Dividend Stock Portfolio: Top 5 Stock Picks By Hedge Funds

In this article, we discuss the top 5 dividend stock picks of elite hedge funds. If you want to see more stocks in this selection, check out Dividend Stock Portfolio: Top 10 Stock Picks By Hedge Funds. 

5. JPMorgan Chase & Co. (NYSE:JPM)

Number of Hedge Fund Holders: 104

Dividend Yield as of November 2: 3.13%

JPMorgan Chase & Co. (NYSE:JPM) is a New York-based financial services company that operates through four segments – Consumer & Community Banking, Corporate & Investment Bank, Commercial Banking, and Asset & Wealth Management. On October 14, the company reported a Q3 GAAP EPS of $3.12 and a revenue of $32.72 billion, outperforming market estimates by $0.23 and $840 million, respectively. Q3 earnings largely benefited from robust performance in the consumer banking unit. As per the smart money, JPMorgan Chase & Co. (NYSE:JPM) is one of the best plays to consider for a dividend stock portfolio. 

On October 17, Citi analyst Keith Horowitz reiterated a Buy rating on JPMorgan Chase & Co. (NYSE:JPM) with a $135 price target following the Q3 results. The analyst noted that the bank is “hitting on all cylinders” and that present share levels offer an “excellent entry point” for a “quality franchise.”

According to Insider Monkey’s Q2 data, 104 hedge funds were bullish on JPMorgan Chase & Co. (NYSE:JPM), compared to 110 funds in the last quarter. Ken Fisher’s Fisher Asset Management featured as the leading position holder in the company, with nearly 8 million shares worth $900 million. 

Here is what Vltava Fund has to say about JPMorgan Chase & Co. (NYSE:JPM) in its Q3 2022 investor letter:

“We regard JPM to be the strongest and best- managed bank in the world. It is a leader in investment banking, commercial banking, credit cards, and asset management. Its size (the largest bank in the USA, with nearly USD 4,000 billion in assets) and diversification give it a strong competitive advantage that is compounded by its cost advantages and the high costs to clients associated with switching banks. JPM’s management prides itself on running the only large bank to avoid major instability over the long term.

JP Morgan’s quality and strength first became fully evident in 2008 under the leadership of its CEO Jamie Dimon. Not only did JP Morgan help to stabilize the market by taking over the failing Bear Stearns in the spring of that year, but throughout the Great Financial Crisis it was the only big US bank that did not require government assistance and it was highly profitable even in the difficult year of 2008.

A well-functioning and efficient bank can be a very good long-term investment, because the interest compounding effect works well here. JPM’s return on equity (ROE) is well into the double digits and this puts it in a good position to continue producing better long-term returns than does the market. JPM has been very profitable even during years when interest rates were close to zero. The current – and perhaps not temporary – return to somewhat more normal, higher interest rates should have a significantly positive impact on the bank’s interest income and overall profitability.”

4. Apple Inc. (NASDAQ:AAPL)

Number of Hedge Fund Holders: 128

Dividend Yield as of November 2: 0.62%

Apple Inc. (NASDAQ:AAPL) is one of the top picks of elite hedge funds for a dividend stock portfolio. On October 27, Apple Inc. (NASDAQ:AAPL) declared a $0.23 per share quarterly dividend, in line with previous. The dividend is payable on November 10, to shareholders of the company as of November 7. 

BofA analyst Wamsi Mohan estimated on November 1 that Apple Inc. (NASDAQ:AAPL)’s global App Store revenue has dropped 4% year-over-year to $2.4 billion in fiscal Q1-to-date through October 30, citing data from SensorTower. Latest app store price increases in some regions will partially offset the stronger dollar, but he still worries about an overall drop in consumer demand. The analyst maintained a Neutral rating and a $160 price target on Apple Inc. (NASDAQ:AAPL) shares.

According to Insider Monkey’s Q2 data, 128 hedge funds were long Apple Inc. (NASDAQ:AAPL), compared to 131 funds in the earlier quarter. Warren Buffett’s Berkshire Hathaway is the biggest stakeholder of the company, with nearly 895 million shares worth $122.3 billion. 

Here is what Wedgewood Partners specifically said about Apple Inc. (NASDAQ:AAPL) in its Q3 2022 investor letter:

“Apple Inc. (NASDAQ:AAPL) grew revenues +5% (foreign exchange adjusted and excluding Russia) driven by record iPhone revenues that were up about +3% on an exceptional year ago comparison of +50%. Apple’s installed base is over 1.8 billion devices which helps drive a software and services business that has generated almost $80 billion of revenue over the past 4 quarters. As we have highlighted in the past, Apple’s relentless focus on the development and integration between hardware (especially ICs) as well as software, continues to add significant value for customers of its products and services. We expect this favorable competitive dynamic to continue for the foreseeable future.”

3. Mastercard Incorporated (NYSE:MA)

Number of Hedge Fund Holders: 137

Dividend Yield as of November 2: 0.60%

Next on our list of the top contenders for a dividend stock portfolio is Mastercard Incorporated (NYSE:MA), the American payments technology provider. On October 27, Mastercard Incorporated (NYSE:MA) reported its Q3 results, posting earnings per share of $2.68, beating analysts’ estimates by $0.11. The revenue of $5.76 billion climbed 15.47% year-over-year, topping market consensus by $100.06 million. 

On November 1, Mizuho analyst Dan Dolev maintained a Buy recommendation on Mastercard Incorporated (NYSE:MA) but trimmed the firm’s price target on the shares to $380 from $385 following the Q3 results. The analyst lifted 2022 estimates but slashed outer-year expectations.

According to Insider Monkey’s data, 137 hedge funds were bullish on Mastercard Incorporated (NYSE:MA) at the end of June 2022, compared to 136 funds in the preceding quarter. Charles Akre’s Akre Capital Management is the largest stakeholder of the company, with 5.8 million shares valued at $1.85 billion. 

Here is what L1 Capital International specifically said about Mastercard Incorporated (NYSE:MA) in its Q2 2022 investor letter:

“Growth in electronic payments, the continued shift away from cash and cheques, and the provision of additional services such as fraud identification and prevention continue to power Mastercard Incorporated (NYSE:MA)’s growth (Figure 14). In person cross-border transactions are recovering alongside normalization of travel.

Mastercard and Visa (we have invested in both) continue to dominate the electronic payments industry outside of China, utilizing their own multi-faceted networks as well as Government and third-party payments infrastructure to facilitate transactions. Another perfect example of a ‘Noah’s Ark’ industry structure.

Regulation, technological disruption and disintermediation, and geopolitical constraints are perennial issues for consideration, but Mastercard (and Visa) management have repeatedly demonstrated their ability to manage these issues…” (Click here to read the full text)

2. Visa Inc. (NYSE:V)

Number of Hedge Fund Holders: 166

Dividend Yield as of November 2: 0.88%

Visa Inc. (NYSE:V) is one of the top picks of elite hedge funds for a dividend stock portfolio. On October 25, Visa Inc. (NYSE:V) declared a $0.45 per share quarterly dividend, a 20% increase from its prior dividend of $0.375. The dividend is payable on December 1, to shareholders of the company as of November 11. The company also announced a new $12 billion share repurchase program. At the end of September, $5.1 billion was remaining in authorized units under its existing buyback program. 

On October 27, Barclays analyst Ramsey El-Assal reiterated an Overweight rating on Visa Inc. (NYSE:V) but lowered the firm’s price target on the shares to $264 from $271 following the Q3 earnings.

According to Insider Monkey’s second quarter database, 166 hedge funds were bullish on Visa Inc. (NYSE:V), up from 159 funds in the earlier quarter. Chris Hohn’s TCI Fund Management is the leading position holder in the company, with approximately 20 million shares worth $4 billion. 

Here is what RiverPark Large Growth Fund has to say about Visa Inc. (NYSE:V) in its Q3 2022 investor letter:

“We reinitiated a small position in Visa, which we had previously owned for years (selling out of the position at higher levels in February). We continue to believe that the long-term secular growth trend towards digital payments remains intact and has been further enhanced by the COVID crisis. The growth in debit cards, contactless payments, e-commerce, and now, buy-now-pay-later (BNPL), are all driving digital payment penetration, and we continue to be impressed with the long-term growth potential of V (and our other payment holdings Mastercard, Adyen, and PayPal).”

1. Microsoft Corporation (NASDAQ:MSFT)

Number of Hedge Fund Holders: 258

Dividend Yield as of November 2: 1.21%

Among the hedge funds tracked by Insider Monkey, Microsoft Corporation (NASDAQ:MSFT) is the top pick for a dividend stock portfolio. In the second quarter of 2022, Microsoft Corporation (NASDAQ:MSFT) was part of 258 hedge fund portfolios, compared to 259 in the prior quarter. Peter Rathjens, Bruce Clarke, and John Campbell’s Arrowstreet Capital is a significant position holder in the company, with approximately 18 million shares worth $4.6 billion. 

On September 20, Microsoft Corporation (NASDAQ:MSFT) declared a $0.68 per share quarterly dividend, a 10.0% increase from its prior dividend of $0.62. The dividend is payable on December 8, to shareholders of record on November 17. Microsoft Corporation (NASDAQ:MSFT) also posted market-beating Q3 2022 financial results. 

Macquarie analyst Sarah Hindlian-Bowler on November 2 initiated coverage of Microsoft Corporation (NASDAQ:MSFT) with a Neutral rating and a $234 price target. The analyst sees short-term headwinds for Microsoft Corporation (NASDAQ:MSFT) from weakness in the macro environment, cloud pull-in from COVID, softer PC sales, heightening energy costs, and low purchasing power.

Here is what Baron Funds specifically said about Microsoft Corporation (NASDAQ:MSFT) in its Q3 2022 investor letter:

“Shares of Microsoft Corporation (NASDAQ:MSFT) pulled back with the overall software industry on the back of macroeconomic issues, including inflation concerns and rising interest rates. The company reported another strong quarter, highlighted by total revenues growing 16% on a constant currency basis and Microsoft Cloud revenues, now 48% of total sales, growing 33%, with Azure (Microsoft’s infrastructure cloud) growing 46%. These results were driven by strong demand for large commercial cloud contracts, as more businesses are standardizing on Microsoft’s platform and the company is signing larger and longer deals. Initial fiscal year 2023 guidance calls for healthy double-digit revenue and operating income growth. Both foreign exchange and personal computer headwinds were contemplated in the guidance and have continued to worsen, but we have conviction in the company’s strong competitive positioning, durable growth drivers, and margin expansion opportunity over the mid- to long term.”

You can also take a look at 10 Cheap Penny Stocks To Buy Now and 12 Best Annual Dividend Stocks To Invest In. 

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