Investors in the market for large-cap dividend-paying companies that nonetheless have huge growth potential need look no further than the following five stocks, which are heavily weighted in the WisdomTree US Quality Dividend Gr ETF (NASDAQ:DGRW) as well as beloved by hedge funds.
WisdomTree Investments, Inc. (NASDAQ:WETF) is one of the leading providers of specialized ETFs in the world, with a focus on actively managed, fundamentally-weighted indexes. One of the asset management company’s most intriguing ETFs for dividend investors is the WisdomTree US Quality Dividend Gr ETF (NASDAQ:DGRW). This ETF uses the WisdomTree U.S. Dividend Index as its starting point, which contains nearly 1,400 dividend-paying companies which have a market cap of at least $2 billion.
The ETF narrows that down to 280 mostly large-cap stocks (about 95%) which are judged to offer the best combination of stability and growth potential. Most of those stocks ranked among the 20 Dividend Stocks That Billionaires Are Piling On, an indication that the wealthiest and most successful investors in the world also see huge growth potential in them. The ETF has thus far delivered on its promise, with average annual market price returns of 12.36% through the end of November.
While the WisdomTree US Quality Dividend Gr ETF (NASDAQ:DGRW) contains a large collection of dividend stocks, which collectively yield 2.48%, it is heavily weighted towards a few dozen companies, with its top 10 holdings alone accounting for just under 35% of its portfolio. From among those top 10 holdings, we’ve gathered the five that are the most heavily owned among the hedge funds tracked by our database and then ordered them based on their combined rankings, providing a powerful consensus on which dividend stocks are must-buys. You can check out the rankings below and on the following pages.
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5. Intel Corporation (NASDAQ:INTC)
– Ranking Among Hedge Funds (as of September 30): 56th (58 hedge fund shareholders)
– Ranking in the WisdomTree US Quality Dividend Gr ETF (as of December 14): 8th (2.33% weighting)
– Forward Dividend Yield: 2.51%
First up is Intel Corporation (NASDAQ:INTC), which was owned by 58 hedge funds on September 30 to rank as the 56th most popular stock among them. It was also given 2.33% weighting within the WisdomTree US Quality Dividend Gr ETF, the third-largest given to a tech company, which was the sector with the highest weighting (21.60%) in the portfolio. Intel has raised its dividend payments for four straight years, growing them by 30% during that time. However, its yield has fallen by a full percentage point since early 2016 due to the stock gaining 50% during that time.
4. Johnson & Johnson (NYSE:JNJ)
– Ranking Among Hedge Funds (as of September 30): 41st (63 hedge fund shareholders)
– Ranking in the WisdomTree US Quality Dividend Gr ETF (as of December 14): 3rd (4.96% weighting)
– Forward Dividend Yield: 2.71%
Johnson & Johnson (NYSE:JNJ) ranked third within the dividend growth ETF, while being owned by 63 of the hedge funds tracked by Insider Monkey’s database. The owner of one of the 15 Best Selling Most Profitable Drugs of All Time, hedge fund sentiment has been turning against Johnson & Johnson somewhat recently, as there has been a decline in hedge fund ownership of the stock for four straight quarters. The dividend king has increased the size of its payments to shareholders for 56-straight years, though its 5-year growth rate stands at a modest 6.71%.
3. Wells Fargo & Co (NYSE:WFC)
– Ranking Among Hedge Funds (as of September 30): 19th (79 hedge fund shareholders)
– Ranking in the WisdomTree US Quality Dividend Gr ETF (as of December 14): 5th (3.50% weighting)
– Forward Dividend Yield: 3.70%
Wells Fargo & Co (NYSE:WFC) has the distinction of having the highest dividend yield on this list by a wide margin (just a tick under a full percentage point). That yield has climbed significantly in 2018 due to WFC shares having lost 26% of their value, as the investment bank has been hit with a regulatory asset cap by the Fed following its fake accounts scandal. Wells Fargo had previously predicted that the cap would be lifted by the middle of next year, but the company is reportedly months behind schedule when it comes to drawing up an acceptable reform plan. The scandal and asset cap did not prevent Fed approval of Wells Fargo’s 10% dividend hike earlier this year.
2. Apple Inc. (NASDAQ:AAPL)
– Ranking Among Hedge Funds (as of September 30): 6th (112 hedge fund shareholders)
– Ranking in the WisdomTree US Quality Dividend Gr ETF (as of December 14): 4th (3.99% weighting)
– Forward Dividend Yield: 1.76%
Apple Inc. (NASDAQ:AAPL) is the first of only two stocks that landed within the top 10 on both lists, being weighted 4th within the ETF, while climbing back to 6th among hedge funds. Apple was one of the most popular stocks among hedge funds during Q3, as the number of hedge funds shareholders of the tech giant jumped by 24%. After a 16-year hiatus, Apple began making dividend payments to its shareholders again in 2012 and has nearly tripled the size of its quarterly payouts since then. There’s plenty of room for Apple to grow its dividend even further, as the profit-generating machine’s dividend payout ratio is currently a mere 22%.
1. Microsoft Corporation (NASDAQ:MSFT)
– Ranking Among Hedge Funds (as of September 30): 1st (170 hedge fund shareholders)
– Ranking in the WisdomTree US Quality Dividend Gr ETF (as of December 14): 2nd (5.15% weighting)
– Forward Dividend Yield: 1.74%
Microsoft Corporation (NASDAQ:MSFT) was nearly the unanimous choice on both lists, only narrowly trailing Exxon Mobil Corporation (NYSE:XOM) in weighting within the WisdomTree US Quality Dividend Growth ETF’s portfolio. Microsoft shot past Facebook, Inc. (NASDAQ:FB) in Q3 to top the list of the 30 Most Popular Stocks Among Hedge Funds and was also the most popular stock among billionaires by a wide margin, being owned by about half of them, one of the highest rates we’ve ever seen a stock achieve. Microsoft has raised its dividend for 15 straight years, which includes a 5-year growth rate of 13.88%.
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