Dividend Stocks Hedge Funds Are Betting On

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).

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#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.

#3 Wells Fargo & Co (NYSE:WFC)

– Number of Hedge Fund Holders (as of December 31): 100
– Total Value of Hedge Fund Holdings (as of December 31): $34.68 billion
– Hedge Fund Holdings as Percent of Float (as of December 31): 12.50%

Wells Fargo & Co (NYSE:WFC)’s dividend yield has never been among the highest in the sector but it certainly has been among the safest. With a wide moat, a valuable brand, and national reach, Wells Fargo has been a consistent earnings generator, and its earnings more than support its current dividend yield of around 2.5%. Although the bank stumbled due to last year’s fake account scandal, the stock has largely recovered much of the losses, and looks primed to rally in the long term as customers forgive the bank. Warren Buffett’s Berkshire Hathaway is a major shareholder and owns around 10% of the bank.

#2 JPMorgan Chase & Co. (NYSE:JPM)
– Number of Hedge Fund Holders (as of December 31): 110
– Total Value of Hedge Fund Holdings (as of December 31): $10.69 billion
– Hedge Fund Holdings as Percent of Float (as of December 31): 3.50%

With 110 elite funds holding the stock at the end of December, JPMorgan Chase & Co. (NYSE:JPM) is the second most widely held dividend stock on our list. Shares of the stock currently yield 2.09% at current prices. Although JPMorgan shares fell slightly due to the FOMC’s decision to imply just two more rate hikes in 2017, many bulls expect the bank to benefit from deregulation and the strong U.S. economy. With less regulation, more normalized interest rates, and a low unemployment rate, JPMorgan’s dividend will very likely grow in the future.

#1 Microsoft Corporation (NASDAQ:MSFT)

– Number of Hedge Fund Holders (as of December 31): 126
– Total Value of Hedge Fund Holdings (as of December 31): $18.77 billion
– Hedge Fund Holdings as Percent of Float (as of December 31): 3.90%

126 top funds owned shares of Microsoft Corporation (NASDAQ:MSFT) at the end of December, unchanged from that of the previous quarter. Although bigger companies such as Apple have certainly performed better of late, Microsoft’s dividend (current yield of 2.4%) is arguably as safe as it gets. Not only does Microsoft have a dominant position in the PC/Software productivity market, but also its cloud division is growing rapidly. With new growth and hopefully a successful HoloLens product, Microsoft’s dividend could continue to rise.

Disclosure:None