Below we presented the list of 5 best dividend stocks with upside potential. For our detailed discussion and a more comprehensive list please see 15 Dividend Stocks with Upside Potential.
5. Citigroup, Inc. (NYSE:C)
No of HFs: 91
Total Value of HF Holdings: $5.54
C is ranked as the fifth-best dividend stocks with upside potential. They were mentioned as one of the 10 Best Finance Stocks to Buy Right Now According to Leon Cooperman. The company was awarded the Global Best Overall Bank for Cash Management in 2016. It was formed with the merger of banking giant Citicorp and Travelers Group in 1998.
The top hedge fund holder of this stock is Jeffrey Ubben’s ValueAct Capital which had $1.16 billion invested in the stock at the end of September. An insider recently purchased 10,000 shares at around $44. The stock has been up 38% since then (in 3 short months). You need to be invested in 30-year Treasury bonds for 30 years to receive this kind of return. Citigroup shares offer a 3.12% annual dividend yield.
Generation PMCA mentioned in an article that C is well positioned to benefit from a global pandemic.
“Citigroup’s operations span more than 160 countries. Faced with record low interest rates, rising loss provisions, and subdued lending, the financial sector has been one of the worst performing groups year-to-date. However, earnings appear to have stabilized for the major banks. The company had its own internal issues too, having to pay significant fines for regulatory deficiencies. They are spending over $1 billion on compliance matters. With these issues being addressed and the company’s dominant network intact, it is well positioned to benefit from a global economic recovery. We have assumed a gradual recovery of earnings to former highs over the next few years. Return on tangible common equity should exceed 10% by 22, implying earnings per share above $8. While shares have risen recently, they still trade at only 6x our 2-year-out earnings estimate and yield just under 4%.”
4. JP Morgan Chase and Co. (NYSE:JPM)
No of HFs: 118
Total Value of HF Holdings: $6.05 Billion
Amazon-Berkshire-JPMorgan venture, Haven recently reported having been disbanded after three years. The move was after the step down of Haven’s CEO Dr. Atul Gawande. Although the shut down was a disappointment, the haven team mentioned that Amazon, Berkshire Hathaway, and JPMorgan Chase & Co. will leverage these insights and continue to collaborate informally
“The Haven team made good progress exploring a wide range of healthcare solutions, as well as piloting new ways to make primary care easier to access, insurance benefits simpler to understand and easier to use, and prescription drugs more affordable, Moving forward, Amazon, Berkshire Hathaway, and JPMorgan Chase & Co. will leverage these insights and continue to collaborate informally to design programs tailored to address the specific needs of our individual employee populations and locations,”
The top hedge fund holder of this stock is Andreas Halvorsen’s Viking Global which had $909 million invested in the stock at the end of September. An insider recently purchased 75,000 shares at around $87. The stock has been up 43% since then. JPM offers a 2.65% annual dividend yield.
Check out our article where VLTAVA Fund mentioned a few comments on the stock,
“In the quarter just ended, we bought shares of the JP Morgan. In our opinion, among all the world’s large banks, this one is the best managed and financially strongest. It did very well already in the recession of 2008, when it remained profitable and did not require government help. This made it exceptional among large banks, and we may say that this was the year when it stood out most despite the fact that, from the profitability viewpoint, it was the worst year for JP Morgan of the whole previous economic cycle. The worst year of this economic cycle clearly will be 2020. Profits will drop substantially, mainly due to large increase in bad loans. Despite this, JP Morgan should earn a lot of money this year and its strength and quality will again come to the fore. The shares of good banks can be very remunerative long-term “compounders”, and the best time to buy them is usually in times of recession.”
Pixabay/Public Domain
3. Bristol Myers Squibb (NYSE:BMY)
No of HFs: 124
Total Value of HF Holdings: $7.56 Billion
BMY is a global biopharmaceutical company that is focused on producing innovative medicines for serious diseases. During the third quarter of 2020, the company reported US revenue of $6.5 billion.
The top hedge fund holder of this stock is Jim Simons’ Renaissance Technologies which had $1.84 million invested in the stock at the end of September. An insider recently purchased 9,174 shares at around $54. The stock has been up 12% since then. BMY’s annual dividend yield is 3.14%.
Check out this article where Generation PMCA made comments on this stock.
“Bristol Myers Squibb is a leading biopharmaceutical company focused on oncology, autoimmune diseases, cardiovascular diseases, and fibrosis. The market has been overly concerned with the loss of exclusivity of Revlimid in 2 years and Eliquis in 5 years. We believe the company has the ability to offset these patent expirations via M&A (it recently announced the acquisition of MyoKardia) and its compelling pipeline, including TYK-2, Opvido, Ozanimod, and Zeposia. To account for the risks associated with drug development and M&A, our valuation models assume zero growth after the next 5 years. The company has a 2.9% dividend yield and our FMV is $75.”
2. Apple, Inc. (NYSE:AAPL)
No of HFs: 134
Total Value of HF Holdings: $127.3 Billion
AAPL was mentioned as one of the 10 Best Magic Formula Stocks to Buy Now. The company recently reported that they have exceeded their internal financial targets in the past fiscal year, resulting in the company paying out 179% of the targeted bonuses for named officers.
Check out this article where RiverPark Advisors commented on the stock:
“Apple: AAPL shares were a top contributor as the company reported record fiscal third quarter results, with revenue up 11% to $60 billion and EPS up 18% to $2.58 – both well ahead of expectations. Revenue was driven by double-digit growth in both Products (up 10%) and Services (up 15%), as well as growth in every geographic segment.
We believe that Apple remains one of the most innovative, best positioned and most profitable companies in what are still the early innings of the mobile technology revolution. Additionally, a fall 5G launch should benefit the company, COVID has highlighted the opportunity for the Apple Watch to be an essential health monitoring device, and the company has rapidly diversified into new high growth and high margin products. AirPods, which were launched only three years ago, are on track to generate $15-$20 billion in revenue this year, 5%-8% of total company revenue. iPhones continue to represent a progressively smaller portion of total revenue (44% of the company’s third quarter revenue, down from 48% a year ago), which should help to lessen the impact of year-to-year iPhone refresh cycles.
At the same time, Services provides robust growth for the company ($13 billion, up 15% yearover-year, and 22% of revenue in the June quarter, and more than $39 billion so far in Apple’s fiscal 2020, is accretive to the company’s margins (Services gross profit grew 20% for the quarter and accounts for 39% of total company gross profit) and adds a large, recurring revenue segment to the company’s business mix. The company maintains a fortress balance sheet with $193 billion of cash, $80 billion net of debt. We expect excess cash flow of more than $60 billion per year, which has been increasingly returned to shareholders through both a growing dividend and increased share repurchases. The company also recently completed a 4 for 1 stock split that was well received by investors.”
And in a separate article where Alger Spectra Fund mentioned their comments on the stock,
“Apple is a leading technology provider in telecommunications, computing and services. Apple’s iOS operating system is the company’s unique intellectual property and competitive strength. This software drives extremely tight engagement with consumers and enterprises. This tight engagement is facilitating significant growth in high-margin services like streaming music. apps. and Apple Pay. Apple’s continued development of high-margin services and earnings streams for wearable devices as well as the potential contribution of 5G phones to the company’s growth supported the performance of Apple shares.”
1. Microsoft Corporation (NASDAQ:MSFT)
No of HFs: 234
Total Value of HF Holdings: $42.1 Billion
Microsoft Corporation tops our best dividend stocks with upside potential. The company was mentioned in the Top 5 Earnings Growth Stocks with Dividends for 2021. MSFT offers a dividend yield of 1.02%. You should have bought Microsoft 8 years ago when the shares were trading at $27 and offering a 4% dividend yield. We published multiple articles at the time pointing to the opportunity.
The top hedge fund holder of this stock is Ken Fisher’s Fisher Asset Management which had over $4.7 billion invested in the stock at the end of September.
RiverPark mentioned in an article that the stock entered a second chapter of market-leading growth that will drive the company’s revenue and profits for years to come.
“Microsoft: Microsoft shares were our next top contributor driven by the company’s solid fiscal third quarter results, as well as the strong rebound in technology shares during the month (especially for those firms, like MSFT, that are not currently targets of antitrust investigations ). For its fiscal third quarter (ending March), MSFT’s Commercial Cloud revenue grew 41% yearover-year to $10 billion, generating more than 30% of Microsoft’s total revenue. The company’s two other segments, Productivity and Business Processes and More Personal Computing, grew a combined 14% as overall company revenue grew 16% and Non-GAAP EPS grew 20%.
Microsoft has, we believe, entered a second chapter of market-leading growth that will drive the company’s revenue and profits for years to come. Microsoft’s Cloud Infrastructure offering is in the fastest growing segment of the cloud services market (including software-as-a-service (SaaS)), a market that is characterized by recurring revenues, strong pricing, high levels of customer engagement and high margins. The overall Infrastructure-as-a-Service (IaaS) industry is growing more than 30% per year and is forecast to reach $100 billion of revenues by 2021. We believe that cloud-based services can become the company’s largest revenue and earnings producer and expect Microsoft to generate significant and growing free cash flow ($11 billion last quarter, up 19% year-over-year). The company should deliver at least mid-to-high teens EPS growth, with upside from deploying its $134 billion cash balance ($7 billion was returned to shareholders in the quarter through dividends and share buybacks). We trimmed our position on strength, and Microsoft remains a top five position in in the Fund.”
Please also see top 10 Dividend Stocks That Pay Monthly, 10 Best Beverage Stocks to Buy Now and 12 Best MLP and Pipeline Stocks to Buy Now.
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