In this article, we discuss 9 dividend stocks to buy according to Richard Hamm’s Bristol Gate Capital. You can skip our detailed analysis of the hedge fund’s past performance, and go directly to read 5 Dividend Stocks to Buy According to Richard Hamm’s Bristol Gate Capital.
Richard Hamm and Peter Simmie founded Bristol Gate Capital in 2006. The Canada-based investment management firm focuses on high-dividend growth investing through the use of data science. The use of artificial intelligence (AI) in the business has helped the firm to generate superior results for its clients. In 2019, Peter Simmie retired from his position of Chief Investment Officer (CIO) and since then, Richard Hamm is serving as the CIO of the firm.
In one of his interviews, Richard Hamm talked about how AI can benefit the trading policies of investors around the world. He further mentioned that even though the investment industry is not fully on the deck with the data analytics yet, Bristol Gate Capital has been employing these methods since its inception. In addition to focusing on dividend growth stocks, the hedge fund invests in companies after evaluating the strength and quality of the business. Along with this, the hedge fund also determines the fair value for each company it considers investing in. The fund’s dividend strategy focuses on the current dividend yield of the stock and by the use of a machine learning model, reaches an estimate for the company’s dividend growth in the next 12 months.
Since its inception, Bristol Gate Capital managed to generate positive returns for its shareholders. In the past three years, the hedge fund delivered a return of 14.3%, while its 5-year return came in at 14.5%. Moreover, from 2009 to 2021, the hedge fund returned 30.2%, compared with a 28.7% return of the S&P 500 during the same time period.
As of Q1 2022, Bristol Gate Capital’s 13F portfolio was valued at over $2.04 billion, down from $2.22 billion in the previous quarter. The hedge fund’s major investments were made in the technology, services, and healthcare sectors. Some of the fund’s major holdings in Q1 were Mastercard Incorporated (NYSE:MA), Microsoft Corporation (NASDAQ:MSFT), and UnitedHealth Group Incorporated (NYSE:UNH).
Photo by Sharon McCutcheon on Unsplash
Our Methodology:
In this article, we discuss the best dividend stocks according to Bristol Gate Capital. For this list, we took data from Bristol Gate’s 13F portfolio as of Q1 2022.
Dividend Stocks to Buy According to Richard Hamm’s Bristol Gate Capital
9. Thermo Fisher Scientific Inc. (NYSE:TMO)
Number of Hedge Fund Holders: 101
Dividend Yield as of May 27: 0.22%
Bristol Gate Capital’s Stake Value: $100,424,000
Thermo Fisher Scientific Inc. (NYSE:TMO) is an American company that supplies scientific instrumentation and also offers software services to its customers. In Q1 2022, the company reported a 16% year-over-year growth in its core organic revenue. Moreover, its Covid-testing revenue was recorded at $1.68 billion. In addition to TMO, Mastercard Incorporated (NYSE:MA), Microsoft Corporation (NASDAQ:MSFT), and UnitedHealth Group Incorporated (NYSE:UNH), some of Bristol’s top holdings, also topped analysts’ estimates in Q1 2022.
Bristol Gate Capital initiated its position in Thermo Fisher Scientific Inc. (NYSE:TMO) during the first quarter of 2021, purchasing shares worth over $67.3 million. At the end of Q1 2022, the hedge fund held stakes worth over $100.4 million in the company, selling off shares worth over $17,000 during the quarter. The company was the fifth-largest holding of Bristol Gate and represented 4.92% of its 13F portfolio.
This February, Thermo Fisher Scientific Inc. (NYSE:TMO) announced a 15% hike in its quarterly dividend to $0.30 per share. This was the company’s fifth consecutive year of dividend growth. The stock’s dividend yield was recorded at 0.22% on May 27.
At the end of March 2022, 101 hedge funds tracked by Insider Monkey were bullish on Thermo Fisher Scientific Inc. (NYSE:TMO), up from 95 in the previous quarter. These stakes hold a consolidated value of roughly $8 billion. Ken Fisher’s Fisher Asset Management held stakes worth over $1.3 billion in the company, becoming its largest shareholder in Q1 2022.
ClearBridge Investments mentioned Thermo Fisher Scientific Inc. (NYSE:TMO) in its Q1 2022 investor letter. Here is what the firm has to say:
“Improving health remains a key impact theme for the portfolio, and over the past year or so we have increased our exposure to the health care sector, through the addition of Thermo Fisher Scientific, a leading health care tools company, a leading provider of fertility benefit management services to self-insured employers that offers a rare win-win-win for employers, employees, health systems, and doctors, with clear savings and quality improvements.”
8. Zoetis Inc. (NYSE:ZTS)
Number of Hedge Fund Holders: 67
Dividend Yield as of May 27: 0.78%
Bristol Gate Capital’s Stake Value: $97,430,000
Zoetis Inc. (NYSE:ZTS) is the world’s largest producer of medicines for pets. In Q1 2022, the company reported an 18% year-over-year growth in its companion animal products, driven massively by the company’s parasiticide portfolio.
Zoetis Inc. (NYSE:ZTS) currently pays a quarterly dividend of $0.325 per share, having raised it by 30% in 2021. In the last three years, the company has raised its dividend at a CAGR of 36%, while its five-year dividend growth rate stood at 15%. The stock’s dividend yield was recorded at 0.78% on May 27.
During Q1 2022, Bristol Gate Capital bought additional 19,000 shares in Zoetis Inc. (NYSE:ZTS) and held a collective stake worth over $97.4 million. The company represented 4.77% of the hedge fund’s 13F portfolio.
At the end of Q1 2022, 67 hedge funds tracked by Insider Monkey were bullish on Zoetis Inc. (NYSE:ZTS), up from 61 in the quarter earlier. The consolidated value of these stakes is over $3.1 billion, showing considerable growth from $2.8 billion worth of stakes held by hedge funds in Q4 2021.
Polen Capital mentioned Zoetis Inc. (NYSE:ZTS) in its Q3 2021 investor letter. Here is what the firm has to say:
“Finally, exiting our position in Zoetis was purely a function of valuation. With the business trading for up to 45x forward earnings, we felt we had more attractive alternatives. We maintain high conviction in the company and their competitive advantages and hope to be owners again, at a more attractive valuation. In short, we sold what we believe to be very a high-quality business at relatively high valuations to fund the purchase of equally high-quality businesses trading at lower valuations and even better long-term earnings growth prospects. While we are certainly not tactical in approach, we do aim to make prudent adjustments over time.”
7. Cintas Corporation (NASDAQ:CTAS)
Number of Hedge Fund Holders: 32
Dividend Yield as of May 27: 0.99%
Bristol Gate Capital’s Stake Value: $106,042,000
Cintas Corporation (NASDAQ:CTAS), an American business services company, currently offers a quarterly dividend of $0.95 per share. The company raised its quarterly dividend in 2021 by 27% and maintains a 35-year track record of consistent dividend growth. The stock’s dividend yield, as of May 27, stood at 0.99%.
As per Insider Monkey’s Q1 2022 database, 32 hedge funds held stakes in Cintas Corporation (NASDAQ:CTAS), down from 42 in the previous quarter. These stakes hold a collective value of over $1.23 billion.
This April, Deutsche Bank highlighted the solid execution of Cintas Corporation (NASDAQ:CTAS) and initiated its coverage of the stock with a Buy rating and a $517 price target. At the end of Q1 2022, Bristol Gate held stakes worth over $106 million in the company, purchasing additional 7,800 shares during the quarter. The company represented 5.19% of the hedge fund’s portfolio and was its third-largest holding.
In its fiscal Q3 2022 results, Cintas Corporation (NASDAQ:CTAS) posted an EPS of $2.69, which beat the analysts’ expectations by $0.25. Moreover, the company’s revenue of $1.96 billion presented a 10% year-over-year growth and also beat consensus by $50 million.
Cooper Investors mentioned Cintas Corporation (NASDAQ:CTAS) in its Q1 2022 investor letter. Here is what the firm has to say:
“During the quarter the Fund established a position in Cintas Corporation, a market leader in uniform rental services across North America (Mcap $44bn). This service provides workwear for large corporate and government clients, for example managing supply and laundry of uniforms for the nationwide employee base of customers such as Home Depot.
Uniform rental is a tough local business (Cintas has a million customers) but management have built a high quality business operating with stable and growing recurring revenues and have consistently delivered for shareholders. They have the scale and a superior service offering which drives a unique and attractive return profile, including mid-to-high single digit sales growth, 40% returns on tangible funds employed, and earnings per share that have risen for an impressive 50 of the last 52 years.
The opportunity to invest arose following a 20% sell-down as Cintas was caught up in the sell down in stable compounding businesses during the quarter, despite no change in the outlook or fundamentals for the business.
We view Cintas as a well-positioned Stalwart that can successfully navigate the existing environment. They have the ability to leverage what is a dominant position to grow market share and raise pricing to align with inflation. Cintas could enter a strong period of growth as job openings are filled, manufacturing moves back onshore and the continued growth from service-based industries outsourcing their uniforms. Led by Chairman and descendent of the founder Scott Farmer (also the largest shareholder at 15% of the company) we expect Cintas to continue their track record as excellent operators over the short, medium and long term.”
6. Dollar General Corporation (NYSE:DG)
Number of Hedge Fund Holders: 53
Dividend Yield as of May 27: 0.99%
Bristol Gate Capital’s Stake Value: $93,887,000
Dollar General Corporation (NYSE:DG) experienced a spike in hedge fund interest in Q1 2022, as 53 hedge funds tracked by Insider Monkey reported owning stakes in the company at the end of the period, up from 44 in the previous quarter. The collective value of stakes held by 53 hedge funds stood at over $2.25 billion. With shares worth approximately $520 million, Orbis Investment Management held the largest position in the Tennessee-based company.
In Q1 2022, Dollar General Corporation (NYSE:DG) generated revenue of $8.8 billion, reflecting a 4.2% growth from its revenue recorded during the same period last year. In March, the company announced a 17% growth in its quarterly dividend to $0.55 per share, which was the company’s 7th consecutive year of dividend growth. The yield of this Dividend Challenger was recorded at 0.99% on May 27.
Bristol Gate started building its position in Dollar General Corporation (NYSE:DG) during the second quarter of 2020, buying shares worth over $52.2 million. The hedge fund increased its stakes in the company over time, owning shares worth roughly $94 million at the end of Q1 2022. The company represented 4.6% of the hedge fund’s 13F portfolio.
Following the company’s Q1 2022 results, Deutsche Bank set a $234 price target on Dollar General Corporation (NYSE:DG), with a Buy rating on the shares. Like major stocks, such as Mastercard Incorporated (NYSE:MA), Microsoft Corporation (NASDAQ:MSFT), and UnitedHealth Group Incorporated (NYSE:UNH), DG is also down in 2022.
LRT Capital Management mentioned Dollar General Corporation (NYSE:DG) in its Q3 2021 investor letter. Here is what the firm has to say:
“Executive Summary
At LRT Capital Management we are continuously searching the market for great investment opportunities. Our favorite finds are companies with moats and growth opportunities that justify a higher price than what the stock is trading for. One of our holdings (approximately 1.5% of our long exposure) is Dollar General (DG), so today, we wanted to tell you a bit about this great company.
Company Overview
Dollar General is a discount retailer with the largest brick-and-mortar presence in the United States by store count. The company’s largest concentration of stores can be found in the southern, southwestern, midwestern, and eastern parts of the United States.10 Dollar General was founded in 1939 by J.L. Turner, who originally named the company “J.L. Turner and Son, Wholesale”. As the name suggests, the company began its life as a wholesaler, but quickly turned to a retailer of general store goods. By the early 1950s, the company had annual sales of $2 million per year,12 which is the equivalent of $22.95 million in 2021 dollars when adjusted for inflation.
The first Dollar General store opened on June 1st, 1955 in Springfield Kentucky. The simple concept was that no item in the store would cost more than one dollar. The company changed its name to Dollar General Corporation in 1968 when Dollar General became publicly traded. At the time of its initial public offering, the business generated more than $40 million in annual sales. The company’s common stock was publicly traded from 1968 until July 2007, when it was taken private by KKR. The company went public again in November 2009, under the ticker DG.
Today, Dollar General is an evolved, and phenomenal business with more room for growth. Annual sales reached a record $33.7 billion in fiscal year 2021 after consecutively growing the top line for many years. The company’s main products are every-day necessities and consumables purchased by lower income consumers on tight budgets…”
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Disclosure. None. 9 Dividend Stocks to Buy According to Richard Hamm’s Bristol Gate Capital is originally published on Insider Monkey.
