In this article, we will take a look at the 10 best dividend stocks according to Jim Cramer. To see more such companies, go directly to 5 Best Dividend Stocks According To Jim Cramer.
US stocks jumped on November 10, a day after the markets broke one of the longest streaks of gains. Talking about the stock market declines on November 9, Jim Cramer on his program said that a few days of market declines does not mean that the market will stay in the red. However, Cramer emphasized that investors need to practice a lot of caution to pick stocks that actually make money. He gave the example of Intel and Microsoft which remained strong in the 90s when inflation was high. Cramer said that today the Magnificent Seven group of stocks (which MSFT is a part of) is gaining because their fundamentals are strong. Cramer emphasized that MSFT remains strong because it’s actually making money from AI and it’s not just a false hope or hype.
Overall, the market sentiment is expected to waver in the coming days. A latest report by University of Michigan shows a worsening consumer sentiment. The report said that the long-term economic outlook tanked in November amid effects of interest rates and wars in Palestine and Ukraine, among other factors. The report also noted that long-term inflation expectations of consumers jumped to new highs since 2011 as consumers now expect inflation at 3.2% over the next five years, significantly higher than the Fed’s target of 2%. Analysts believe this new report will be an important point for the Fed in the days to come as it charts its path regarding rate hikes. The Federal Reserve has already made it clear time and again that it won’t hesitate to up interest rates if needed.
In this environment dividend stocks could become relevant again. Dividend stocks haven’t been as attractive in 2023 so far as they were in 2022, thanks in part to the rise in risk appetite fueled by the AI rally. But recession calls are creeping back in the market again and amid the expected doom and gloom investors are expected to pile into stable dividend-paying equities to hedge against inflation. In this backdrop it’d be interesting to see which dividend stocks Jim Cramer likes.
Methodology
For this article we went through Jim Cramer’s recent programs on CNBC and picked dividend stocks he’s bullish on. Cramer likes some of these stocks solely for their dividends while others he is bullish on for a variety of reasons which we’ve briefly touched upon in each section. Jim Cramer is a fan of high dividend yields but he also gives huge importance to fundamentals and growth. Cramer has been recommending investors to stay away from money-losing companies this entire year and has been recommending solid stocks that are stable and are not prone to waver when markets decline. Some top dividend picks of Cramer include The Procter & Gamble Company (NYSE:PG), Costco Wholesale Corporation (NASDAQ:COST) and Walmart Inc. (NYSE:WMT).
Best Dividend Stocks According To Jim Cramer
10. Realty Income Corporation (NYSE:O)
Number of Hedge Fund Holders: 24
Earlier this month, Jim Cramer, while answering a question about a dividend stock, recommended Realty Income Corporation (NYSE:O) and praised the stock’s yield. Realty Income Corporation (NYSE:O) recently posted third quarter results. FFO in the period came in at $1.04, beating estimates by $0.02. Revenue in the period jumped 24.2% year over year to $1.04 billion, surpassing estimates by $84.22 million.
As of the end of the second quarter of 2023, 24 hedge funds out of the 910 funds tracked by Insider Monkey reported owning stakes in Realty Income Corporation (NYSE:O). The biggest stakeholder of Realty Income Corporation (NYSE:O) was Paul Marshall and Ian Wace’s Marshall Wace LLP which owns a $59 million stake in the company.
Unlike The Procter & Gamble Company (NYSE:PG), Costco Wholesale Corporation (NASDAQ:COST) and Walmart Inc. (NYSE:WMT), Realty Income is a monthly dividend stock.
Answering a question during Q3 earnings call, Realty Income Corporation (NYSE:O)’s CEO Sumit Roy said the following about his expectations for 2024:
“I think if you look at where we are today and you look a year ahead in 2024, we believe that without having to rely on the equity capital markets, we’ll be able to deliver approximately 4% to 5% AFFO per share growth. And that is a pretty powerful statement to make and that obviously assumes that the Spirit transaction closes either in the first month, either in January or in February. And with just the free cash flow that we are going to generate pro forma, which is going to be right around $800 million, some of the headwinds that we are going to experience in the refinancing, absorbing all of that to be able to sit here today and say that we could deliver that growth without having to raise $1 of equity.
I think it’s a very good place to be. And so when I said about being hyper selective, what has happened more recently is that the cost of capital has moved so dramatically, so quickly that the cap rates haven’t had a chance to sort of adjust. And so we find ourselves in this – like I said in the second quarter, we had about 135 basis points of spread. And then in this quarter we have 105 basis points of spread. It’s a tough environment to be in when we are entering into transactions six months, seven months in advance of closing a transaction and the cap rate environment – I mean the cost of capital environment changes and when you are permanently financing it, it sort of eats into what you had originally underwritten. That is what I meant when I said, we want to be hyper selective because we want to help drive the cap rates out to help accommodate for these unforeseen movements in the cost of capital.”
Read the full earnings call transcript here.
9. The Clorox Company (NYSE:CLX)
Number of Hedge Fund Holders: 34
Consumer products company The Clorox Company (NYSE:CLX) ranks 9th in our list of the best Jim Cramer dividend stock picks. Answering a question about The Clorox Company (NYSE:CLX) on his program, Cramer said he would own the stock and praised the company’s management. He said The Clorox Company (NYSE:CLX) has found a bottom and the recently reported quarter was “OK.” The stock has a dividend yield of 3.6%. Earlier this month, UBS upgraded The Clorox Company (NYSE:CLX) to Neutral from Sell, adding that the stock’s risk/reward ratio is now balanced.
A total of 34 hedge funds out of the 910 funds in Insider Monkey’s database had stakes in The Clorox Company (NYSE:CLX) as of the end of the second quarter of 2023.
8. U.S. Bancorp (NYSE:USB)
Number of Hedge Fund Holders: 42
Jim Cramer recently said in a program that U.S. Bancorp (NYSE:USB) is undervalued and he also praised the stock’s high dividend yield of over 6%. Cramer also said that he was beginning to like U.S. Bancorp (NYSE:USB) because he believes the Fed might be “done” with the rate hikes for now.
In October U.S. Bancorp (NYSE:USB) posted Q3 results. Adjusted EPS in the quarter came in at $1.05, surpassing estimates by $0.05. Revenue in the quarter jumped 11.1% year over year to $7.03 billion, beating estimates by $10 million.
As of the end of the second quarter of 2023, 42 hedge funds out of the 910 funds tracked by Insider Monkey had stakes in U.S. Bancorp (NYSE:USB). The biggest stakeholder of U.S. Bancorp (NYSE:USB) was Jean-Marie Eveillard’s First Eagle Investment Management which owns a $300 million stake in the company.
Here is what Davis New York Venture Fund has to say about U.S. Bancorp (NYSE:USB) in its Q3 2023 investor letter:
“In spring 2023, a number of high-profile regional banks, none of which we owned, collapsed over the course of a few weeks. In contrast, the select, large banks we own, including U.S. Bancorp, actually saw deposit inflows and increasing profits, reinforcing our thesis that high-quality financial services companies remain among the most misunderstood and attractive sectors of the market. This stress test models a dramatic recession—one meaningfully worse than the great financial crisis of 2008-2009. It includes a 3.5% decline in gross domestic product, a 10% unemployment rate, a 37% decline in residential real estate, a 40% decline in commercial real estate and a 55% decline in the stock market. The resilience and strength required to weather such an economic storm combined with proven economies of scale in branding and technology should drive DNYVF market share gains and growth for years to come. Trading at some of the lowest valuations in the market, our financial sector holdings—such as U.S. Bancorp, deserve to be revalued upwards over time. In the meantime, increasing dividends and a shrinking share base create value while we wait.”
7. Constellation Brands, Inc. (NYSE:STZ)
Number of Hedge Fund Holders: 48
Jim Cramer recently disclosed during one of his programs on CNBC that Constellation Brands, Inc. (NYSE:STZ) is part of his charitable trust’s portfolio. He recommended Constellation Brands, Inc. (NYSE:STZ) while answering a question about Diageo, which he recommends to stay away from. Constellation Brands, Inc. (NYSE:STZ) has a dividend yield of 1.49%.
Of the 910 funds tracked by Insider Monkey, 48 hedge funds had stakes in the Constellation Brands, Inc. (NYSE:STZ). The biggest hedge fund stakeholder of Constellation Brands, Inc. (NYSE:STZ) was Brandon Haley’s Holocene Advisors which owns a $196 million stake in the company.
6. International Business Machines Corporation (NYSE:IBM)
Number of Hedge Fund Holders: 51
Jim Cramer in September said that International Business Machines Corporation (NYSE:IBM) is a very “inexpensive” stock and it is “off to the races.” Cramer was commenting on RBC Capital’s initiation of International Business Machines Corporation (NYSE:IBM) stock coverage with a Buy rating. RBC Capital set a price target of $188 on International Business Machines Corporation (NYSE:IBM). International Business Machines Corporation (NYSE:IBM) stock has a dividend yield of over 4%.
As of the end of the second quarter of 2023, 51 hedge funds out of the 910 funds tracked by Insider Monkey reported owning stakes in International Business Machines Corporation (NYSE:IBM).
Earlier in November International Business Machines Corporation (NYSE:IBM) announced that it was launching a $500 million venture fund focused on AI.
Like IBM, The Procter & Gamble Company (NYSE:PG), Costco Wholesale Corporation (NASDAQ:COST) and Walmart Inc. (NYSE:WMT) are among the top dividend picks of Jim Cramer.
Diamond Hill Long-Short Fund made the following comment about International Business Machines Corporation (NYSE:IBM) in its Q4 2022 investor letter:
“New positions initiated in Q4 included shorts International Business Machines Corporation (NYSE:IBM), Acushnet Holdings (GOLF) and elf Beauty (ELF). Since diversified information technology company IBM’s 2019 acquisition of Red Hat, the company has aggressively pursued a hybrid cloud strategy. Though IBM and its new management team have made solid progress on this pivot, we believe the company still meaningfully lags the cloud hyperscalers and other cloud-native companies. Management has also laid out aggressive long-term targets for revenue growth and free cash flow, both of which we believe the company will struggle to achieve as it faces intense competition in its hybrid cloud business and structural headwinds in the company’s legacy businesses.”
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Disclosure: None. 10 Best Dividend Stocks According To Jim Cramer is originally published on Insider Monkey.
