In this article, we discuss the 10 dividend stocks billionaire D. E. Shaw is buying.
David Elliot Shaw, more commonly known as D. E. Shaw, gained prominence on Wall Street due to his unique scientific investment methods. Shaw founded D E Shaw, a New York-based hedge fund, with only 6 employees and a capital of $28 million. He started the firm with a sheer focus on computational finance and is focused on the same strategy to date. As of January 2022, Shaw’s real-time net worth stands at $7.5 billion.
D.E. Shaw’s Investment Philosophy
Along with the quantitative investment, the firm also provides services in portfolio management and fundamental analysis. As mentioned before, Shaw’s investment strategy combines quantitative investment processes and computational finance. Additionally, the firm also utilizes hypothesis formulation and validation while searching for markets to invest in.
According to a recent report published by Bloomberg, since its inception, the firm’s flagship Composite Fund posted negative returns in just one year. In 2021, the fund reported double-digit gains, returning 18.5%. As of December 2021, the hedge fund manages over $60 billion in assets. In this article, we will discuss the dividend stocks that D. E. Shaw is buying. Some of the most prominent of those are Walmart Inc. (NYSE:WMT), Intel Corporation (NASDAQ:INTC), Merck & Co., Inc. (NYSE:MRK), and The Coca-Cola Company (NYSE:KO).
Our Methodology:
In this article, we discuss the 10 best dividend stocks in billionaire D. E. Shaw’s portfolio. We took into account Shaw’s 13F portfolio as of Q3 for this list. Along with this, we also considered the dividend policy and dividend history of each stock, along with hedge fund sentiment, business fundamentals, and analysts’ ratings. The stocks are ranked according to their position in D. E. Shaw’s 13F portfolio of Q3.
10 Dividend Stocks Billionaire D. E. Shaw is Buying
10. Comcast Corporation (NASDAQ:CMCSA)
Dividend Yield as of January 11: 1.98%
Number of Hedge Fund Holders: 75
Comcast Corporation (NASDAQ:CMCSA) is an American media and tech company that also provides internet services to consumers. In Q3 2021, D E Shaw increased its stake in the company by 75% and now owns shares worth over $185 million. Comcast Corporation represented 0.16% of D. E. Shaw’s portfolio.
Comcast Corporation has been increasing its dividend for the past 13 years and currently pays an annual dividend of $1.00 per share, with a dividend yield of 1.98%. The stock’s dividend payout ratio is relatively low at 32.3% and its debt to equity ratio stands at 1.05, highlighting strong debt metrics. Deutsche Bank named Comcast Corporation as its favorite cable stock for 2022 and lifted its price target on the stock to $62, with a Buy rating on the shares.
At the end of Q3 2021, 75 hedge funds tracked by Insider Monkey were bullish on Comcast Corporation, down from 84 in the previous quarter. These stakes hold a consolidated value of over $8.5 billion. Among these hedge funds, First Eagle Investment Management was the company’s largest shareholder in Q3, owning shares worth $1.6 billion.
Like Walmart Inc., Intel Corporation, Merck & Co., Inc., and The Coca-Cola Company, Comcast Corporation is one of the most prominent dividend stocks in D. E. Shaw’s portfolio.
9. NextEra Energy, Inc. (NYSE:NEE)
Dividend Yield as of January 11: 1.83%
Number of Hedge Fund Holders: 53
NextEra Energy, Inc. (NYSE:NEE) is an American energy company that specializes in clean energy and develops power projects to generate electricity. Appreciating the company’s profile and focus on renewable energy, in December, BMO Capital lifted its price target on NextEra Energy, Inc. to $98, while maintaining Outperform rating on the shares.
As per Insider Monkey’s Q3 data, 53 hedge funds held stakes in NextEra Energy, Inc., down from 59 in the previous quarter. These stakes hold a consolidated value of over $2.37 billion.
In Q3 2021, D E Shaw owned over 3.3 million shares in NextEra Energy, Inc., worth $264.4 million. The company accounted for 0.23% of D. E. Shaw’s portfolio. Currently, NextEra Energy, Inc. pays an annual dividend of $1.54 per share, with a relatively low dividend yield of 1.83%, compared to the utilities’ sector average yield of 3.25%. In its recent quarterly letter, the management announced to grow its dividend at roughly 10% rate per year through 2022 off of a 2020 base..
8. Merck & Co., Inc. (NYSE:MRK)
Dividend Yield as of January 11: 3.36%
Number of Hedge Fund Holders: 77
An American multinational pharmaceutical company, Merck & Co., Inc. has a 12-year track record of consistent dividend growth. On November 30, the company announced a 6% growth in its quarterly dividend at $0.69 per share. The stock’s current dividend yield stands at 3.36%, compared with the broad market’s average dividend yield of 1.3%. Moreover, Merck & Co., Inc. has a debt to equity ratio of 0.7, indicating less risk and strong financial health.
Merck & Co., Inc. has been D E Shaw’s holding for the past decade. The hedge fund made its first investment in the company during the fourth quarter of 2010, with shares worth $78.5 million. In Q3 2021, Merck & Co., Inc. accounted for 0.24% of D. E. Shaw’s portfolio, with stakes worth $266.4 million. This December, Mizuho raised its price target on Merck & Co., Inc. to $100, while keeping a Buy rating on the shares.
Of the 867 elite funds tracked by Insider Monkey, 77 hedge funds held stakes in Merck & Co., Inc. in Q3, compared with 79 in the previous quarter. The total value of these stakes is over $4.5 billion. Ken Fisher’s Fisher Asset Management was the company’s largest shareholder in Q3, holding shares worth $798.6 million.
Miller Howard Investments mentioned Merck & Co., Inc. in its Q3 2021 investor letter. Here is what the firm has to say:
“While optimistic about a recovery, we continue to balance our cyclical holdings with dividend-payers in stable, less economically-sensitive industries. We hold three pharmaceutical companies, (which includes) Merck (MRK). All three have strong cash flows and balance sheets, making their high dividends reasonably safe. The investment controversy surrounding these pharma companies is whether they can develop or acquire new products to replace their current blockbuster drugs. The low valuations on these stocks reflects what we believe to be undue pessimism by investors on the prospects for new drugs.”
7. Exxon Mobil Corporation (NYSE:XOM)
Dividend Yield as of January 11: 5.08%
Number of Hedge Fund Holders: 64
Exxon Mobil Corporation (NYSE:XOM), an American natural gas company, has been in deep waters due to the pandemic when it announced a dividend cut in late 2020, after maintaining an 18-year streak of consistent dividend growth. However, the company raised its quarterly dividend by 1% on October 27, 2021, to $0.88 per share, with a dividend yield of 5.08%, above the industry’s average yield of 4.9%.
In Q3, GQG Partners was the largest shareholder of Exxon Mobil Corporation, holding shares worth over $1.56 billion. Overall, 64 hedge funds tracked by Insider Monkey held stakes in the company in Q3, down from 68 in the previous quarter. However, the value of these stakes grew to $$4.64 billion in Q3, from $3.7 billion in Q2.
As of Q3 2021, D E Shaw increased its position in Exxon Mobil Corporation by 30% and holds shares worth $301.6 million. The company constituted 0.27% of D. E. Shaw’s portfolio. While presenting a constructive outlook on Exxon Mobil Corporation, recently, Goldman Sachs lifted its price target on the stock to $71, with a Buy rating on the shares.
Goehring & Rozencwajg Associates published its Q3 2021 investor letter and mentioned Exxon Mobil Corporation in its. 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.”
6. The Coca-Cola Company (NYSE:KO)
Dividend Yield as of January 11: 2.80%
Number of Hedge Fund Holders: 61
The Coca-Cola Company is one of the most famous dividend stocks as the company holds a 59-year track record of consistent dividend growth. According to analysts, the company is expected to announce a 60th consecutive dividend hike in February 2022. In 2021, The Coca-Cola Company increased its dividend by 2.44%, down from 2.5% in 2020.
Recently, JPMorgan called The Coca-Cola Company an attractive entry point for investors due to the reopening of economies. The firm set a $63 price target on the stock, with an Overweight rating on the shares. D E Shaw owned over 7.5 million shares in The Coca-Cola Company in Q3, valued at over $396.4 million. The company accounted for 0.35% of the hedge fund’s portfolio.
Warren Buffett’s Berkshire Hathaway held shares worth roughly $21 billion in The Coca-Cola Company, becoming its largest shareholder in Q3. Along with this, 61 hedge funds tracked by Insider Monkey were bullish on the stock in Q3, compared with 62 in the previous quarter. These stakes are valued at over $25.1 billion.
The Coca-Cola Company is one of the most famous dividend stocks in D. E. Shaw’s portfolio, like Walmart Inc., Intel Corporation, Merck & Co., Inc..
5. QUALCOMM Incorporated (NASDAQ:QCOM)
Dividend Yield as of January 11: 1.49%
Number of Hedge Fund Holders: 70
QUALCOMM Incorporated (NASDAQ:QCOM) is an American semiconductor company that also develops software and provides related wireless services to consumers. As of Q3, D E Shaw holds shares worth $438.5 million in the company. It represented 0.39% of D. E. Shaw’s portfolio.
In fiscal 2021, QUALCOMM Incorporated’s free cash flow stood at $8.6 billion, $2.9 billion of which was paid in dividends. The company has been increasing its dividend since 2003 and currently pays a quarterly dividend of $0.68 per share. The stock’s dividend yield stands at 1.49%. This December, JPMorgan added QUALCOMM Incorporated to its Analyst Focus List, expecting positive performance from the company in 2022. The firm lifted its price target on the stock to $225, with an Overweight rating on the shares.
As of Q3 2021, 70 hedge funds tracked by Insider Monkey reported owning stakes in QUALCOMM Incorporated, compared with 72 in the previous quarter. The total value of these stakes is over $3.5 billion.
ClearBridge Investments mentioned QUALCOMM Incorporated in its Q1 2021 investor letter. Here is what the firm has to say:
“Within IT, we have also increased exposure to a cyclical semiconductor industry currently working through a severe supply shortage due to several years of capacity reductions, COVID-19 shutdowns and one-off production delays as well as demand resilience in areas like autos and smartphones. The main risk for semiconductors is short-term revenue pressure until capacity catches up with demand, which hurt wireless chipmaker Qualcomm. Looking past current constraints, we expect the industry to see a strong second half and solid growth in 2022.”
4. Intel Corporation (NASDAQ:INTC)
Dividend Yield as of January 11: 2.49%
Number of Hedge Fund Holders: 66
An American technology and semiconductor company, Intel Corporation has been paying dividends since 1993. However, the company cut its dividend in 2013 and 2014, but still holds a 7-year track record of consistent dividend growth.
Insider Monkey’s Q3 data shows a decline in the number of hedge funds having stakes in Intel Corporation to 66, from 78 in Q2. The consolidated value of these stakes is over $6.4 billion.
D E Shaw made its first investment in Intel Corporation during the fourth quarter of 2010. In Q3 2021, the hedge fund increased its stake in the company by 10% and now holds shares worth $532.1 million. Intel Corporation represented 0.48% of D. E. Shaw’s portfolio. Due to the company’s investment in processor development, recently, Tigress Financial lifted its price target on the stock to $72. The firm maintained its Buy rating on the shares.
Andaz Private Investments mentioned Intel Corporation in its Q3 2021 investor letter. Here is what the firm has to say:
“Intel (INTC) is trading on a high single digit earnings multiple and is essentially: 1) an oligopolistic foundry set to benefit from large government incentives; and 2) a semiconductor business that is returning to competitiveness after years of being a laggard.”
3. Walmart Inc. (NYSE:WMT)
Dividend Yield as of January 11: 1.53%
Number of Hedge Fund Holders: 71
Walmart Inc. is an American retail company that operates a chain of department and grocery stores. In Q3 2021, D E Shaw held over 4.4 million shares in the company, worth $618.1 million. The company constituted 0.55% of the hedge fund’s portfolio.
The number of hedge funds having stakes in Walmart Inc. stood at 71, the same as in the previous quarter. These stakes hold a value of roughly $8 billion. Among these hedge funds, Bill & Melinda Gates Foundation Trust was one of the company’s most prominent shareholders in Q3, holding shares worth $964.7 million.
Walmart Inc. has been increasing its dividend since 1974, the year it declared its first annual dividend of $0.05 per share. Currently, the company pays a quarterly dividend of $0.55 per share, with a dividend yield of 1.53%. Acknowledging the company’s winter sales, recently, MKM Partners lifted its price target on Walmart Inc. to $166, while maintaining a Buy rating on the shares.
ClearBridge Investments mentioned Walmart Inc. in its Q2 2021 investor letter. Here is what the firm has to say:
“The pandemic has created challenges for businesses large and small; one major challenge for large essential retailers such as ClearBridge holdings Home Depot, Walmart and Costco has been ensuring adequate staffing to meet demand under trying conditions. All three instituted enhanced pay practices during the pandemic, with raises, unplanned bonuses and other benefits helping compensate employees for their efforts in a difficult environment. In September 2020 Walmart raised wages for 165,000 employees, including a number of entry positions to $15 an hour. It followed this in February with a raise for 425,000 workers that moved its average pay above $15 an hour.”
2. Marathon Petroleum Corporation (NYSE:MPC)
Dividend Yield as of January 11: 3.19%
Number of Hedge Fund Holders: 43
Marathon Petroleum Corporation (NYSE:MPC) is an American energy company that also operates the country’s largest refining system. The company reported solid Q3 results, posting an EPS of $0.73, which beat estimates by $0.03. As of the close of January 11, Marathon Petroleum Corporation delivered a 59.4% return to shareholders in the past year.
On October 27, Marathon Petroleum Corporation announced a quarterly dividend of $0.58 per share, with a dividend yield of 3.19%. Recently, Barclays lifted its price target on Marathon Petroleum Corporation to $80, while keeping an Overweight rating on the shares. In Q3, D E Shaw increased its activity in the company by 14% and now holds shares worth over $631 million. Marathon Petroleum Corporation accounted for 0.56% of D. E. Shaw’s portfolio.
At the end of Q3 2021, 43 hedge funds tracked by Insider Monkey reported owning stakes in Marathon Petroleum Corporation, down from 48 in the previous quarter. These stakes hold a consolidated value of over $2.68 billion.
1. Activision Blizzard, Inc. (NASDAQ:ATVI)
Dividend Yield as of January 11: 0.71%
Number of Hedge Fund Holders: 80
An American video game holding company, Activision Blizzard, Inc. (NASDAQ:ATVI) experienced a positive hedge fund sentiment in Q3. 80 hedge funds tracked by Insider Monkey were bullish on the stock, up from 78 in the previous quarter. The total value of these stakes is over $4.28 billion.
Activision Blizzard, Inc. pays an annual dividend of $0.47 per share, with a dividend yield of 0.71%. This December, Stifel set a $77 price target on Activision Blizzard, Inc., with a Buy rating on the shares.
D E Shaw started investing in Activision Blizzard, Inc. during the fourth quarter of 2010, with shares worth $138.3 million. In Q3 2021, the hedge fund increased its stakes in the company significantly by 1,084%, holding roughly 10 million shares, worth $765.2 million. Activision Blizzard, Inc. was the eighth-largest holding of the fund in Q3 and represented 0.69% of D. E. Shaw’s portfolio.
Baron Funds mentioned Activision Blizzard, Inc. in its Q3 2021 investor letter. Here is what the firm has to say:
“Core Growth businesses were hurt by the rotation into more value and cyclical businesses. Despite the rotation, this business category still outperformed the broader Index. Activision Blizzard, Inc. were pressured by political activities. Activision faced regulatory concerns in China and investors shifted to more stable businesses.”
You can also take a look at 10 Dividend Stocks in Adage Capital’s Portfolio and 10 Dividend Stocks in Tiger Cub Lee Ainslie’s Portfolio
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This article is originally published at Insider Monkey.
