We recently published a list of 10 Best Dividend Paying Stocks To Buy According to Quant Hedge Fund AQR. In this article, we are going to take a look at where Chubb Limited (NYSE:CB) stands against the other dividend-paying stocks to buy according to Quant Hedge Fund AQR.
Only a handful of hedge funds have pursued unique investment strategies, and Cliff Asness’ Applied Quantitative Research, or AQR Capital, stands out among them. Known for its quantitative value strategies, Asness co-founded AQR in 1998 after working at Goldman Sachs. He and his partners developed the firm’s investment approach during their time in the University of Chicago’s Ph.D. program, emphasizing value and momentum strategies. These distinct approaches have delivered strong results for the fund over the years. In fact, AQR’s longest-running multistrategy fund returned 18.5% last year after fees, and had its best year in 2022, with a 43.5% gain. In January 2023, Asness forecasted that buying undervalued companies while shorting overvalued ones in particular sectors would be especially advantageous for that year.
Given the growing focus on generative AI and machine learning, Asness mentioned that his natural inclination is to be contrarian. However, he acknowledges that he needs to move past this instinct because he recognizes significant opportunities in machine learning. During a recent Bloomberg Invest conference, Asness highlighted that they increasingly rely on automated decision-making at AQR, expressing a belief that the machine might have a slight edge over human judgment. The firm’s improved performance in recent years is partly attributed to market cycles, but it has also implemented some changes.
Though Asness is now directing his focus toward artificial intelligence, diversification has always been a fundamental aspect of his investment strategy. He believes that concentrating investments into a single asset does not adequately address the inherent risks in financial markets. According to Asness, the rationale for preferring a diversified portfolio lies in its potential to provide a higher return for the risk taken, rather than simply offering a higher expected return.
When discussing diversification, different investment strategies can have varying advantages. Dividend investing is particularly popular among investors. In his paper published in the Financial Analysts Journal, which earned him the Graham and Dodd Award for the best paper of the year twice, Asness emphasized the value of dividends. He explained that companies that distribute higher dividends generally experience stronger earnings growth over the following decade compared to those that pay out less. Asness elaborated that substantial dividend payouts often indicate a company’s confidence in its future prospects, as firms are reluctant to cut dividends and typically wouldn’t pay them if they anticipated poor performance. Furthermore, companies paying large dividends must be more selective with their investment projects, potentially leading to wiser investment choices. On the other hand, companies that pay minimal dividends might be either struggling (as seen with inflated earnings in 1999) or engaging in “empire building,” where managers, having plenty of cash, may invest imprudently in less profitable ventures.
Asness’s preference for dividend stocks is also apparent in his Q2 2024 portfolio, which features a significant number of dividend-paying equities. With that in mind, we will take a look at some of the best dividend-paying stocks according to AQR Capital.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points. (see more details here).
A close-up of an insurance agent’s hand pointing to a marine insurance policy, highlighting the company’s expertise in marine coverage.
Chubb Limited (NYSE:CB)
AQR Capital’s Stake Value: $296,412,873
Dividend Yield as of August 22: 1.34%
Chubb Limited (NYSE:CB) is an American Swiss insurance company, based in Zurich, Switzerland. The company offers a wide range of related products and services to its consumers. During the second quarter of 2024, AQR Capital increased its position in the company by 31%. The hedge fund owned over one million CB shares at the end of the quarter, worth over $296 million. The company made up 0.45% of the firm’s 13F portfolio.
Similar to dividend stocks, insurance companies typically don’t offer rapid, large-scale returns. However, they are dependable businesses that consistently grow over time due to their role in managing risk. Chubb Limited (NYSE:CB)’s approach centers on developing personalized customer relationships through a network of independent agents, providing coverage options that are often not easily available with other insurers. The stock has gained over 19% since the start of 2024 and its 12-month returns came in at over 36%.
Chubb Limited (NYSE:CB) is a strong dividend payer with stable cash generation. In the second quarter of 2024, the company reported an operating cash flow of $4.08 billion and its free cash flow amounted to $3.57 billion. This cash was enough to pay $369 million worth of dividends to shareholders during the quarter. The company’s overall revenue came in at $11.78 billion, which showed a 10.29% growth from the same period last year.
Chubb Limited (NYSE:CB), one of the best dividend-paying stocks, offers a quarterly dividend of $0.91 per share. In May this year, the company achieved its 31st consecutive year of dividend growth. As of August 22, the stock has a dividend yield of 1.34%.
At the end of Q2 2024, 46 hedge funds tracked by Insider Monkey held stakes in Chubb Limited (NYSE:CB), compared with 53 in the previous quarter. The collective value of these stakes is more than $8 billion. With over 27 million shares, Warren Buffett’s Berkshire Hathaway was the company’s largest stakeholder in Q2.
Overall CB ranks 10th on our list of the best dividend paying stocks to buy according to Quant Hedge Fund AQR. While we acknowledge the potential of CB as an investment, our conviction lies in the belief that some deeply undervalued dividend stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for a deeply undervalued dividend stock that is more promising than CB but that trades at less than 7 times its earnings and yields nearly 10%, check out our report about the dirt cheap dividend stock.
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Disclosure: None. This article is originally published at Insider Monkey.