Five Dividend Kings to Buy Based on Billionaire Investors’ Sentiment

Dividend investing offers an opportunity to benefit from a steady inflow of payments that allow investors to diversify their portfolio, while waiting for a stock to appreciate over time. In addition, buying shares of companies that pay dividends usually signals a solid financial position of a company. However, among hundreds of companies that pay dividends a special place is deserved for the so-called “dividend aristocrats” and “dividend kings” which represent companies that have been paying an increased dividend for at least 20 and 50 years, respectively. Dividend kings represent a very small and elite group of companies that over decades showed the ability to adapt to a changing environment and survive even the toughest economic conditions, which often wipes out its peers. Even though there are just 17 dividend kings, one of the ways to identify the best bets in the list is to look at the smart money investors are bullish on them. And among almost 800 hedge funds and other institutional investors that we follow at Insider Monkey as part of our small-cap strategy (read more details here), an elite group includes around 50 funds that are managed or were founded by billionaires. We have earlier discussed five dividend aristocrats that billionaires in our database are bullish on (read article), so now let’s turn our attention to five dividend kings that ranked as the most popular among these investors, based on the last round of 13F filings.

On the fifth spot we have Colgate-Palmolive Company (NYSE:CL), in which seven billionaires hold positions as of the end of 2015, down by one over the quarter. At the same time, among our whole database of investors, 32 funds own shares of the company, but the billionaires hold the largest amount of shares, worth $1.06 billion out of $1.78 billion that the funds we follow have amassed in aggregate. The largest position in Colgate-Palmolive Company (NYSE:CL) among the funds we track is held by billionaire Jim Simons’ Renaissance Technologies, which reported 10.06 million shares worth $670.39 million in its last 13F filing. Other billionaires’ funds bullish on Colgate-Palmolive include Jacob Rothschild’s RIT Capital Management, David Shaw’s D. E. Shaw & Co. and David Harding’s Winton Capital Management.

Colgate-Palmolive Company (NYSE:CL)’s stock has gained almost 150% over the last decade and currently sports a yield of 2.20%, based on the $0.39 dividend the company pays quarterly. Earlier this year, Colgate-Palmolive raised the dividend by 3% and, overall, the company has paid dividends since 1895, which is pretty impressive. However, Colgate-Palmolive, similar to many of its peers in the consumer sector, has been hit by a stronger dollar and to counteract currency headwinds, the company has recently announced plans to cut between 3,300 and 3,800 employees throughout 2017. Nevertheless, the company’s restructuring plan launched back in 2012, will still be appealing to investors as it includes “expanding commercial hubs”, “extending shared business services and streamlining global functions” and “optimizing global supply chain and facilities”, as the company said in a filing with the Securities and Exchange Commission.

Next in line is another consumer stock, Procter & Gamble Co (NYSE:PG), in which also seven billionaires reported stakes as of the end of December, down from nine investors a quarter earlier. The billionaires in our database have amassed around $5.27 billion worth of Procter & Gamble’s shares, while the largest position is held by Warren Buffett‘s Berkshire Hathaway and contains 52.79 million shares valued at $4.19 billion. Billionaires Ken Fisher’s Fisher Asset Management, Ken Griffin’s Citadel Investment Group and Mario Gabelli’s GAMCO Investors are also among the investors long Procter & Gamble.

Procter & Gamble Co (NYSE:PG)’s stock has appreciated by 40% during the last 10 years and the company pays a dividend of $0.66 per share, which yields 3.19%. The management is committed to returning capital to shareholders and it has paid out around $60 billion through dividends and buybacks for the last five years. The company, also affected by a stronger dollar, has put some cost cuts in place in order to boost its bottom line and it currently aims to further increase the capital return program to $70 billion by fiscal 2019. In addition, to raise cash Procter & Gamble Co (NYSE:PG) plans to sell more brands from its portfolio, such as Duracell, which was acquired by Berkshire Hathaway.

The dividend king from the healthcare sector that enjoys the most support from the billionaires we track is Johnson & Johnson (NYSE:JNJ). However, during the last quarter, the number of billionaires bullish on the drug manufacturer slid by four to eight, while the total value of their holdings amounted to $1.69 billion at the end of last year. Fisher Asset Management owns the largest position in Johnson & Johnson (NYSE:JNJ) among the funds we track, reporting 10.82 million shares worth $1.11 billion in its 13F filing for the end of December.

Last year Johnson & Johnson (NYSE:JNJ) raised the quarterly dividend to $0.75 from $0.70 and currently its stock sports a yield of 2.79%. The company is currently involved in a series of lawsuits related to its discontinued hysterectomy device that allegedly led to spreading uterine cancer. The company has settled most claims and is continuing talks on others, according to reports.

The second-largest home improvement retailer in the world Lowe’s Companies, Inc. (NYSE:LOW) is also the second favorite dividend king among billionaire investors followed by Insider Monkey. At the end of December, nine billionaires reported long positions in the company (unchanged over the quarter) with a total value of $1.22 billion. Among the largest shareholders of the company are Citadel Investment Group and billionaire Israel Englander’s Millenniun Management, which own 5.54 million shares and 2.89 million shares, respectively.

Lowe’s Companies, Inc. (NYSE:LOW)’s stock has gained 118% for the last decade and sports a yield of 1.49%. The company yesterday announced a quarterly dividend of $0.28 per share that will be paid on May 4 to shareholders as of April 20. Lowe’s Companies has benefitted from the low interest rate environment, which led to a housing market growth, and as a result benefitted most home-improvement retailers. Seeing as the Fed is not rushing into raising the interest rates and the unemployment rate in the US remains at some of the lowest levels, Lowe’s Companies, Inc. (NYSE:LOW) is likely to see a strong top line. Moreover, the company is taking steps towards narrowing the gap with Home Depot Inc (NYSE:HD), such as the recent acquisition of Canadadian home improvement retailer Rona for $2.28 billion, which will expand its international presence.

Finally, on the top spot we have The Coca-Cola Co (NYSE:KO), in which 10 billionaires reported long positions as of the end of 2015, down from 13 a quarter earlier. However, the total value of their positions went up to $18.31 billion from $17.30 billion during the last three months of 2015. The lion’s share of the aggregate value is held by Berkshire, which owns a $17.18 billion stake in The Coca-Cola Co that contains 400 million shares. Other billionaires’ funds long the stock include Fisher Asset Management, Renaissance Technologies and D. E. Shaw & Co.

The Coca-Cola Co (NYSE:KO) currently pays a quarterly dividend of $0.35 per share, giving its stock a yield of 3.07%. Shares of the beverage maker took a hit earlier this week, when the UK announced a tax on sugary drinks that will be implemented in 2018. The tax is aimed towards reducing obesity, but experts consider that the cost of the tax will most likely be passed to consumers through higher prices, or hidden costs, such as smaller pack sizes. Coca-Cola’s sales have also been affected by a stronger dollar and another risk that investors should be aware of is the focus of consumers towards a healthier lifestyle. However, The Coca-Cola Co (NYSE:KO) will adapt to the changes and will remain, in the words of Warren Buffett, “a forever stock”.

Disclosure: none