Top 16 Dividend Stocks To Buy According To Hedge Funds

Published on June 7, 2023 at 7:25 am by Vardah Gill in Dividend Stocks, Hedge Funds, News

In this article, we will discuss top 16 dividend stocks to buy according to hedge funds. You can skip our detailed analysis of dividend stocks and their performance, and go directly to read Top 5 Dividend Stocks To Buy According To Hedge Funds.

Dividends can be a significant component of hedge funds’ overall investment strategy because of income generation, risk mitigation, and value investing. In addition to this, dividend growth can lead to potential capital gains, especially when it is accompanied by an increase in the stock price. For instance, Warren Buffett’s Berkshire Hathaway purchased 400 million shares of The Coca-Cola Company (NYSE:KO) in 1994 for $1.3 billion, a value which has now increased to $25 billion. The “hedge fund” is expected to generate over $5.7 billion in cash this year, with dividends representing most of it, as mentioned in our article Warren Buffett’s $5.7 Billion Dividend Portfolio: Top 15 Picks.

Last year’s high inflationary environment turned investors’ attention toward dividend stocks as they have historically proved their resilience during clampdowns. Dividend stocks are generally defensive in nature and can provide a potential hedge against inflation. In 25 Things Every Dividend Investor Should Know, we cited data from Fidelity Investments which revealed that dividends represented a significant percentage of the market’s returns during the high inflationary decades of the 1940s, 1960s, and 1970s. Inflation in these decades averaged above 5% and total returns were below 10%.

Dividend stocks not only remained prominent during periods of high inflation, but dividends have also contributed a substantial portion of the total returns of the US stock market over extended periods. Since 1930, dividend stocks have accounted for nearly 40% of the stock market’s overall return. Their historical performance, coupled with positive investor sentiment, resulted in the growth of dividend payments over the years. Global dividends rose 12% in the first quarter of 2023, reaching their record high of $327 billion, according to a report by Janus Henderson Investors.

When investing in dividend stocks, investors pay attention to dividend yields and the dividend history of the respective company. Companies that consistently increase their dividends over time demonstrate financial strength, stability, and a commitment to returning capital to shareholders. Chevron Corporation (NYSE:CVX), Medtronic plc (NYSE:MDT), and The Coca-Cola Company (NYSE:KO) are some of the best dividend stocks because of their consistent dividend growth. In this article, we will discuss top dividend stocks to buy according to hedge funds.

Top 16 Dividend Stocks To Buy According To Hedge Funds

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Our Methodology:

For this list, we scanned the holdings of 943 elite hedge funds tracked by Insider Monkey and picked the top 16 dividend stocks which are most popular among these funds as of the end of the first quarter of 2023. The stocks are ranked in ascending order of the number of funds that have stakes in them as of the end of March.

16. Johnson & Johnson (NYSE:JNJ)

Number of Hedge Fund Holders: 86

Johnson & Johnson (NYSE:JNJ) is an American multinational pharmaceutical industry company. In the first quarter of 2023, the company reported revenue of $24.7 billion, which showed a 5.6% growth from the same period last. The company’s revenue also beat analysts’ estimates by $1.09 billion. For FY23, the company expects to generate revenue between $97.9 billion to $98.9 billion.

One of the best dividend stocks on our list, Johnson & Johnson (NYSE:JNJ) has been raising its dividends consistently for the past 62 years. The company offers a quarterly dividend of $1.19 per share and has a dividend yield of 3.08%. Chevron Corporation (NYSE:CVX), Medtronic plc (NYSE:MDT), and The Coca-Cola Company (NYSE:KO) are some other popular dividend stocks to consider.

As per Insider Monkey’s database, 86 hedge funds owned stakes in Johnson & Johnson (NYSE:JNJ) at the end of Q1 2023, up from 83 in the previous quarter. These stakes have a consolidated value of $4.5 billion.

15. Intuit Inc. (NASDAQ:INTU)

Number of Hedge Fund Holders: 86

Intuit Inc. (NASDAQ:INTU) is a California-based company that specializes in financial software. In fiscal Q3 2023, the company reported an operating cash flow of over $4.2 billion, up from $3.5 billion during the same period last year. At the end of April 2023, the company had $3.7 billion in cash and cash equivalents, compared with $2.8 billion last year.

Intuit Inc. (NASDAQ:INTU), one of the best dividend stocks on our list, currently pays a quarterly dividend of $0.78 per share. The company maintains a 10-year streak of consistent dividend growth. The stock has a dividend yield of 0.74%.

Following the company’s recent earnings beat, Street analysts are placing positive ratings on ntuit Inc. (NASDAQ:INTU). In May, both Morgan Stanley and Bank of America raised their price targets on Intuit Inc. (NASDAQ:INTU) to $525 and $500, respectively.

At the end of Q1 2023, 86 hedge funds tracked by Insider Monkey reported having stakes in Intuit Inc. (NASDAQ:INTU), worth over $5.2 billion collectively. Among these hedge funds, Durable Capital Partners was the company’s leading stakeholder in Q1.

14. The Charles Schwab Corporation (NYSE:SCHW)

Number of Hedge Fund Holders: 87

The Charles Schwab Corporation (NYSE:SCHW) is an American financial services company that mainly provides commercial banking and investing services to its consumers. In May, Raymond James upgraded the stock to Outperform with a $63 price target, highlighting the company’s balance sheet and stable net interest margin.

On April 26, The Charles Schwab Corporation (NYSE:SCHW) declared a quarterly dividend of $0.25 per share, which was consistent with its previous dividend. The stock’s dividend yield stands at around 1.92%.

The Charles Schwab Corporation (NYSE:SCHW) saw a spike in hedge fund positions in Q1 2023, as 87 funds tracked by Insider Monkey owned stakes in the company with an aggregate value of $4 billion, up from 74 in the previous quarter.

RiverPark Advisors mentioned The Charles Schwab Corporation (NYSE:SCHW) in its Q1 2023 investor letter. Here is what the firm has to say:

“The Charles Schwab Corporation (NYSE:SCHW): SCHW shares were our top detractor for the quarter as bank stocks sold off aggressively following the failures of Silicon Valley Bank and Signature Bank. Despite the bulk of Schwab’s $7 trillion of assets being in the brokerage business, the company does have a large deposit base on which it earns net interest income. While Schwab has seen asset growth increase as depositors look for safety, the company has seen persistent cash sorting (depositors moving cash from deposits to money market funds to generate higher yields). This sorting has two negative consequences: first, it reduces the firm’s profitability because Schwab earns more in net interest income on assets on deposit than it does on management fees from money market funds, and second, it forces Schwab to sell assets held by its bank subsidiary to fund the cash transfers into money market funds. Because of the recent rapid rise in interest rates, these asset sales could cause Schwab to realize trading losses. We think this latter scenario is unlikely for two reasons: first, following historical patterns from past cycles, we believe the cash sorting trend will slow in the coming months, and second, Schwab has enough available liquidity from other sources to fund nearly 100% of its deposit base without selling marked-down securities.

Schwab and TD Ameritrade (which Schwab acquired in October 2020) have been the leading share gainers in the discount brokerage industry over the last decade, with both generating substantial organic asset growth while also growing operating margins and remaining amongst the price leaders on all products. With these two businesses now combined, revenue and expense synergies should accelerate in 2023, and we believe the company will be in an even stronger position to gather assets and drive long-term margins and free cash flow in the years to come.”

13. Danaher Corporation (NYSE:DHR)

Number of Hedge Fund Holders: 90

Danaher Corporation (NYSE:DHR) is an American diversified conglomerate that manufactures products for a wide range of industries. The company currently offers a quarterly dividend of $0.27 per share and has a dividend yield of 0.48%. It has been raising its dividends consistently for the past nine years.

One of the best dividend stocks on our list, Danaher Corporation (NYSE:DHR) reported a strong cash position in the first quarter of 2023. The company’s operating cash flow came in at $1.9 billion and it generated $1.7 billion in free cash flow. Its revenue for the quarter came in at $7.2 billion.

In May, SVB Securities presented a bullish stance on Danaher Corporation (NYSE:DHR) as the firm initiated its coverage on the stock with an Outperform rating and a $300 price target. The firm highlighted the company’s diversified businesses and a leading profitability profile.

At the end of the first quarter, 90 hedge funds tracked by Insider Monkey had stakes in Danaher Corporation (NYSE:DHR), up from 88 in the preceding quarter. These stakes are collectively worth over $5.6 billion.

Madison Investments mentioned Danaher Corporation (NYSE:DHR) in its Q1 2023 investor letter:

“Danaher Corporation (NYSE:DHR) has been trading lower since it reported fourth quarter earnings in January. The company lowered Covid-19 related sales for 2023 from $500 million to $150 million as pharmaceutical companies are switching their focus away from pandemic vaccines and therapeutics to the research and development of new drugs. Danaher’s pharmaceutical customers will be working through existing inventory before starting to order new products. We remain confident in Danaher’s strong competitive position providing innovative products to Life Science companies. Healthcare insurance stocks have been weak due to a ruling by CMS (Center for Medicare & Medicaid Services) in late January where claw back payments totaling $4.7 billion were due from insurers that overcharged Medicare. The claw back payment period goes back to 2011.”

12. S&P Global Inc. (NYSE:SPGI)

Number of Hedge Fund Holders: 90

S&P Global Inc. (NYSE:SPGI) is a New York-based private banking company that specializes in financial information and analytics. On May 3, the company declared a quarterly dividend of $0.90 per share. It has been growing its dividends consistently for the past 50 years. The stock has a dividend yield of 1.01%.

In the first quarter of 2023, S&P Global Inc. (NYSE:SPGI) returned $290 million to shareholders in dividends. The company’s operating cash flow for the quarter came in at $594 million and its free cash flow stood at $488 million. This shows that the company’s cash position is strong to fulfill its future dividend payments.

Wells Fargo initiated its coverage on one of the best dividend stocks, S&P Global Inc. (NYSE:SPGI) with an Overweight rating and a $415 price target. The firm highlighted the company’s organic revenue growth and margin expansion.

As of the close of Q1 2023, 90 hedge funds in Insider Monkey’s database owned stakes in S&P Global Inc. (NYSE:SPGI), with a total value of over $7.3 billion.

Here is what Wedgewood Partners has to say about S&P Global Inc. (NYSE:SPGI) in its Q1 2023 investor letter.

“S&P Global Inc. (NYSE:SPGI) was a bottom contributor to portfolio performance during the quarter. Adjusted revenue declined -5%, mostly driven by the decline in ratings revenues which is lapping strong one-year and two-year comparisons. During 2022, the Company closed on its acquisition of IHS Markit which has diversified its revenue streams into new, but high-margin business lines. The Company’s new corporate structure should allow for attractive growth, even if fixed income issuance trends stay at stall-speeds for the next few quarters.”

11. Walmart Inc. (NYSE:WMT)

Number of Hedge Fund Holders: 91

Walmart Inc. (NYSE:WMT) is an American multinational retail company that owns grocery and department stores across the country. In May, Barclays raised its price target on the stock to $162 and maintained an Overweight rating on the shares. The firm mentioned that the company’s first-quarter earnings were stronger than expected and also highlighted its guidance for the next fiscal year.

Walmart Inc. (NYSE:WMT) currently pays a quarterly dividend of $0.57 per share. It is a Dividend King with 50 consecutive years of dividend growth. The stock has a dividend yield of 1.55%. It is also one of the best dividend stocks on Billionaire Ray Dalio’s Top 12 Dividend Stock Picks.

Walmart Inc. (NYSE:WMT) saw growth in bullish hedge fund sentiment during the first quarter, as 91 hedge funds tracked by Insider Monkey held stakes in the company, up from 61 in the previous quarter.

Leaven Partners made the following comment about Walmart Inc. (NYSE:WMT) in its Q3 2022 investor letter.

“In our last quarterly letter, I briefly mentioned that the consensus estimates for corporate profits appeared to be a bit too sanguine. I referenced a Reuters article that reported, as of June 17, Wall Street expected S&P 500 earnings to grow by 9.6% in 2022, which was up from 8.8% in April and from 8.4% in January. That tune began to change at the end of July and accelerated in August and September, as major players, such as Walmart (NYSE:WMT), has recently issued profit warnings and/or have withdrawn guidance. In response, Wall Street has altered its outlook: lowering third-quarter profit growth to 4.6%^[2] from 7.2% in early August and slashing full-year profit growth to 4.5%.”

10. Bank of America Corporation (NYSE:BAC)

Number of Hedge Fund Holders: 91

Bank of America Corporation (NYSE:BAC) is a North Carolina-based investment bank and financial services company. In April, the company reported that its credit card delinquency rate increased to 1.17%, from 1.15% in March. Total receivables in the trust also grew to $1651 billion at the end of April, compared with $161.3 billion in March. It is among the best dividend stocks on our list.

On April 26, Bank of America Corporation (NYSE:BAC) declared a quarterly dividend of $0.22 per share, which was in line with its previous dividend. In 2022, the company stretched its dividend growth streak to ten years.

At the end of March 2023, 91 hedge funds tracked by Insider Monkey owned stakes in Bank of America Corporation (NYSE:BAC), valued collectively at over $31.7 billion. Warren Buffett’s Berkshire Hathaway owned the largest stake in the company, worth roughly $30 billion.

Artisan Partners discussed reasons to invest in Bank of America Corporation (NYSE:BAC) in its Q1 2023 investor letter. Here is what the firm has to say:

“At the end of Q1, we had an ~7% weighting in banks consisting of PNC, US Bancorp and Bank of America Corporation (NYSE:BAC). All 3 are among the 10 largest US banks. We believe the range of probabilities and long-term outcomes are tilted in our favor at current prices but are proceeding with caution for several reasons. First, while we believe deposit-runs have likely burned themselves out, there is a non-zero risk these runs spread wider than our base case. Second, we expect more regulation in coming years which will increase the cost of doing business, potentially in exchange for higher FDIC limits. Third, at the very least we expect banks to cease buybacks for the rest of the year to build up liquidity and capital ratios. There is an increasingly more likely outcome that banks issue equity capital and preferred stock once markets stabilize. Fourth, with the banking system in shock, it will likely retrench, which will constrict capital to the US economy. Coupled with the “long and variable lags” of Fed policy, this will slow US economic growth beyond what private credit markets can make up.”

9. Thermo Fisher Scientific Inc. (NYSE:TMO)

Number of Hedge Fund Holders: 98

Thermo Fisher Scientific Inc. (NYSE:TMO) is next on our list of the best dividend stocks and was popular among hedge funds in the most recent quarter. The American life sciences company reported a strong cash position in the first quarter of 2023. Its operating cash flow came in at $729 million and it generated over $277 million in free cash flow. The company’s revenue for the quarter stood at $10.7 billion.

Thermo Fisher Scientific Inc. (NYSE:TMO) has raised its dividends for six years running, which makes it one of the best dividend stocks on our list. The company offers a quarterly dividend of $0.35 per share and has a dividend yield of 0.27%, as of May 24.

The number of hedge funds in Insider Monkey’s database holding stakes in Thermo Fisher Scientific Inc. (NYSE:TMO) grew to 98 in Q1 2023, from 92 in the preceding quarter. These stakes have a consolidated value of over $6.2 billion.

Polen Capital revealed why it believes Thermo Fisher Scientific Inc. (NYSE:TMO) to be a recession-proof investment in its Q4 2022 investor letter.

“Thermo Fisher Scientific Inc. (NYSE:TMO) is a leader in attractive end markets with a skilled management team who has demonstrated the ability to consistently and wisely allocate capital. It is the world leader in serving science. It is a globally scaled supplier serving more than 400,000 customers working within pharmaceutical and biotech companies, hospitals and clinical diagnostic labs, research institutions, and government agencies. Thermo provides many of the products and services that companies in these industries, particularly pharma and biotech, need to operate and drive science forward. The company manufactures and sells instruments, reagents, and consumables used for a wide range of applications in labs. (Click here to view the full text)

8. Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM)

Number of Hedge Fund Holders: 102

Taiwan-based multinational semiconductor company, Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) remained popular among elite funds in Q1 2023. According to Insider Monkey’s database, 102 hedge funds owned stakes in the company in Q1, up from 86 a quarter earlier. These stakes hold a collective value of roughly $9 billion.

In April, Needham & Company reiterated its $110 price target on Taiwan Semiconductor Manufacturing Company Limited’s (NYSE:TSM) stock and kept a Buy rating on the shares.

Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) has been making regular dividend payments to shareholders since 2004. The company pays a quarterly dividend of $0.4294 per share, which gives its stock a dividend yield of 2.51%.

Wedgewood Partners appreciated Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM)’s performance in its Q1 2023 investor letter.

“Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) contributed to performance as revenues grew +27% (in USD) from the year ago quarter. Despite this strength, the Company’s customers have seen near-term weakness in demand due to Covid-19 normalization as well as the launch timing of new products. However, the Company is well-positioned to continue a long-term growth trajectory because its leading-edge capacity is being absorbed by high-performance computing applications, particularly at nontraditional integrated circuit (IC) design houses, such as Apple, Alphabet and Amazon, which have become IC-design powerhouses over the past decade. Importantly, the Company’s aggressive investment in leading-edge equipment, tight development with fabless IC designers, and embrace of open development libraries, should continue to foster a superior competitive position and attractive long-term growth.”

7. JPMorgan Chase & Co. (NYSE:JPM)

Number of Hedge Fund Holders: 112

JPMorgan Chase & Co. (NYSE:JPM) is an American multinational financial services company that offers investment and commercial banking services to its consumers. The company is one of the best dividend stocks on our list as it distributed over $3 billion to shareholders in dividends during the first quarter of 2023. It pays a quarterly dividend of $1 per share and its stock has a dividend yield of 2.96%.

Evercore ISI maintained an Outperform rating on JPMorgan Chase & Co. (NYSE:JPM) with a $151 price target, presenting a neutral stance on the banking sector following the Silicon Valley Bank fallout.

At the end of March, 112 hedge funds tracked by Insider Monkey reported having stakes in JPMorgan Chase & Co. (NYSE:JPM), up from 100 in the previous quarter. These stakes have a consolidated value of over $4.1 billion.

6. UnitedHealth Group Incorporated (NYSE:UNH)

Number of Hedge Fund Holders: 116

UnitedHealth Group Incorporated (NYSE:UNH) is a Minnesota-based multinational managed healthcare and insurance company. In May, Cantor Fitzgerald initiated its coverage of one of our best dividend stocks with an Overweight rating and a $591 price target. The firm gave a positive outlook on the company’s earnings growth over the next years.

UnitedHealth Group Incorporated (NYSE:UNH) currently pays a quarterly dividend of $1.65 per share. The company has been growing its dividends consistently since 2010. The stock’s dividend yield on May 24 came in at 1.37%.

In order to generate regular income, investors can also load up on other dividend growth stocks such as Chevron Corporation (NYSE:CVX), Medtronic plc (NYSE:MDT), and The Coca-Cola Company (NYSE:KO).

At the end of Q1 2023, 116 hedge funds in Insider Monkey’s database owned positions in UnitedHealth Group Incorporated (NYSE:UNH), compared with 110 in the previous quarter. The stakes owned by these hedge funds have a collective value of over $11.7 billion.

Fred Alger Management mentioned UnitedHealth Group Incorporated (NYSE:UNH) in its Q1 2023 investor letter. Here is what the firm has to say:

“UnitedHealth Group Incorporated (NYSE:UNH) is an integrated healthcare benefits company uniquely positioned to address rising healthcare costs for its customers, due to its vertical integration, size, and scale. The Optum health benefits services unit, which accounts for approximately 45% of the company’s operating earnings, in our view, has the potential to grow even further as customers look for ways to manage rising healthcare costs. During the period, shares detracted from performance due to several factors: 1) many 2022 healthcare winners with shorter duration profiles and persistent earnings profiles, such as UnitedHealth Group. underperformed in the first quarter of 2023, 2) uncertainty surrounding Medicare Advantage reimbursement levels from the Federal government in 2023, which will be determined later in the year, and 3) increased regulatory scrutiny in the form of potential Medicare Advantage audits across the industry. While these concerns have impacted UnitedHealth in the near-term, we believe company fundamentals remain intact given its large scale business model, competitive advantages, and medium to long- term growth prospects.”

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