The Smart Money Loves These Dividend Aristocrats: Wal-Mart, Chevron, More

Dividend Aristocrats have passed the test of time. By definition, each one of them has raised their dividend payout for 25 or more consecutive years, including through the Great Recession. For a company to raise its dividend so consistently, it has to have a wide moat, shareholder-friendly management, and substantial competitive advantages, making them safe bets over long periods of time.

In this article, we’ve compiled a list of Dividend Aristocrats that the smart money tracked by Insider Monkey was collectively bullish on in the second quarter, as the ownership of them among those investors rose during the period. Without further elaboration, let’s take a closer look at those stocks, which are Archer Daniels Midland Company (NYSE:ADM), Chevron Corporation (NYSE:CVX), Abbott Laboratories (NYSE:ABT), AT&T Inc. (NYSE:T), and Wal-Mart Stores, Inc. (NYSE:WMT).

While there are many metrics that investors can assess in the investment process, the hedge fund sentiment is something that is often overlooked. However, hedge funds and other institutional investors allocate significant resources while making their bets and their long-term focus makes them the perfect investors to emulate. This is supported by our research, which determined that following the small-cap stocks that hedge funds are collectively bullish on can help a smaller investor to beat the S&P 500 by around 95 basis points per month (see the details here).

#5 Archer Daniels Midland Company (NYSE:ADM)

– Number of Hedge Fund Shareholders (as of June 30): 26
– Total Value of Hedge Funds’ Holdings (as of June 30): $779.93 million
– Hedge Funds’ Holdings as Percent of Float (as of June 30): 3.10%

According to our database of 749 successful hedge funds which filed 13Fs for the June quarter, 26 were long Archer Daniels Midland Company (NYSE:ADM) at the end of June, up by two from the end of March. One of the funds that bought a new stake in Archer Daniels during the second quarter was Dmitry Balyasny‘s Balyasny Asset Management, which initiated a position of 797,160 shares worth over $34.19 million on June 30. One reason the smart money likes Archer Daniels is indeed for the company’s rather attractive quarterly dividend of $0.30 per share, good for a 2.83% forward yield. Another reason is that Archer Daniels’ payout is very dependable. The company has been increasing its dividend for 40-straight years and its management has plenty of room to raise it even further, given the payout ratio of just 51.1%. Due to a growing global population and wealthier middle class, demand for ADM’s products will likely continue to grow in the decades to come and its dividend will likely grow along with it.

#4 Abbott Laboratories (NYSE:ABT)

– Number of Hedge Fund Shareholders (as of June 30): 47
– Total Value of Hedge Funds’ Holdings (as of June 30): $1.61 billion
– Hedge Funds’ Holdings as Percent of Float (as of June 30): 2.80%

Abbott Laboratories (NYSE:ABT) has one of the best dividend track records in the drug industry, having raised its payout for 43-straight years. Due to that history, Abbott now pays $1.04 per share to its shareholders annually, good for a 2.46% yield. With a payout ratio of just 47.3%, a growing population of elderly people in the U.S., increasing prescription prices, and rising coverage, it is a good bet that Abbott will likely continue to inch up its dividend in the years to come. 47 funds in our database were long Abbott Laboratories (NYSE:ABT) at the end of June, up by five funds quarter-over-quarter.

The next page contains three more Dividend Aristocrats that hedge funds were loving in the second quarter.

#3 Chevron Corporation (NYSE:CVX)

– Number of Hedge Fund Shareholders (as of June 30): 47
– Total Value of Hedge Funds’ Holdings (as of June 30): $1.96 billion
– Hedge Funds’ Holdings as Percent of Float (as of June 30): 1.00%

Although Brent prices just recently peeked above the $50 per barrel mark, Chevron Corporation (NYSE:CVX) shares have nevertheless rallied by over 14% year-to-date. The number of smart money funds in our system with holdings in Chevron also inched up by one during the second quarter to 47 at the end of June. One big reason why Chevron has shown relative strength and the smart money loves the stock is that investors remain confident in the safety of the company’s annual dividend of $4.28 per year. That payout currently amounts to an annual yield of 4.16%, or more than double the 10-year yield. With Chevron’s production expected to grow over the next few years and OPEC having just announced that it will curtail production, many investors don’t think Chevron will have to cut its dividend any time soon.

#2 AT&T Inc. (NYSE:T)

– Number of Hedge Fund Shareholders (as of June 30): 55
– Total Value of Hedge Funds’ Holdings (as of June 30): $3.56 billion
– Hedge Funds’ Holdings as Percent of Float (as of June 30): 1.30%

AT&T Inc. (NYSE:T) is the definition of a wide-moat stock. First, it has substantial economies of scale that afford it wide margins given its leading position in the telecommunications business. Second, the company has strong customer lock-in given its many contracts and brand loyalty. Third, AT&T has great financial resources that provide it flexibility when needed. Given those traits, it isn’t surprising that AT&T has raised its dividend for 31 years in a row, to the current annualized payout of $1.92 per share, which translates into a juicy 4.73% yield. It also isn’t surprising that 55 funds that we track had a long position in AT&T Inc. (NYSE:T) as of the most recent 13F reporting period, up by four funds over the second quarter.

#1 Wal-Mart Stores, Inc. (NYSE:WMT)

– Number of Hedge Fund Shareholders (as of June 30): 58
– Total Value of Hedge Funds’ Holdings (as of June 30): $6.87 billion
– Hedge Funds’ Holdings as Percent of Float (as of June 30): 3.00%

Although the company has unquestionably been overshadowed by the continued growth of Amazon.com, Inc. (NASDAQ:AMZN) in recent years, the smart money still loves Wal-Mart Stores, Inc. (NYSE:WMT). According to our database, 58 funds were bullish on Wal-Mart Stores, Inc. (NYSE:WMT) at the end of June, up by four from the end of March. Given the company’s massive financial resources, wide economies of scale, and attractive margins, Wal-Mart remains as attractive a dividend play as ever. Shares currently sport an annual yield of 2.77%, thanks to an annualized payout of $2 per share. Wal-Mart’s dividend has grown for 41-straight years and will likely continue to grow in the future given that the company’s payout ratio is just 46.2%. Wal-Mart also isn’t standing still in its battle against Amazon. The company recently closed on the acquisition of Jet.com, which could help it gain more e-commerce market share in the future.

Disclosure: None