In this article, we discuss the top 10 dividend stock picks of Chuck Royce’s Royce & Associates. You can skip our detailed analysis of the hedge fund’s past performance and investment strategies, and go directly to read the Top 5 Dividend Stock Picks of Chuck Royce’s Royce & Associates.
Chuck Royce founded Royce & Associates in 1972. Since then, the hedge fund has been investing primarily in small-cap companies, as these investments can improve shareholders’ returns and diversify their portfolios. Moreover, small-cap stocks are generally misunderstood and lightly researched, so most investors overlook these companies.
Chuck Royce serves as the chairman and portfolio manager at Royce & Associates, which manages around $16 billion in assets. When choosing which companies to invest in, he focuses on a strong balance sheet, record business history, and a profitable future. Moreover, he focuses on stocks that trade at lower than expected multiples to increase the likelihood of positive results for his fund’s investors.
The hedge fund’s first small-cap Value Trust fund was founded in 1986 and combines multiple investment strategies to offer wide exposure to small-cap stocks. In 2021, the fund delivered a 19.97% return to investors, outperforming the benchmark Russell 2000, which gained 14.82% during the same period. In addition to this, the firm’s Royce Pennsylvania Mutual Fund returned 22% in 2021 and was up by 7% for the fourth quarter of the year, compared with a 2.1% return for the Russell 2000.
The hedge fund also invests heavily in dividend-paying companies. The firm’s Dividend Value Fund focuses on small-cap companies that pay dividends to shareholders and which have strong business fundamentals. From 2004 through December 2021, the fund’s average annual return stood at 9.1%.
As of December 31, 2021, Royce & Associates’ 13F portfolio value stood at $13.3 billion. During the quarter, the hedge fund invested in technology, consumer goods, finance, and services, among other sectors. As mentioned before, the fund does not invest in blue-chip and large-cap companies like Amazon.com, Inc. (NASDAQ:AMZN), Alphabet Inc. (NASDAQ:GOOG), and Meta Platforms, Inc. (NASDAQ:FB), so the portfolio contains mostly small-cap and relatively unknown companies.
Chuck Royce of Royce & Associates
Our Methodology:
In this article, we will focus on the dividend stocks in Chuck Royce’s portfolio and have ranked them in order of dividend yield. The data used for the list was taken from the list of Royce & Associates’ 13F holdings as of December 31, 2021 according to its latest 13F filing with the SEC.
Top 10 Dividend Stock Picks of Chuck Royce’s Royce & Associates
10. Reliance Steel & Aluminum Co. (NYSE:RS)
Number of Hedge Fund Holders: 18
Dividend Yield as of March 2: 1.87%
Royce & Associates’ Stake Value: $60,301,000
Reliance Steel & Aluminum Co. (NYSE:RS) is an American metal services company. The company pays a quarterly dividend of $0.6875 per share, having raised it by 10% in 2021. On March 2, the stock’s dividend yield was recorded to be at 1.87%.
Appreciating the company’s Q4 results, KeyBanc raised its price target on Reliance Steel & Aluminum Co. (NYSE:RS) to $200 in February, with an ‘Overweight’ rating on the shares. At the end of Q4 2021, Royce & Associates held shares worth over $60.3 million in Reliance Steel & Aluminum Co. (NYSE:RS). The position represented 0.45% of the value of Chuck Royce’s portfolio.
As of the end of Q4 2021, 18 hedge funds tracked by Insider Monkey reported owning stakes in Reliance Steel & Aluminum Co. (NYSE:RS), down from 24 in the previous quarter. The total value of these stakes was over $540.7 million.
Like major large-cap companies such as Amazon.com, Inc. (NASDAQ:AMZN), Alphabet Inc. (NASDAQ:GOOG), and Meta Platforms, Inc. (NASDAQ:FB), analysts and investors are also paying attention to Reliance Steel & Aluminum Co. (NYSE:RS).
9. Air Lease Corporation (NYSE:AL)
Number of Hedge Fund Holders: 18
Dividend Yield as of March 2: 1.89%
Royce & Associates’ Stake Value: $94,541,000
Air Lease Corporation (NYSE:AL), an American aircraft leasing company, raised its quarterly dividend by 15.6% in November 2021. This marked the company’s ninth straight year of dividend growth. The company pays a quarterly dividend of $0.185 per share, with a dividend yield of 1.89%, as of March 2.
Given that economies and borders are steadily reopening as the effects of the pandemic lessen, Barclays lifted its price target on Air Lease Corporation (NYSE:AL) to $61 in January, while maintaining an ‘Overweight’ rating on the shares. In Q4 2021, Royce & Associates held a stake worth over $94.5 million in Air Lease Corporation (NYSE:AL), after reducing its position by 1%. The holding accounted for 0.7% of Chuck Royce’s portfolio value.
At the end of Q4 2021, 18 hedge funds tracked by Insider Monkey held stakes in Air Lease Corporation (NYSE:AL), down from 24 in the previous quarter. The consolidated value of these stakes stood at $572.4 million. of those 24 funds, Windacre Partnership held the largest stake in the company in Q4, worth $278.2 million.
Artisan Partners mentioned Air Lease Corporation (NYSE:AL) in its Q2 2021 investor letter. Here is what the firm had to say:
“Airplane leasing firm Air Lease had performed well in the pandemic reopening trade. Their subsequent weakness reflects that trade’s slowing momentum in Q2 as virus variants surged globally and rising uncertainty weighed on economic growth expectations. Still, we remain confident in this business. Each are leaders in their respective industries with wide moats and superior business economics. Each is led by a battle-tested management team we believe is executing well on appropriately set strategy to deliver shareholder value. They are carefully and wisely financed, and they have undemanding valuations based on normalized earnings power.”
8. Vishay Intertechnology, Inc. (NYSE:VSH)
Number of Hedge Fund Holders: 31
Dividend Yield as of March 2: 2.18%
Royce & Associates’ Stake Value: $85,080,000
Vishay Intertechnology, Inc. (NYSE:VSH) is an American semiconductor manufacturing company that also develops other electronic devices. In its Q4 results, the company reported a 26.4% growth in its quarterly revenue, which grabbed the attention of Wall Street analysts. This February, Stifel set a $28 price target on Vishay Intertechnology, Inc. (NYSE:VSH), while keeping a ‘Buy’ rating on the shares.
By the end of Q4 2021, 31 hedge funds tracked by Insider Monkey were bullish on Vishay Intertechnology, Inc. (NYSE:VSH), holding stakes worth $452.7 million. In the previous quarter, 28 hedge funds held stakes in the company worth $437.3 million.
Vishay Intertechnology, Inc. (NYSE:VSH) has been consistently paying dividends to shareholders since 2014. In 2021, the company announced a 5% hike to its quarterly dividend, raising it to $0.10 per share. The stock’s dividend yield, as recorded on March 2, stood at 2.18%. In Q4 2021, Royce & Associates increased its stake in Vishay Intertechnology, Inc. (NYSE:VSH) by 8%, with the position representing 0.63% of Chuck Royce’s portfolio.
7. Ralph Lauren Corporation (NYSE:RL)
Number of Hedge Fund Holders: 24
Dividend Yield as of March 2: 2.21%
Royce & Associates’ Stake Value: $83,593,000
Royce & Associates started investing in Ralph Lauren Corporation (NYSE:RL) during the third quarter of 2011. In Q4 2021, the hedge fund snipped its position in the American clothing company by 2%, maintaining a stake worth nearly $83.6 million. His Ralph Lauren Corporation (NYSE:RL) holding accounted for 0.62% of Chuck Royce’s portfolio.
Ralph Lauren Corporation (NYSE:RL) temporarily terminated its dividends during the height of the pandemic in 2020. However, in 2021, the company announced the reinstatement of dividends to pre-pandemic levels. Currently, Ralph Lauren Corporation (NYSE:RL) pays a quarterly dividend of $0.6875 per share, with a dividend yield of 2.21%, as of March 2.
Appreciating the company’s transformational changes, UBS lifted its price target on Ralph Lauren Corporation (NYSE:RL) to $171 in February, and has a ‘Buy’ rating on the shares.
Besides Royce & Associates, Marshall Wace LLP was also one of the biggest shareholders of Ralph Lauren Corporation (NYSE:RL) in Q4, holding shares worth over $62.4 million. Overall, 24 hedge funds tracked by Insider Monkey held stakes in the company on December 31, down from 25 in the previous quarter. Those 24 stakes had a consolidated value of $364.3 million.
6. Standard Motor Products, Inc. (NYSE:SMP)
Number of Hedge Fund Holders: 12
Dividend Yield as of March 2: 2.48%
Royce & Associates’ Stake Value: $74,259,000
Standard Motor Products, Inc. (NYSE:SMP) is an American manufacturer of automotive parts. Though the company temporarily cut its dividend payments in 2008 and 2020 due to financial volatility, it restored them soon after. On February 1, Standard Motor Products, Inc. (NYSE:SMP) announced an 8% growth in its quarterly dividend to $0.27 per share, with a dividend yield of 2.48%, as of March 2. Moreover, the company has been a dividend payer for the past 30 years.
The number of hedge funds tracked by Insider Money holding stakes in Standard Motor Products, Inc. (NYSE:SMP) declined to 12 in Q4, from 14 in the previous quarter. The total value of those stakes was just over $110 million.
At the end of 2021, Royce & Associates held over 1.4 million shares in Standard Motor Products, Inc. (NYSE:SMP), worth $74.2 million. The holding accounted for 0.55% of Chuck Royce’s portfolio value.
Along with Standard Motor Products, Inc. (NYSE:SMP), analysts have also presented a bullish outlook on major blue-chip companies, such as Amazon.com, Inc. (NASDAQ:AMZN), Alphabet Inc. (NASDAQ:GOOG), and Meta Platforms, Inc. (NASDAQ:FB).
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Disclosure. None. Top 10 Dividend Stock Picks of Chuck Royce’s Royce & Associates is originally published on Insider Monkey.
