In this article, we discuss 10 dividend stocks to buy according to John Allison’s Unio Capital. If you want to read our detailed analysis of the hedge fund’s investment philosophy and Allison’s investment career, go directly to read John Allison’s Unio Capital Portfolio: 10 Dividend Stocks.
5. Fastenal Company (NASDAQ:FAST)
Dividend Yield as of July 3: 2.49%
Unio Capital’s Stake Value: $781,000
Fastenal Company (NASDAQ:FAST) is a Minnesota-based company that specializes in the wholesale distribution of industrial and construction supplies globally.
At the end of Q1 2022, Unio Capital owned 172,137 shares in Fastenal Company (NASDAQ:FAST), valued at $781,000. The hedge fund reduced its position in the company by 5% during the quarter. The company represented 4.13% of John Allison’s portfolio.
On April 12, Fastenal Company (NASDAQ:FAST) declared a quarterly dividend of $0.31 per share, having raised it by 11% in February. The company started paying annual dividends in 1991 and shifted to quarterly payouts in 2011. As of July 3, the stock’s dividend yield was 2.49%.
As of the quarter ended in March 2022, Fastenal Company (NASDAQ:FAST) was a part of 29 hedge fund portfolios, the same as in the previous quarter. The stakes held by these funds are valued at $1.04 billion. With over 7.3 million shares, Select Equity Group held the largest position in the company in Q1.
Nomadic Value Partners mentioned Fastenal Company (NASDAQ:FAST) in its Q2 2021 investor letter. Here is what the firm has to say:
“In mid-June we completely sold out of Fastenal (FAST). Although we had been using FAST as a source of liquidity for a few months already, it still feels bad to say an official goodbye to such an amazing company. However, we must stay focused on the math and the math concludes a difficult task to get our return hurdle going forward. The last time FAST traded at a forward P/E ratio of 34x (the multiple at our exit), the year was 2012. The company had been growing at 20% per year, and the US was about to embark on a shale oil boom, sustaining a low-teens growth trajectory. Today, FAST’s sales growth could turn anemic as the surge for COVID safety products is waning and heavy construction and resources customers are slow to return. An investor must have an optimistic view towards 5+ years of strong real GDP growth as well as sustained inflation. If one lowers the growth assumption to a more likely outcome, then the implicit bet is that low to negative real interest rates will persist and the forward P/E multiple will stay elevated4. I do not want to make such a strong macro bet as the justification for owning a stock. Fastenal is a cyclical business with a growth model proven to take market share secularly, but the time to buy FAST (the stock) will be when we are in the depths of an industrial recession. Stay tuned.”
4. Danaher Corporation (NYSE:DHR)
Dividend Yield as of July 3: 0.39%
Unio Capital’s Stake Value: $782,000
Danaher Corporation (NYSE:DHR) is an American manufacturing company that deals in medical, industrial, and commercial products. In Q1 2022, the company’s revenues increased 12% year-over-year to $7.7 billion and its net earnings came in at $1.7 billion.
In the past 10 years, Danaher Corporation (NYSE:DHR) has raised its dividend at a CAGR of 29%. The company currently offers a quarterly payout of $0.25 per share, with a yield of 0.39%, as of July 3. RBC Capital appreciated the company’s portfolio in June and raised its price target on Danaher Corporation (NYSE:DHR) to $310 while upgrading the stock to Outperform.
During Q1 2022, Unio Capital trimmed its position in Danaher Corporation (NYSE:DHR) by 7%, taking its total stake in the company to $782,000. The company constituted 4.13% of John Allison’s portfolio.
The number of hedge funds tracked by Insider Monkey owning stakes in Danaher Corporation (NYSE:DHR) stood at 83 in Q1, falling from 87 in the previous quarter. The collective value of stakes owned by these hedge funds stood at over $6 billion. Ken Fisher, Dan Loeb, and Ken Griffin were some of the most prominent stakeholders of the Washington-based company in Q1.
Cooper Investors mentioned Danaher Corporation (NYSE:DHR) in its Q1 2022 investor letter. Here is what the firm has to say:
“This combination of attributes was not in favour during a quarter where the market rotated into larger, more traditional index heavyweights that, while growing more slowly and generating lower returns on capital, typically trade on lower headline multiples. In Healthcare for example, we saw portfolio holdings Danaher fall 10-15% in the quarter. Given the relative business quality and growth prospects for a life sciences capital allocator champion like Danaher versus a large diversified pharma company, we think this period of underperformance is likely more a blip than a trend.”
3. Parker-Hannifin Corporation (NYSE:PH)
Dividend Yield as of July 3: 2.14%
Unio Capital’s Stake Value: $872,000
Parker-Hannifin Corporation (NYSE:PH) is an Ohio-based manufacturing company that produces motion and control technologies and systems.
On April 28, Parker-Hannifin Corporation (NYSE:PH) announced a quarterly dividend of $1.33 per share, up 29% from the previous dividend. The company has a solid history of dividend payments, offering dividends to shareholders for the past 286 quarters consecutively. Moreover, it also maintains a 66-year track record of dividend growth. The stock’s yield stood at 2.14%, as of the close of July 3.
During Q1 2022, Unio Capital purchased additional 6,600 PH shares, increasing its stake in the company by 26%. The hedge fund’s total stake in the company stood at $872,000, which accounted for 4.61% of John Allison’s portfolio. In April, Stifel set a $338 price target on Parker-Hannifin Corporation (NYSE:PH) with a Buy rating on the shares.
Viking Global owned over 3 million shares in Parker-Hannifin Corporation (NYSE:PH), worth $898 million, becoming the company’s largest shareholder in Q1. In addition to this, 39 hedge funds held stakes in the company, as tracked by Insider Monkey. The consolidated value of these stakes is over $1.3 billion.
2. Costco Wholesale Corporation (NASDAQ:COST)
Dividend Yield as of July 3: 0.74%
Unio Capital’s Stake Value: $988,000
Costco Wholesale Corporation (NASDAQ:COST) is an American big-box store company that sells discounted goods through membership warehouses and also operates online. On June 30, the company closed on its $1.05 billion deal, purchasing a 45% minority interest in the Costco-Taiwan joint venture. The company now owns all of Costco Taiwan.
Unio Capital opened its position in Costco Wholesale Corporation (NASDAQ:COST) during the first quarter of 2018, with shares worth $343,000. During Q1 2022, the hedge fund reduced its position in the company by 6%, with its total stake amounting to $988,000. COST accounted for 5.22% of John Allison’s portfolio.
On April 13, Costco Wholesale Corporation (NASDAQ:COST) announced a 13% hike in its quarterly dividend to $0.90 per share. The company maintains an 18-year streak of dividend growth. The stock’s dividend yield stood at 0.74%, as of July 3. Atlantic Equities appreciated the strong earnings momentum of Costco Wholesale Corporation (NASDAQ:COST) in June and raised its price target on the stock to $615 with an Overweight rating on the shares.
According to Insider Monkey’s Q1 database, 61 hedge funds owned stakes in Costco Wholesale Corporation (NASDAQ:COST), up from 57 a quarter earlier. These stakes hold a collective value of over $5.4 billion.
ClearBridge Investments mentioned Costco Wholesale Corporation (NASDAQ:COST) in its Q4 2021 investor letter. Here is what the firm has to say:
“Portfolio gains were led by a diverse group of contributors. Also in consumer discretionary, Costco, which operates a chain of membership-only big-box retail stores, continues to impress as it takes to share and becomes more relevant for the consumer even as the world opens up.”
1. Cigna Corporation (NYSE:CI)
Dividend Yield as of July 3: 1.64%
Unio Capital’s Stake Value: $1,270,000
Cigna Corporation (NYSE:CI) is an American healthcare and insurance company that offers Medicare plans to its consumers.
At the end of Q1 2022, Cigna Corporation (NYSE:CI) was the largest holding of Unio Capital, as the hedge fund owned nearly 66,000 shares worth over $1.27 million. The company accounted for 6.71% of John Allison’s portfolio.
Cigna Corporation (NYSE:CI) has been making dividend payments for the past 31 years. The company’s current quarterly payout stands at $1.12 per share, raising it by 12% in February. The stock’s dividend yield, as of July 3, stood at 1.64%. In June, Morgan Stanley upgraded Cigna Corporation (NYSE:CI) to Overweight, with a $296 price target, up from $283. The firm believes that the company is well-positioned to benefit from Humira biosimilars, which are expected to hit the market in 2023.
At the end of Q1 2022, Cigna Corporation (NYSE:CI) was a popular buy among hedge funds, with 63 funds owning stakes in the company, up from 53 in the previous quarter, according to Insider Monkey’s data. The collective value of these stakes is roughly $2.7 billion. Among these hedge funds, Glenview Capital was the company’s largest stakeholder in Q1, having stakes worth over $382.4 million.
Davis Funds mentioned Cigna Corporation (NYSE:CI) in its Q4 2021 investor letter. Here is what the firm has to say:
“Healthcare is included in the portfolio both for company-specific reasons, as well as big picture trends. At the company level, we hold select companies in pharmaceuticals, healthcare services and health insurance at attractive valuations. This is at a time when the average age of the U.S. population is fast approaching 40, older than Asia-Pacific and a little younger than the aged populations of Europe and Japan. The number of seniors in the U.S.—i.e., 65 years or older— now surpasses 54 million, or about 15% of the population. Seniors, on average, take a much greater number of medications and account for a large and disproportionate share of healthcare spending, and we expect that trend to continue due to both raw demographics and a proliferation in the number of available treatments and services available now, the latter being driven by innovation and investment in the healthcare industry. Representative holdings in the Fund include Cigna, United Health Group, Viatris and Quest Diagnostics.”
You can also take a look at 10 Dividend Stocks to Buy According to Bryan Hinmon’s Motley Fool Asset Management and Bill Gates’ Latest Stock Portfolio: Top 10 Picks.
