Dividends are an investor’s best friend. Not only does a solid sustained dividend illustrate dependability and competitiveness, but also the payout shows that management allocates capital responsibly through good times and bad. As a bonus, many consistent wide-moated dividend stocks have outperformed the broader market over time.
In this article, let’s take a look at five stocks that hedge funds love, Microsoft Corporation (NASDAQ:MSFT), JPMorgan Chase & Co. (NYSE:JPM), Wells Fargo & Co (NYSE:WFC), Gilead Sciences, Inc. (NASDAQ:GILD), and Pfizer Inc. (NYSE:PFE).
At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 39.7% gains over the past 12 months and outperformed the 24.1% gain enjoyed by the S&P 500 ETFs. Our enhanced small-cap hedge fund strategy returned more than 45% over the last 12 months and outperformed SPY by more than 30 percentage points over the last 4.5 years (see details here).
#5 Pfizer Inc. (NYSE:PFE)
– Number of Hedge Fund Holders (as of December 31): 82
– Total Value of Hedge Fund Holdings (as of December 31): $5.23 billion
– Hedge Fund Holdings as Percent of Float (as of December 31): 2.70%
Of the 742 elite funds that we track, a total of 82 were long Pfizer Inc. (NYSE:PFE) at the end of December of last year. With a dividend yield of 3.7% at current prices, Pfizer is one of the higher yield stocks in the Big Pharma sector. The stock has been a good performer since Donald Trump won the Presidency, having rallied nicely from the $31 level. Although any sort of tax inversion is out of the question, bulls hope Trump’s policies will loosen industry regulation and help new drugs get to the finish line faster. If that occurs, Pfizer could potentially outperform expectations and its dividend could continue to grow.
#4 Gilead Sciences, Inc. (NASDAQ:GILD)
– Number of Hedge Fund Holders (as of December 31): 85
– Total Value of Hedge Fund Holdings (as of December 31): $3.3 billion
– Hedge Fund Holdings as Percent of Float (as of December 31): 3.50%
Another Big Pharma company, Gilead Sciences, Inc. (NASDAQ:GILD), hasn’t performed as well as Pfizer since November. Shares have fallen 3.65% year-to-date as the company struggles to find another blockbuster to add to its hepatitis C drug. Given Gilead’s substantial cash on its balance sheet and its cheap forward earnings valuation of 9.09x, the company’s dividend is safe for the foreseeable future, however. Currently shares yield just north of 3%. Cliff Asness’ AQR Capital Management owned more than 4 million shares at the end of December. For those of you interested, also check out the article on the 11 Largest Pharmaceutical Companies In The World.
Click next to see analysis on Wells Fargo, Microsoft, and JPMorgan Chase.