Billionaires Love These 5 Dividend Aristocrats

Most investors think that to generate significant wealth from the stock markets, one needs to routinely hit home runs by finding multi-bagger stocks for their portfolios. However, legendary investors like Warren Buffett have proved time and again that to generate superior returns all one needs to do is invest in companies with stable cash flows and consistent earnings growth. Research shows that in the long run such companies, through a combination of share price appreciation, dividend payouts, and/or stock buyback programs, deliver much better returns to their shareholders than the broader market. At Insider Monkey, we pay special attention to 58 of the 800 funds and institutional investors that we track as part of our small-cap strategy (see more details here), as those funds were founded by or are currently headed by billionaires who have lengthy track records of excellence. Given these billionaire investors’ penchant for investing in companies which boast a consistent history of making dividend payments, we have compiled a list of their favorite dividend aristocrat stocks, companies which have increased their annual dividend payments for at least he past 25 years.

#5 The Coca-Cola Co (NYSE:KO)

– Billionaires with Long Positions (as of December 31): 10

– Value of Billionaires’ Holdings (as of December 31): $800.8 million

Let’s start with beverage giant The Coca-Cola Co (NYSE:KO), which is currently trading up by 2.44% year-to-date and very close to its lifetime high. During the fourth quarter, billionaire investors in our system with long positions in the stock inched down by three, but the aggregate value of their holdings in the company saw an increase of over $1 billion. The Coca-Cola Co (NYSE:KO), has a multi-decade history of consistently paying dividends to its stockholders and recently hiked its quarterly dividend to $0.35 per share from $0.33 per share, which currently represents an annual dividend yield of nearly 3.20%. Though most analysts continue to have a positive outlook on the company, some feel that its stock has become overvalued due to the rise it has experienced over the past few months. On March 5, analysts at Susquehanna reiterated their ‘Hold’ rating on the stock. With ownership of 400.00 million shares Warren Buffett’s Berkshire Hathaway continued to remain the largest shareholder of The Coca-Cola Co among the funds in our database at the end of the fourth quarter.

#4 PPG Industries, Inc. (NYSE:PPG)

– Billionaires with Long Positions (as of December 31): 11

– Value of Billionaires’ Holdings (as of December 31): $784 million

Despite its stock appreciating by 12.7% and its ownership among the billionaire investors that we track increasing by one during the fourth quarter the aggregate value of these investors’ holding in PPG Industries, Inc. (NYSE:PPG) saw a fall of 9.8% during that time. Led by an over 11% rally in the past month, PPG Industries, Inc. (NYSE:PPG)’s stock is currently trading up by 4.6% year-to-date. However, it still sports a respectable annual dividend yield of 1.40%. On February 29, auto parts distribution company LKQ Corporation (NASDAQ:LKQ) announced that it has agreed to acquire Pittsburgh Glass Works, in which PPG Industries, Inc. holds a nearly 40% stake, for $635 million. On February 11, analysts at Credit Suisse lowered their price target on PPG Industries’ stock to $91.34 from $102 while keeping their rating on it unchanged at ‘Outperform’. Billionaire David Tepper‘s Appaloosa Management LP initiated a stake in the company during the October-to-December period, purchasing 751,154 shares.

#3 Air Products & Chemicals, Inc. (NYSE:APD)

– Billionaires with Long Positions (as of December 31): 12

– Value of Billionaires’ Holdings (as of December 31): $4.71 billion

While Air Products & Chemicals, Inc. (NYSE:APD)’s stock and its ownership among billionaire investors remained flat during the fourth quarter, the aggregate value of their holdings in it had a marginal decline of 3.2%. Due to its cost-cutting efforts and improved pricing Air Products & Chemicals, Inc. (NYSE:APD) was able to deliver an earnings beat for its first quarter of fiscal year 2016 in late-January, following which its stock has appreciated by over 12% and now trades up by over 3% year-to-date. Whereas the Street was expecting it to report EPS of $1.71 on revenue of $2.45 billion for the quarter, Air Products & Chemicals, Inc. declared EPS of $1.78 on revenue of $2.36 billion. The company has been hiking its dividend payments consistently for the past 38 years and its shares currently sport an annual dividend yield of 2.41%. Billionaire Andreas Halvorsen‘s Viking Global reduced its stake in Air Products & Chemicals by 9% to 5.38 million shares during the fourth quarter.

#2 McDonald’s Corporation (NYSE:MCD)

– Billionaires with Long Positions (as of December 31): 14

– Value of Billionaires’ Holdings (as of December 31): $2.1 billion

Amid an over 20% rise in McDonald’s Corporation (NYSE:MCD)’s stock during the fourth quarter, billionaire investors in our system with long positions in the stock increased by five. However, the aggregate value of their holdings in the company during the same period declined by $157 million. This year, shares of McDonald’s Corporation (NYSE:MCD) spiked after the company reported its fourth quarter numbers, but gave up those gains pretty quickly and now trade flat year-to-date. Nevertheless, the $0.89 per share quarterly dividend that the company pays currently translates into an attractive annual dividend yield of over 3%. Since McDonald’s Corporation’s stock is currently trading at a forward P/E of almost 20, which is considerably above its historical forward P/E, some analysts are concerned that it has become overvalued and will begin to make a downward move soon. Their argument received a major boost recently when short interest in the company rose to a 10-year high of 33.7 million shares. D.E. Shaw, founded by billionaire David E. Shaw, increased its stake in McDonald’s Corporation by 26% to almost 1.45 million shares during the fourth quarter.

#1 Walgreens Boots Alliance Inc (NASDAQ:WBA)

– Billionaires with Long Positions (as of December 31): 15

– Value of Billionaires’ Holdings (as of December 31): $4.14 billion

Walgreens Boots Alliance Inc (NASDAQ:WBA) emerged as hedge funds’ favorite dividend aristocrat at the end of 2015. The company currently pays a quarterly dividend of $0.36 per share, which translates into a respectable annual dividend yield of 1.8%. During the fourth quarter, the ownership of Walgreens Boots Alliance among billionaire investors covered by us inched up by one, though the aggregate value of their holdings in it saw a fall of over 27%. The announcement by the company last October that it will be acquiring Rite Aid Corporation (NYSE:RAD) in a $17.4 billion deal could be one of the main reasons behind Walgreens Boots Alliance Inc (NASDAQ:WBA) seeing an increase in its popularity among billionaire investors during the fourth quarter. Though Rite Aid Corporation (NYSE:RAD)’s shareholders approved the acquisition last month, some analysts are still not convinced that the deal will be completed due to the regulatory hurdles it faces. On March 1, analysts at Mizuho upgraded Walgreens Boots to ‘Buy’ from ‘Neutral’ and also increased their price target on it to $90 from $89. Billionaire John Griffin‘s Blue Ridge Capital cut its stake in Walgreens Boots Alliance by one-fourth to 2.48 million shares during the fourth quarter.

Disclosure: None