Five Dividend Stocks Hedge Funds Love

#3 Merck & Co., Inc. (NYSE:MRK)

– Number of Hedge Fund Holders (as of March 31): 70
– Total Value of Hedge Fund Holdings (as of March 31): $2.49 billion
– Hedge Fund Holdings as Percent of Float (as of March 31): 1.70%

Merck & Co., Inc. (NYSE:MRK) is one of the giants in the pharmaceutical industry. With multiple hit drugs such as Januvia and Janumet, the company is an earnings machine, making the dividend safe. Merck reported earnings of $0.89 per share for its first quarter, or almost double the company’s quarterly dividend payout of $0.46 per share, with its stock having a dividend yield of 3.26%. 2016 EPS guidance stands at between $3.65 and $3.77, better than the management’s previous forecast of $3.60 to $3.75. As some of its products fall off the patent cliff, look for Merck to get involved in M&A to boost its portfolio and increase its cash flow.

#2 Wells Fargo & Co (NYSE:WFC)

– Number of Hedge Fund Holders (as of March 31): 90
– Total Value of Hedge Fund Holdings (as of March 31): $29.76 billion
– Hedge Fund Holdings as Percent of Float (as of March 31): 12.10%

Wells Fargo & Co (NYSE:WFC) reported excellent results for its first quarter, earning $0.99 per share on sales of $22.19 billion, beating expectations by $0.01 and $590 million, respectively. Average loans rose by 7% year-over-year, while average deposits inched up by 4% year-over-year. Wells Fargo’s management has recently raised the quarterly dividend to $0.38 per share from the previous $0.375 per share, giving the stock a dividend yield of 3%. The future looks bright for the company.  Crude prices have surged by over 80%, trimming the bank’s exposure to bad energy loans. Many investors expect the Federal Reserve to raise interest rates next month, helping increase Wells Fargo’s net interest margin. The bank’s valuation is reasonable with the stock trading for 11.5 times forward earnings estimates. Warren Buffett’s Berkshire Hathaway owned almost 480 million shares at the end of the first quarter.

#1 Pfizer Inc. (NYSE:PFE)

– Number of Hedge Fund Holders (as of March 31): 119
– Total Value of Hedge Fund Holdings (as of March 31): $8.37 billion
– Hedge Fund Holdings as Percent of Float (as of March 31): 4.60%

Although Pfizer Inc. (NYSE:PFE)’s deal to merge with Allergan plc Ordinary Shares (NYSE:AGN) to save on taxes failed, the company remains a great dividend holding. The drug giant turned in a solid first quarter, beating EPS and revenue estimates by $0.12 per share and $1 billion, respectively, having reported earnings of $0.67 per share on sales of $13 billion. For the full year, the company expects adjusted EPS of $2.38 to $2.48 on revenue of $51 to $53 billion. The robust EPS guidance is good news for the dividend. Pfizer currently pays a $0.30 per share quarterly dividend, which gives its stock a 3.5% yield. If EPS continues to grow, look for Pfizer to raise the dividend further. Ken Fisher’s Fisher Asset Management was one of the top shareholders of Pfizer at the end of March.

Disclosure: none