McDonald’s (MCD), Johnson & Johnson (JNJ) Among Hedge Funds’ Favorite Dividend Aristocrats

Dividend aristocrats are by definition some of the most wide-moat and dependable stocks available on the market today. Dividend aristocrats are stocks that have had their dividend payments increased for at least the last 25 years, passing the tests of the 2002 and 2008 recessions with flying colors. Each one also has strong pricing power and considerable hedge fund support.

In this article, we’ll take a look at some of the smart money’s favorite dividend aristocrats, which are Johnson & Johnson (NYSE:JNJ), Lowe’s Companies, Inc. (NYSE:LOW), Walgreens Boots Alliance Inc (NASDAQ:WBA), McDonald’s Corporation (NYSE:MCD), and Exxon Mobil Corporation (NYSE:XOM).

While there are many metrics that investors can assess in the investment process, the hedge fund sentiment is something that is often overlooked. However, hedge funds and other institutional investors allocate significant resources while making their bets and their long-term focus makes them the perfect investors to emulate. This is supported by our research, which determined that following the small-cap stocks that hedge funds are collectively bullish on can help a smaller investor to beat the S&P 500 by around 95 basis points per month (see the details here).

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#5 Exxon Mobil Corporation (NYSE:XOM)

– Number of Hedge Fund Shareholders (as of June 30): 60
– Total Value of Hedge Funds’ Holdings (as of June 30): $3.02 billion
– Hedge Funds’ Holdings as Percent of Float (as of June 30): 0.80%

Given that it’s the largest public energy company in the world (until Saudi Aramco eventually IPO’s in 2017), Exxon Mobil has unrivaled economies of scale that allow it to earn solid returns on its invested capital. Due to great leadership, Exxon Mobil also has one of the energy sector’s best balance sheets and credit ratings. All of those qualities have helped Exxon Mobil increase its dividend for 33 straight years, even in 2015 and 2016, when crude prices fell hard. Currently, the integrated major pays a quarterly dividend of $0.75 per share, which amounts to a juicy annual yield of 3.5%. 60 out of the 749 funds that Insider Monkey tracks which filed 13Fs for the June 30 reporting period were long Exxon Mobil Corporation (NYSE:XOM), unchanged from the March reporting period.

#4 McDonald’s Corporation (NYSE:MCD)

– Number of Hedge Fund Shareholders (as of June 30): 63
– Total Value of Hedge Funds’ Holdings (as of June 30): $3.03 billion
– Hedge Funds’ Holdings as Percent of Float (as of June 30): 2.90%

Although the number of funds that had holdings in the restaurant chain fell by 20 during the second quarter to 63 at the end of June, McDonald’s Corporation (NYSE:MCD) was still the fourth-most popular dividend aristocrat among the smart money in our database. Being one of the most famous brands in the world, McDonald’s has been able to successfully franchise its restaurants to tens of thousands of locations around the world and generate very profitable and stable cash flows in the process. The stable income has allowed McDonald’s to raise its dividend for 39 straight years to its current $0.89 per share quarterly mark. Like Exxon, McDonald’s annual yield is currently north of 3%.

Hedge funds’ three favorite dividend aristocrats are analyzed on the next page.