Hedge Funds’ 5 Favorite Dividend Stocks With 4%+ Yields

With the ten-year treasury yield having risen at a brisk pace in the last year, dividend stocks have lost some momentum as investors diversify their portfolios away from income stocks. The SPDR S&P Dividend (ETF) (NYSEARCA:SDY) has gained just 4% in 2018 and was down for much of the year. That is good news for dividend investors, as selling pressure has pushed down the price of numerous dividend stocks while pushing up their yields.

Dividend investors could also look to Insider Monkey’s flagship “Best Performing Hedge Funds Strategy”, which has returned 107.5% since its May 2014 inception, crushing the S&P 500 by over 40 percentage points during that time. Among the stock picks recommended to our subscribers this year (stocks which delivered over 17% gains between mid-February and the end of July) were dividend-paying stocks like Peabody Energy Corporation (NYSE:BTU) and Hyatt Hotels Corporation (NYSE:H). Check out a detailed analysis of Insider Monkey’s past performance and quarterly stock picks for all the details. Our newest picks were just released this month, don’t miss out!

Below, we’ll check out the five most popular dividend stocks among hedge funds which have an annual dividend yield of at least 4%.

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5. IBM Common Stock (NYSE:IBM)

Hedge Funds Long IBM as of June 30: 46

IBM Dividend Yield: 4.30%

With a 4.30% dividend yield, IBM Common Stock (NYSE:IBM) ranks fifth on our list, being owned by 46 hedge funds in our system on June 30. Seth Klarman‘s Baupost Group opened a $300 million position (9.48 million shares) in IBM during the second-quarter, while James Dinan’s York Capital Management also opened a large new position during that time (1.34 million shares).

In an effort to keep its employees alert, IBM Common Stock (NYSE:IBM) has filed a patent for a drone-based coffee delivery system that could recognize when employees need a mental boost based on various signals such as pupil dilation. The proposed system could also factor in employees’ sleep and meeting schedules to determine the ideal potency of coffee required for the situation.

4. Verizon Communications Inc. (NYSE:VZ)

Hedge Funds Long VZ as of June 30: 48

VZ Dividend Yield: 4.32%

Verizon Communications Inc. (NYSE:VZ) ranks fourth with 48 hedge funds being shareholders of the telecommunications giant at the end of June. Phill Gross and Robert Atchinson’s Adage Capital Management (6.23 million shares), Ken Griffin’s Citadel Investment (4.68 million shares), and Cliff Asness’ AQR Capital Management (2.64 million shares) were among the top Verizon shareholders.

Verizon Communications Inc. (NYSE:VZ) has enjoyed strong EPS growth in 2018 and remains the leading mobile carrier in the U.S with over 150 million subscribers. On the other hand, its Fios video service shed a net total of 37,000 pay TV subscribers in Q2. Verizon was criticized this week for throttling the internet speeds of California wildfire responders, which lead to calls to re-institute net neutrality. Verizon has contended that the throttling wasn’t actually due to net neutrality, though its actions likely would have violated the old net neutrality rules nonetheless.

On the next page we’ll look at the three high-yield dividend stocks that hedge funds can’t live without.

3. Exxon Mobil Corporation (NYSE:XOM)

Hedge Funds Long XOM as of June 30: 50

XOM Dividend Yield: 4.11%

Exxon Mobil Corporation (NYSE:XOM) ranks third, with 50 hedge funds owning the stock at the end of June, which carries a 4.11% dividend yield. The hedge fund ownership was a decline from 57 funds at the end of March, though the value of their collective positions rose to $2.22 billion from $1.67 billion. Dmitry Balyasny’s Balyasny Asset Management (948,888 shares) and John A. Levin’s Levin Capital Strategies (854,667 shares) both made large additions to their Exxon Mobil positions during Q2.

After reaching $89 in late-January, Exxon Mobil Corporation (NYSE:XOM) shares have since retreated to less than $80. Q2 revenue of $73.5 billion beat estimates, but EPS of $0.92 fell well short of the $1.27 consensus. During the quarter, Exxon managed oil-equivalent production of 3.6 million barrels per day, down 7% year-over-year, while natural gas production fell by 10%.

2. General Motors Company (NYSE:GM)

Hedge Funds Long GM as of June 30: 59

GM Dividend Yield: 4.23%

General Motors Company (NYSE:GM) sports an impressive 4.23% dividend yield and was owned by 59 of the hedge funds in our database on June 30, ranking it second on this list. David Einhorn‘s Greenlight Capital (21.26 million shares) has been a vocal bull of GM for some time, while Stephen J. Errico’s Locust Wood Capital Advisors opened a new position of 336,045 GM shares during the June quarter.

After a big finish to 2017, shares of General Motors Company (NYSE:GM) have slumped in 2018, sliding by over 10%. Though GM’s second-quarter profits beat expectations it lowered its full-year profit outlook due to rising steel and aluminum costs as a result of President Trump’s tariffs. GM’s forward P/E sits at just 6.2, half of what it was less than four years ago.

1. AT&T Inc. (NYSE:T)

Hedge Funds Long T as of June 30: 94

T Dividend Yield: 6.14%

AT&T Inc. (NYSE:T) certainly appears to be the most attractive high-yield dividend stock on this list, having wide leads in both the amount of hedge fund ownership and the stock’s dividend yield (just over 6%). 94 hedge funds owned AT&T at the end of June, a massive jump from just 39 three months prior. New owners of the stock during the second-quarter included Seth Klarman’s Baupost Group (9.48 million shares) and John Paulson’s Paulson & Co (2.38 million shares).

AT&T Inc. (NYSE:T)’s huge spike in hedge fund ownership was courtesy of the telecommunications giant closing its $85.4 billion purchase of Time Warner. The completed mega-merger, which is nonetheless still facing some antitrust scrutiny, has done nothing to help AT&T’s shares. Not only are AT&T’s shares down by over 15% this year, they are also trading at a deep historical discount relative to peer Verizon. AT&T will now focus on unlocking as much as $2.5 billion in synergies from the Time Warner merger, which it hopes to accomplish by 2021.

Disclosure: None