In this article, we will look at 5 high-yielding dividend stocks to buy according to journalist investor Jim Cramer. If you want to explore similar stocks, you can also take a look at Jim Cramer is Recommending These 2 High-Yield Dividend Stocks.
The Short-Term Camp Vs The Silent Majority
Following the Fed’s 75 basis point hike on September 22, Jim Cramer spoke on his show about how he sees people being divided into two groups as the Fed commits to staying hawkish “until the job is done”. Jim Cramer said that the Fed will continue to raise interest rates “until the help wanted signs come down, until savings are diminished, until housing prices cool, and until supply and demand get in balance”.
Jim Cramer thinks the Fed’s approach to curtailing inflation will be good for the economy in the long term. Cramer said that the Fed “is creating and preserving long-term wealth” at the cost of deteriorating short-term value and noted that long-term inflation is bad for all asset classes and the overall economy. Jim Cramer said that people can either lose money right now as the Fed makes borrowing expensive, or people can see the value of their investments “erode gradually over time because of inflation”.
Jim Cramer believes the Fed is “punishing us now in order to save us from financial purgatory later on”.
Cramer identified two “broad camps” of people emerging as the Fed continues to raise interest rates. He said that the “short-term” camp is made up of people who are in the stock market for short-term gains and lack confidence in the Fed’s ability to curtail inflation while also thinking that the Fed will “overshoot” and cause a recession. The second camp, “the silent majority”, believes that the Fed is acting in the best longer-term interests of the economy, and Cramer said that he is part of “the silent majority”.
Cramer said:
“The short-term camp is made up of people who either can’t handle any pain or don’t believe in Powell and want to get out ahead of others who think that it’s going to really come down. The longer-term camp though, including me, knows that Powell’s methods are serious and we’re going to see downward revisions of everything until it’s clear that the inflation giant is slain and we can start moving up again…
I think Powell wins the game and when he does, we’ll (silent majority) be on the field, and the short-termers will be on the bottom of the standings if they are still in the standings at all…”
Cramer’s “Accidental High-Yielders”
On September 28, Jim Cramer gave bullish calls on 5 dividend stocks that he referred to as “accidental high-yielders”. Cramer said that the yield on the 2-year treasury bill rose to above 4% recently and that it’s “widely viewed as a sign that we are on the cusp of a recession” and that “it means the Fed is gonna hit us with more rate hikes”. Cramer thinks there’s an opportunity in his “accidental high-yielders” as the “rapidly rising treasury yields put tremendous pressure on dividend stocks because they finally have competition from the fixed-income market”. Here are some comments from the journalist investor:
“I know this is cliche but I gotta view this as an opportunity. At this point of the cycle, you are getting the chance to buy the accidental high-yielders, I call them the ‘AHY’. Dividend stocks have been hammered to the point where their yields are irresistible regardless of where the treasuries are. They might have more downside here, but I recommend you start buying them here and gradually build up a position”
Jim Cramer said that he is confident in the “accidental high-yielders” because he made a call back in “late 2008 when the market was falling apart” and that the call became one of his “best calls since the show began”. Cramer sees the current market situation exhibiting the same signs as he saw in 2008 and therefore he looked for the “accidental high-yielders” following the same methodology he used back in 2008.
In addition to the “accidental high-yielders”, Jim Cramer also has a selection of his favorite dividend aristocrats which the journalist investor recommends to own through the end of 2022. Some of Jim Cramer’s top favorite dividend aristocrats include McDonald’s Corporation (NYSE:MCD), General Dynamics Corporation (NYSE:GD), and The Coca-Cola Company (NYSE:KO).
Our Methodology
We reviewed Jim Cramer’s list of the “accidental high-yielders” and arranged them in increasing order of their dividend yields. Along with each stock, we mentioned the hedge fund sentiment and analyst ratings. The hedge fund sentiment was derived from Insider Monkey’s database of roughly 900 elite hedge funds.
Best High-Yield Dividend Stocks to Buy According to Jim Cramer
5. KeyCorp (NYSE:KEY)
Dividend Yield as of September 28: 4.75%
Number of Hedge Fund Holders: 37
KeyCorp (NYSE:KEY) is among Jim Cramer’s undervalued “accidental high-yielders”. The company has been growing its dividends for 11 years and has a 5-year dividend CAGR of 16.72% and an annual payout ratio of 33.77%. On July 7, KeyCorp (NYSE:KEY) declared a quarterly cash dividend of $0.195 per common share. The dividend was payable on September 15 to stockholders of record on August 30. As of September 28, KeyCorp (NYSE:KEY) has a trailing twelve-month PE ratio of 6.98 and is offering a forward dividend yield of 4.75%, which the company supports with free cash flows of $1.6 billion.
On September 12, Deutsche Bank analyst Matt O’Connor revised his price target on KeyCorp (NYSE:KEY) to $23 from $26.50 and maintained a Hold rating on the shares. This September, Wedbush analyst David Chiaverini started coverage of KeyCorp (NYSE:KEY) with a Neutral rating and an $18 price target. Over the past three months, KeyCorp (NYSE:KEY) has received 6 Buy and 7 Hold ratings from Wall Street analysts. The stock has an average price target of $22.19 which represents an upside of 40.6% from its current share price.
At the end of the second quarter of 2022, 37 hedge funds were long KeyCorp (NYSE:KEY) and held stakes worth $338.4 million in the company. This is compared to 38 hedge funds in the first quarter of 2022 with stakes worth $264.6 million.
As of June 30, Adage Capital Management owns more than 4.4 million shares of KeyCorp (NYSE:KEY) and is the top shareholder in the company. The fund’s stakes are valued at $77 million and the investment covers 0.17% of Adage Capital Management’s 13F portfolio.
Some of Jim Cramer’s favorite dividend stock picks for 2022 include McDonald’s Corporation (NYSE:MCD), General Dynamics Corporation (NYSE:GD), and The Coca-Cola Company (NYSE:KO).
4. Federal Realty Investment Trust (NYSE:FRT)
Dividend Yield as of September 28: 4.78%
Number of Hedge Fund Holders: 24
In addition to being one of his top “accidental high-yielders”, Federal Realty Investment Trust (NYSE:FRT) is also one of Jim Cramer’s favorite dividend aristocrats. Jim Cramer likes the REIT’s portfolio of suburban properties and thinks it can survive an economic downturn. On August 4, Federal Realty Investment Trust (NYSE:FRT) reported market-beating earnings for the second quarter of fiscal 2022. The company generated a revenue of roughly $287 million, up 14% year over year, and ahead of expectations by $13 million. The company reported funds from operations of $1.65 and beat market consensus by $0.16.
On August 4, Federal Realty Investment Trust (NYSE:FRT) increased its quarterly cash dividend by 1% and declared a dividend of $1.08 per common share. The dividend is payable on October 17 to stockholders of record at the close of business on September 22. As of September 28, Federal Realty Investment Trust (NYSE:FRT) is offering a forward dividend yield of 4.78% and has free cash flows of $67.2 million.
This August, Truist analyst Ki Bin Kim adjusted his price target on Federal Realty Investment Trust (NYSE:FRT) to $120 from $125 and reiterated a Hold rating on the shares. On September 27, Evercore ISI analyst Steve Sakwa revised his price target on Federal Realty Investment Trust (NYSE:FRT) to $110 from $119 and maintained an In Line rating on the shares. Over the past three months, the stock has received 8 Buy and 6 Hold ratings from Wall Street analysts and has an average price target of $118.68, which implies an upside of 35% from current levels.
Federal Realty Investment Trust (NYSE:FRT) was spotted on 24 hedge fund portfolios at the end of the second quarter of 2022. The collective stakes of these hedge funds amounted to 199.8 million.
In addition to Federal Realty Investment Trust (NYSE:FRT), Jim Cramer also likes McDonald’s Corporation (NYSE:MCD), General Dynamics Corporation (NYSE:GD), and The Coca-Cola Company (NYSE:KO) and recommends owning them through year-end.
3. Ford Motor Company (NYSE:F)
Dividend Yield as of September 28: 4.87%
Number of Hedge Fund Holders: 46
Legendary American carmaker, Ford Motor Company (NYSE:F) is among Jim Cramer’s “accidental high-yielders” and the stock is trading cheaply relative to earnings. As of September 28, Ford Motor Company (NYSE:F) is trading at a PE multiple of 4.21 and is offering a forward dividend yield of 4.87%, which the company supports with free cash flows of $5.98 billion. The company has also managed to maintain profitability and has a trailing twelve-month operating margin of 7.82%. Cramer’s charitable trust has a stake in Ford Motor Company (NYSE:F).
On September 2, Ford Motor Company (NYSE:F) announced that its sales for August 2022 grew 27.3% year over year and amounted to over 158,000 vehicles. The company also announced that its market share rose 2.4% year over year and as of August 2022, the company holds a 13.4% market share in the automotive industry. On September 15, Ford Motor Company (NYSE:F) unveiled the seventh-generation Ford Mustang which features a fighter jet-inspired digital cockpit and an advanced turbocharged engine. The new Ford Mustang is expected to be commercially available in the summer of 2023. On September 27, Ford Motor Company (NYSE:F) announced that it will invest $700 million in its Kentucky plant to support new vehicle manufacturing. The new investment in the Kentucky plant is expected to create 500 additional hourly manufacturing jobs.
This September, Morgan Stanley analyst Adam Jonas reiterated his $14 price target and Equal Weight rating on Ford Motor Company (NYSE:F). On September 27, Citi analyst Itay Michaeli revised his price target on Ford Motor Company (NYSE:F) to $13 from $16 and maintained a Neutral rating on the shares. Over the past three months, Ford Motor Company (NYSE:F) has received 4 Buy and 9 Hold ratings from Wall Street analysts. The stock has a median price target of $15.74, which implies a 34.6% upside from current levels.
Insider Monkey found 46 hedge funds that held stakes in Ford Motor Company (NYSE:F) at the end of the second quarter of 2022. The total value of these stakes amounted to $608.7 million. As of June 30, D E Shaw owns more than 23 million shares of the Ford Motor Company (NYSE:F) and is the largest shareholder in the company. The fund’s stake is valued at $257.6 million, which accounts for 0.3% of the fund’s investment portfolio.
Here is what Baron Funds had to say about Ford Motor Company (NYSE:F) in its first-quarter 2022 investor letter:
“Ford (NYSE:F) is another example of typical industrial manufacturing business executive mindsets. The April 18, 2022, Bloomberg Businessweek cover story features Ford CEO Jim Farley behind the wheel of an electrified Ford F-150 Lightning. The article is titled, “Hey Elon, THIS is a truck.” I thought the article was terrific. One idea especially stood out to me. Since the F-150 is such a popular vehicle, it “argued for a gradual approach to electrification. Essentially the company retrofitted an existing F-150 with an electric powertrain rather than develop an entirely new truck.” No all-in financial and operation bet by this company on electrification.”
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Disclosure. None. Jim Cramer is Recommending These 5 High-Yield Dividend Stocks is originally published on Insider Monkey.
