the previous dividend. The stock’s annualized yield stands at 3.62%. Evergy, Inc. expects to raise its dividend by 6%-8% by 2024, considering its healthy payout ratio of 65%. As the company performed well in 2021, in December, Goldman Sachs set a $72 price target on Evergy, Inc., with a Neutral rating on the shares.
6. Newmont Corporation (NYSE:NEM)
Number of Hedge Fund Holders: 48
Dividend Yield as of January 27: 3.72%
Winton Capital Management’s Stake Value: $4,719,000
Newmont Corporation (NYSE:NEM) is an American gold mining company, with the largest gold reserve base in the industry. In Q3 2021, Winton Capital Management increased its activity in the company by 89%, which represented 0.26% of its 13F portfolio.
Newmont Corporation increased its quarterly dividend by 38% in 2021 at $0.55 per share. The stock’s dividend yield of 3.72% ranks in the top 10% of all S&P 500 companies. In January, National Bank raised its price target on Newmont Corporation to C$98, while maintaining an Outperform rating on the shares.
As per Insider Monkey’s data for Q3, 48 hedge funds held a $774.4 million worth of stake in Newmont Corporation. In comparison, 55 hedge funds held stakes in the company in the preceding quarter.
Due to its performance in the past, Newmont Corporation becomes one of the most notable holdings of David Harding in Q3, like famous stocks, such as McDonald’s Corporation, Meta Platforms, Inc., and Amazon.com, Inc.
First Eagle Investment Management, the largest shareholder of Newmont Corporation in Q3, mentioned the company in its Q3 2021 investor letter. Here is what the firm has to say:
“The largest gold miner in the world, Newmont shares lost ground in what was a volatile and ultimately down quarter for the price of gold. The Colorado-based company has continued to execute well in what has been a challenging environment. The company recently reaffirmed its full-year 2021 production guidance, but indicated that it was likely to come in at the mid to low point of the range provided as a result of disruptions from Covid-19 as well as severe weather events. It also noted that inflation pressures were likely to push its costs higher in 2021. None of this changes our opinion of the stock, which has historically offered steady production anchored in good jurisdictions, a good pipeline of organic projects, a strong balance sheet and proven management.”
5. Exxon Mobil Corporation (NYSE:XOM)
Number of Hedge Fund Holders: 64
Dividend Yield as of January 27: 4.73%
Winton Capital Management’s Stake Value: $2,300,000
In Q3 2021, Winton Capital Management increased its stake in Exxon Mobil Corporation (NYSE:XOM) by 73% and held a stake worth $2.3 million in the company. The American natural gas and oil company represented 0.12% of DavidHarding’s portfolio in Q3.
On October 27, 2021, Exxon Mobil Corporation announced a 1% increase in its quarterly dividend at $0.88 per share. The stock’s current dividend yield stands at 4.73%. Exxon Mobil Corporation has been paying dividends to shareholders for more than 100 years now. Moreover, the company also maintains a 39-year track record of solid dividend growth, coming through as one of the best dividend stocks in David Harding’s portfolio.
With stakes worth over $4.6 billion, 64 hedge funds tracked by Insider Monkey held positions in Exxon Mobil Corporation in Q3. In comparison, 68 hedge funds held stakes in the company in the previous quarter, worth $3.69 billion.
Goehring & Rozencwajg Associates mentioned Exxon Mobil Corporation in its recently published Q3 2021 investor letter. Here is what the firm has to say:
“After successfully replacing 25% of Exxon’s board of directors despite owning just 0.02% of the outstanding equity, Engine No. 1, the climate-focused activist hedge fund, met with Chevron’s management late last summer. In discussions that were later described as “cordial,” Chevron executives shared their plan to reduce carbon emissions. Subsequently, Chevron announced new plans to further reduce carbon output, along with their intention to appoint a new director with “environmental expertise.” Although it remains unclear exactly what Engine No. 1 is planning, rumors suggest the fund has contacted other investors, strongly suggesting they intend to launch a second campaign in the not-too-distant future.
What should Chevron expect?
It was recently reported by The Wall Street Journal that Exxon was considering abandoning two massive natural gas projects: the 75 trillion cubic foot (tcf ) Rovuma LNG project (capital cost $30 bn) and the 5 tcf Ca Voi Xanh offshore-Vietnam gas project (capital cost $10 bn). Exxon board members (most likely including the three supported by Engine No. 1) have publically expressed concerns about both projects.
According to internal reports, these projects are among the highest CO2 producers in Exxon’s pipeline; it is no surprise these projects have been called into question. However, we find the plight of both fields to be perplexing since production would almost certainly be used to displace coal in electricity generation, cutting CO2 emissions by nearly 50%. This fact seems to be lost on the new Exxon board members.”
4. Philip Morris International Inc. (NYSE:PM)
Number of Hedge Fund Holders: 48
Dividend Yield as of January 27: 4.88%
Winton Capital Management’s Stake Value: $10,545,000
A Swiss-American tobacco manufacturing company, Philip Morris International Inc. (NYSE:PM) saw an increase in the number of hedge funds having stakes in it in Q3. 48 hedge funds tracked by Insider Monkey held positions in the company, compared with 46 in the previous quarter. These stakes hold a consolidated value of roughly $6 billion.
Philip Morris International Inc. has increased its annual dividend since its inception in 2008. Since then, the company’s compound annual dividend growth rate stands at 8%. Philip Morris International Inc. increased its dividend by 4.2% in 2021 and now pays a quarterly dividend of $1.25 per share, with a dividend yield of 4.88%. This January, Morgan Stanley raised its price target on Philip Morris International Inc. to $115, while maintaining an Overweight rating on the shares.
In Q3 2021, Winton Capital Management held a stake worth over $10.5 million in Philip Morris International Inc., which represented 0.59% of its 13F portfolio.
3. International Business Machines Corporation (NYSE:IBM)
Number of Hedge Fund Holders: 41
Dividend Yield as of January 27: 4.90%
Winton Capital Management’s Stake Value: $8,716,000
International Business Machines Corporation (NYSE:IBM), an American multinational tech company, was lauded at BMO Capital in January due to its fiscal Q4 earnings beat. The firm lifted its price target on the stock to $155, while keeping a Market Perform rating on the shares.
The number of hedge funds tracked by Insider Monkey having stakes in International Business Machines Corporation stood at 41 in Q3, the same as in the previous quarter. These stakes are valued at over $1.4 billion. Arrowstreet Capital was among the company’s largest shareholders in Q3, owning shares worth roughly $399 million.
In Q3 2021, Winton Capital Management increased its stake in International Business Machines Corporation by 17%, holding a stake worth over $8.7 million. The company constituted 0.48% of David Harding’s portfolio. International Business Machines Corporation currently pays a quarterly dividend of $1.64 per share, with a dividend yield of 4.90%. The company has been paying dividends since 1916 while increasing its dividend consistently for the past 26 years. Moreover, the dividend payout is around $6 billion a year.
St. James Investment Company mentioned International Business Machines Corporation in its Q4 2021 investor letter. Here is what the firm has to say:
“IBM was not the first company to build computers. The distinction belongs to Sperry-Rand’s subsidiary UNIVAC, which introduced the first commercially successful computers in the early 1950s. In this era, IBM did possess the largest research and development department of the business machines industry and quickly caught up, introducing cost-competitive computers a few years after UNIVAC. By the late 1950s, IBM held the dominant market share in computers. IBM also touted a vastly superior sales organization, which used a sales tactic called “paper machines” (the equivalent of today’s “vaporware”). If a competitor’s product was selling well in a market segment that IBM had yet to penetrate, the company would announce a competing product and start taking orders for the “paper machine” long before it was available.
One cannot overstate how powerful IBM was in the computer industry in the 1950s and 1960s. Every competitor rightly worried that if their product worked too well for too long, it was only a matter of
time before an army of IBM salesforce representatives mobilized. In their easily recognizable uniforms of starched white shirts, red ties and blue suits, IBM marketers marched on their customers and offered a more expensive, but much more defensible, choice. “Nobody gets fired for buying IBM” was a common phrase. Even competitors acknowledged that the company excelled at sales. As a UNIVAC executive once complained, ‘It doesn’t do much good to build a better mousetrap if the other guy selling mousetraps has five times as many salesmen.’” (Click here to see the full text)
2. Verizon Communications Inc. (NYSE:VZ)
Number of Hedge Fund Holders: 57
Dividend Yield as of January 27: 4.91%
Winton Capital Management’s Stake Value: $3,458,000
Verizon Communications Inc. (NYSE:VZ) is an American multinational telecommunications company. On September 2, 2021, the company increased its quarterly dividend by 2% to $0.64 per share, with a dividend yield of 4.91%. This marked the company’s 15th consecutive dividend growth, making it one of the best dividend stocks in David Harding’s portfolio. Moreover, in the first half of 2021, Verizon Communications Inc. paid approximately $5.2 billion in cash dividends.
Winton Capital Management held a stake worth over $3.4 million in Verizon Communications Inc. in Q3, which made up 0.19% of its 13F portfolio. According to Ivan Feinseth, an analyst at Tigress Financial, the growing momentum in wireless and broadband will benefit the company in the future. The analyst, in January, lifted its price target on Verizon Communications Inc. to $68, while reiterating a Buy rating on the shares.
In Q3 2021, 57 hedge funds tracked by Insider Monkey held stakes in Verizon Communications Inc., down from 63 in the previous quarter. The consolidated value of these stakes is over $10.3 billion. Among these hedge funds, Berkshire Hathaway held a stake worth $8.5 billion in the Delaware-based company, becoming its largest shareholder in Q3.
Miller/Howard Investments mentioned Verizon Communications Inc. in its Q1 2021 investor letter. Here is what the firm has to say:
“We sold Verizon (VZ) based on concerns over how much they might spend in ongoing spectrum auctions. Management may legitimately view spending billions of dollars to expand their spectrum holdings as necessary, but we believe the payoff will be slow and will make it challenging to grow the dividend at a good pace.”
1. Altria Group, Inc. (NYSE:MO)
Number of Hedge Fund Holders: 45
Dividend Yield as of January 27: 7.17%
Winton Capital Management’s Stake Value: $10,713,000
Altria Group, Inc. (NYSE:MO) is one of the world’s largest manufacturers of tobacco and related products. Winton Capital Management held shares worth over $10.7 million in the company, increasing its stake by 6% in Q3. Altria Group, Inc. accounted for 0.6% of the hedge fund’s 13F portfolio.
In 2021, Altria Group, Inc. reported a 5% hike in its quarterly dividend at $0.90 per share. The stock’s dividend yield stands at 7.17%. Altria Group, Inc. has increased its dividend 56 times in the past 52 years. In its note to investors, the company announced a targeted payout ratio of 80%, allocating a significant amount of cash flow to shareholders. In January, Morgan Stanley lifted its price target on Altria Group, Inc. to $51, with an Equal Weight rating on the shares.
At the end of Q3 2021, 45 hedge funds tracked by Insider Monkey reported owning stakes in Altria Group, Inc., down from 47 in the preceding quarter. These stakes are valued at over $829.7 million.
Broyhill Asset Management mentioned Altria Group, Inc. in its Q2 2021 investor letter. Here is what the firm has to say:
“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.”
You can also take a look at 10 Best Healthcare Dividend Stocks and 10 Best Finance Stocks To Buy Now
Follow Insider Monkey on Twitter
Suggested articles:
- 10 Best Dividend Stocks to Buy According to Billionaire Howard Marks
- 10 Best Stocks Under $10 to Buy Right Now
- 15 Best Energy Stocks to Buy Now
This article is originally published at Insider Monkey.
