Top Five Dividend Stocks ‘Endorsed’ By Hedge Funds

The recent market sell-off left many large investors concerned and led them to move to less risky investments or forced them to keep more cash. However, among thousands of publicly-traded companies, there are a few stocks that are still attractive due to their strong fundamentals and their management’s commitment to return capital to shareholders. While the drop in oil prices raised concerns regarding oil & gas companies’ ability to maintain dividend payments, other sectors are more solid bets for dividend investors. For this article, we have compiled a list of stocks that ranked as the most popular among the funds we track and sport a considerable dividend yield.

Insider Monkey’s database contains more than 700 hedge funds and other institutional investors that registered a strong performance over the years and whose equity portfolios we analyze every quarter to determine which stocks they are bullish on. This approach allows us to benefit from the expertise and stock-picking skills of these investors and helps us determine stocks that can substantially outperform the market (see more details here).

Without any further ado, let’s start with Microsoft Corporation (NASDAQ:MSFT), which is the most popular dividend stock among the funds we track and one of the five most popular companies among the investors we track (see full list here). Microsoft Corporation (NASDAQ:MSFT)’s stock has advanced by more than 19% over the last 52 weeks and it currently spots a dividend yield of 2.59%. This is not the highest dividend yield out there, but Microsoft is also one of the largest tech companies and its stock is currently trading at a beta of 0.92, which makes it less volatile than the broader market, an important factor in the current environment. Overall, a total of 140 funds from our database own shares of Microsoft Corporation (NASDAQ:MSFT) as of the end of December, versus 113 funds a quarter earlier. Among them, Jeff Ubben‘s ValueAct Capital owns some 56.62 million shares of Microsoft, while Stephen Mandel’s Lone Pine Capital holds 27.26 million shares.

Next in line is Pfizer Inc. (NYSE:PFE), in which a total of 109 funds from our database reported long positions in the latest round of 13F filings, up from 97 investors a quarter earlier. Pfizer pays a dividend of $0.30 per share, which gives its stock a yield of 4.07% amid a 14.30% drop registered in the last year. In this way, Pfizer’s stock currently sports one of the highest dividend yields among large-cap healthcare companies and its forward P/E of 12.00 is lower than the average of the S&P 500. In this way, aside from buying Pfizer Inc. (NYSE:PFE) on the back of its upcoming merger with Allergan, the stock also represents a good dividend investment. Among the funds we track, billionaire Ken Fisher‘s Fisher Asset Management reported holding 32.33 million shares of Pfizer Inc. (NYSE:PFE) as of the end of 2015.

On the next page, we are going to discuss the other three dividend stocks that the investors from our database like.

In JPMorgan Chase & Co. (NYSE:JPM), a total of 100 funds among those we track disclosed holding shares, flat over the quarter. Lansdowne Partners and Fisher Asset Management reported ownership of 20.16 million shares and 13.99 million shares as of the end of December, respectively. JPMorgan Chase & Co. (NYSE:JPM)’s stock has inched down by 2.40% over the last 52 weeks as the decrease in oil and turmoil in China has put more pressure on banks. Nevertheless, JPMorgan pays a dividend of $0.44 per share, which gives its stock a yield of 3.04%. This compares with a yield of 3.12% of Wells Fargo & Co (NYSE:WFC), 0.51% of Citigroup Inc (NYSE:C) and 1.65% of Bank of America Corp (NYSE:BAC). JPMorgan Chase & Co has consistently increased its dividend over the last several years and since the bank last year passed the Fed’s stress test, it is likely to increase its dividend and buybacks this year as well.

Wells Fargo & Co (NYSE:WFC) is another financial stock that made the list of the most popular dividend stocks among the funds we track. As stated earlier, the stock sports a dividend yield of 3.12%. Wells Fargo’s stock plunged by more than 12% over the last year, but, similar to JPMorgan, the bank passed the stress tests last year, which allowed it to hike the dividend by 7% to $0.375. Last year, Wells Fargo & Co (NYSE:WFC) returned $12.60 billion to shareholders through dividends and stock buybacks. Overall, a total of 85 funds from our database reported long positions in Wells Fargo, amassing $32.56 billion worth of stock at the end of December. Billionaire Warren Buffett‘s Berkshire Hathaway is the largest shareholder of Wells Fargo & Co (NYSE:WFC) and, in the last three months of 2015, it added 9.41 million shares to its position, taking it to 479.70 million shares.

Finally, General Motors Company (NYSE:GM) pays a dividend of $0.38 per share and its stock has a dividend yield of 5.28%, which is the largest in this list. In addition, General Motors’ stock slid by 24% over the last 12 months, while the company still managed to report strong results and provided a strong outlook with car sales expected to grow amid lower gas prices. The decline set General Motors’ stock trading at just 5.0 times forward earnings, which makes it very cheap. Even though among the funds we track General Motors Company (NYSE:GM) is not among the 10 most popular stocks, it is the favorite car maker and a total of 84 funds from our database held shares at the end of December, versus 84 funds a quarter earlier. More specifically, Berkshire Hathaway owns 50 million shares of General Motors Company (NYSE:GM), according to its latest 13F filing, while David Einhorn’s Greenlight Capital reported ownership of 13.92 million shares as of the end of 2015.

Disclosure: none