In this article, we discuss 10 dividend stocks to buy according to Tom Russo’s Gardner Russo & Gardner.
Tom Russo, one of the most famous value investors and managing partner at Gardner Russo & Gardner, expressed concerns about the market volatility in his interview in February 2022. He maintained that the financial instability has put investors at a risk, who now have to choose the winning stocks from the underperforming ones. In the same interview, Russo also talked about his position in Warren Buffett’s Berkshire Hathaway Inc. (NYSE:BRK-B), the company he has been investing in since 1983 as it offered attractive value to investors. As the company fights inflation and higher interest rates, Russo still maintains a bullish view of the stock as it promises to maximize long-term returns to shareholders.
Tom Russo joined Gardner Russo & Gardner as a partner in 1989 and became the Managing Member of the firm in 2014. His hedge fund manages over $10.4 billion in 13F securities as of the first quarter of 2022. Russo invests in companies with stable cash flows and strong balance sheets. His hedge fund also prefers to invest in family-owned public companies. According to Russo, these companies are well-positioned to resist criticism and offer significant investment exposure to shareholders. He derives his investment strategy from Warren Buffett, preferring the value and price of stocks while investing. During the financial crisis of 2008, his hedge fund invested heavily in European companies that offered a huge discount to investors. At that time, his portfolio comprised 70% of the European companies, as reported by CNBC. Following these strategies, he managed to beat the S&P 500 index by 4.7% annually between 1984 and 2011.
As of Q1 2022, Tom Russo’s hedge fund invested heavily in the finance, consumer goods, and services sector, with healthcare, industrial goods, and technology making up the smaller portions of the portfolio. Some of the hedge fund’s major holdings include Apple Inc. (NASDAQ:AAPL), Alphabet Inc. (NASDAQ:GOOG), and Mastercard Incorporated (NYSE:MA).
Our Methodology:
In this article, we discuss the best dividend stocks in Tom Russo’s portfolio. The data used in this list is taken from Gardner Russo & Gardner’s 13F portfolio as of Q1 2022.
10 Best Dividend Stocks According to Tom Russo’s Gardner Russo & Gardner
10. American Express Company (NYSE:AXP)
Number of Hedge Fund Holders: 69
Dividend Yield as of May 30: 1.23%
Gardner Russo & Gardner’s Stake Value: $7,521,000
American Express Company (NYSE:AXP) is an American credit card service company that issues personal, small business, and corporate credit cards to consumers. In Q1 2022, the company reported a 121% year-over-year growth in its travel and entertainment spending after suffering losses for two years due to the pandemic-related lockdown.
American Express Company maintains a 30-year dividend streak with occasional dividend increases. In March, the company announced a 20% hike in its quarterly dividend to $0.52 per share. As of May 30, the stock’s dividend yield was recorded at 1.23%. Unlike major blue-chip tech stocks like Apple Inc., Alphabet Inc., and Mastercard Incorporated, American Express Company is trading in the green in 2022 so far.
Gardner Russo & Gardner started investing in American Express Company during the fourth quarter of 2010 with shares worth roughly $4 million. At the end of Q1 2022, the hedge fund owned a stake worth over $7.5 million in the company, which accounted for 0.07% of Tom Russo’s portfolio. As the company showed growth in consumer activity in the first quarter of 2022, RBC Capital raised its price target on American Express Company to $200, with a Sector Perform rating on the shares.
At the end of Q1 2022, 69 hedge funds tracked by Insider Monkey reported owning stakes in American Express Company, up from 64 in the previous quarter. The consolidated value of these stakes is over $33.1 billion. With a stake worth over $28 billion, Berkshire Hathaway held the largest position in the New York-based company in Q1 2022.
9. McCormick & Company, Incorporated (NYSE:MKC)
Number of Hedge Fund Holders: 34
Dividend Yield as of May 30: 1.59%
Gardner Russo & Gardner’s Stake Value: $4,713,000
McCormick & Company, Incorporated is an American food company that manufactures, markets, and distributes different food products, including spices, condiments, and other flavoring products. In Q1 2022, McCormick & Company, Incorporated saw a 3% year-over-year growth in its sales and further expects the sales to grow by 3% to 5% in FY22 versus the estimates of 3.84%.
At the end of Q1 2022, Gardner Russo & Gardner owned a stake worth over $4.7 million in McCormick & Company, Incorporated, after reducing its position in the company by 2%. The company represented 0.04% of Tom Russo’s portfolio.
The number of hedge funds tracked by Insider Monkey owning stakes in McCormick & Company, Incorporated grew to 34 in Q1 2022 from 25 in the previous quarter. The collective value of these stakes is roughly $1.8 billion.
McCormick & Company, Incorporated currently pays a quarterly dividend of $0.37 per share, raising it by 8.8% in November 2021. The company has been paying dividends to shareholders for the past 97 years while maintaining a 36-year track record of consistent dividend growth. The stock’s dividend yield, as of May 30, stood at 1.59%.
ClearBridge Investments mentioned McCormick & Company, Incorporated in its Q3 2021 investor letter. Here is what the firm has to say:
“Within consumer staples, we sold out of Unilever, a great company and sustainability leader that we believe faces margin headwinds as it invests to promote growth, and replaced it with McCormick, a leader in food seasonings and flavors. McCormick is a high-quality business that has lagged recently due to the negative COVID-19 impacts on the business, which provided us with an attractive entry point. The company is also levered to the healthy eating trend, as seasonings are a healthier substitute for sugar and fat.”
8. Crane Holdings Co. (NYSE:CR)
Number of Hedge Fund Holders: 26
Dividend Yield as of May 30: 1.97%
Gardner Russo & Gardner’s Stake Value: $8,051,000
Crane Holdings Co. (NYSE:CR) is an American manufacturing company that specializes in industrial products. The company announced its Q1 2022 results on April 25, reporting revenue of $801 million, which reflected a 3% growth from the same period last year. Following its first-quarter results, Stifel set a $134 price target on Crane Holdings Co., with a Buy rating on the shares.
Gardner Russo & Gardner initiated its position in Crane Holdings Co. during the fourth quarter of 2010, with shares worth over $8 million. At the end of Q1 2022, the hedge fund owned 74,356 shares in the company, valued at over $8.05 million. The company constituted 0.07% of Tom Russo’s portfolio.
In April, Crane Holdings Co. declared a quarterly dividend of $0.47 per share, having raised it by 9% in January. The stock’s dividend yield came to be recorded at 1.97% on May 30.
GAMCO Investors was the largest shareholder of Crane Holdings Co. in Q1 2022, owning a $161.3 million worth of stake. Overall, 26 hedge funds in Insider Monkey’s Q1 2022 database held positions in the company, up from 25 in the previous quarter. The consolidated value of these stakes is over $287 million.
7. Union Pacific Corporation (NYSE:UNP)
Number of Hedge Fund Holders: 89
Dividend Yield as of May 30: 2.34%
Gardner Russo & Gardner’s Stake Value: $5,006,000
Union Pacific Corporation (NYSE:UNP), an American transport company, announced a 10% hike in its quarterly dividend in May to $1.30 per share. The company has paid dividends on its common stock for 123 consecutive years. The stock’s dividend yield came to be recorded at 2.34% on May 30.
Gardner Russo & Gardner owned stakes worth over $5 million in Union Pacific Corporation at the end of Q1 2022, after increasing its position by 1%. The company represented 0.04% of Tom Russo’s portfolio.
In addition to Gardner Russo & Gardner, 89 hedge funds in Insider Monkey’s database held stakes in Union Pacific Corporation in Q1 2022, up from 59 in the previous quarter. These stakes hold a collective value of $7 billion, compared with $5.6 billion worth of stakes held by hedge funds in Q4 2021.
Appreciating the improved service of Union Pacific Corporation, in April, UBS raised its price target on the stock to $285, while maintaining a Strong Buy rating on the shares.
ClearBridge Investments mentioned Union Pacific Corporation in its Q4 2021 investor letter. Here is what the firm has to say:
“Despite these mixed emerging growth results, the ClearBridge Global Growth Strategy outperformed the benchmark due to resilience among our secular and structural growth holdings. These consistent growers were complemented by solid contributions from structural holdings including Union Pacific.”
6. Comcast Corporation (NASDAQ:CMCSA)
Number of Hedge Fund Holders: 78
Dividend Yield as of May 30: 2.45%
Gardner Russo & Gardner’s Stake Value: $228,293,000
In Q1 2022, Comcast Corporation (NASDAQ:CMCSA) reported strong earnings, posting broadband revenue of $6 billion, up 8% from the same period last year. The company’s total sales amounted to over $31 billion, presenting a 14% year-over-year growth. Despite solid quarterly and FY21 results, the telecommunications company has lost 12.9% of its value in 2022 so far, just like Apple Inc., Alphabet Inc., and Mastercard Incorporated, which are also down in 2022.
As per Insider Monkey’s Q1 2022 database, 78 hedge funds owned stakes in Comcast Corporation, worth over $7.1 billion. In comparison, 80 hedge funds held positions in the company in the previous quarter, with stakes valued at over $8.6 billion.
In January, Comcast Corporation announced an 8% increase in its quarterly dividend to $0.27 per share. This marked the company’s 14th consecutive year of dividend growth. The stock’s dividend yield stood at 2.45%, as of the close of May 30. Appreciating the free cash flow growth of Comcast Corporation, in April, Morgan Stanley set a $55 price target on the stock, with an Overweight rating on the shares.
Gardner Russo & Gardner initiated its position in Comcast Corporation during the fourth quarter of 2010, buying shares worth $659,000. The hedge fund has increased its position over time in the company, owning roughly 5 million CMCSA shares at the end of Q1 2022, valued at over $228.2 million. Comcast Corporation represented 2.19% of Tom Russo’s portfolio.
ClearBridge Investments mentioned Comcast Corporation in its Q4 2021 investor letter. Here is what the firm has to say:
“Weakness among our holdings in the communication services sector was the other detractor to performance. Comcast was hurt by tepid subscriber growth in its broadband business but demonstrated strong growth in free cash flow, positioning the company for accelerated capital return going forward.”
5. The Procter & Gamble Company (NYSE:PG)
Number of Hedge Fund Holders: 72
Dividend Yield as of May 30: 2.46%
Gardner Russo & Gardner’s Stake Value: $5,863,000
The Procter & Gamble Company saw a spike in hedge fund interest in Q1 2022, as 72 hedge funds tracked by Insider Monkey held stakes in the company, up from 67 in the previous quarter. The consolidated value of these stakes is over $6.06 billion. Rajiv Jain’s GQG Partners owned over $1.5 billion worth of stakes in the company, becoming its largest shareholder in Q1 2022.
In April, The Procter & Gamble Company increased its quarterly dividend by 5% to $0.9133 per share. The company has been raising its dividend for the past 66 years and has been paying dividends consistently since 1890. As of May 30, the stock’s dividend yield was recorded at 2.46%.
At the end of Q1 2022, Gardner Russo & Gardner owned 38,372 shares in The Procter & Gamble Company, valued at roughly $6 million. The company represented 0.05% of Tom Russo’s portfolio. In April, Barclays raised its price target on The Procter & Gamble Company to $176, with an Overweight rating on the shares, highlighting the company’s solid performance in Q1 2022.
4. PepsiCo, Inc. (NASDAQ:PEP)
Number of Hedge Fund Holders: 62
Dividend Yield as of May 30: 2.68%
Gardner Russo & Gardner’s Stake Value: $3,627,000
In Q1 2022, PepsiCo, Inc. (NASDAQ:PEP) topped analysts’ expectations, posting an EPS of $1.29, which beat estimates by $0.06. The company’s revenue of $16.2 billion also surpassed market estimates by $660 million. Wall Street analysts presented a positive stance on the company after its quarterly reports. In April, both JPMorgan and Guggenheim raised their price targets on PepsiCo, Inc. to $186 and $193, respectively.
At the end of Q1 2022, Gardner Russo & Gardner held stakes worth over $3.6 million in PepsiCo, Inc., which represented 0.03% of Tom Russo’s portfolio. The hedge fund has been investing in the company since 2010.
In May, PepsiCo, Inc. announced a quarterly dividend of $1.15 per share, growing it by 7%. This marked the company’s 50th consecutive year of dividend growth. The stock’s dividend yield was recorded at 2.68% on May 30.
As per Insider Monkey’s Q1 2022 database, 62 hedge funds held stakes in PepsiCo, Inc., valued at roughly $4.9 billion. In the previous quarter, 60 hedge funds held positions in the company, worth over $4.6 billion.
ClearBridge Investments mentioned PepsiCo, Inc. in its Q4 2021 investor letter. Here is what the firm has to say:
“The pandemic created opportunities for us to be more aggressive in a variety of areas of the market. We were opportunistic throughout the year. After a strong year for equities, we sought to bolster more defensive areas of the portfolio and added to PepsiCo, increasing our exposure to a high-quality and stable name.”
3. Exxon Mobil Corporation (NYSE:XOM)
Number of Hedge Fund Holders: 83
Dividend Yield as of May 30: 3.61%
Gardner Russo & Gardner’s Stake Value: $14,855,000
Exxon Mobil Corporation (NYSE:XOM) is an American multinational oil and gas company, formed by the merger of Exxon and Mobil in 1999. Since the beginning of the year, the stock has marched upward steadily, gaining 53.5%. Moreover, in Q1 2022, the company reported revenue of $90.5 billion, up 53% from the same period last year.
In May, Argus raised its price target on Exxon Mobil Corporation to $104, while maintaining a Buy rating on the shares. The firm’s analyst expected the company to benefit from the strong energy market and improving balance sheet. He also raised his EPS estimates to $9.52 from $6.40, as commodity prices continue to grow.
Exxon Mobil Corporation currently pays a quarterly dividend of $0.88 per share, with a dividend yield of 3.61%, as of May 30. The company has been raising its dividend for the past 39 years at an annual average rate of 6%. At the end of Q1 2022, Exxon Mobil Corporation represented 0.14% of Tom Russo’s portfolio, as his hedge fund increased its position in the company by 1% during the quarter.
Among the 900+ elite funds tracked by Insider Monkey, 83 hedge funds were bullish on Exxon Mobil Corporation in Q1 2022, up from 71 in the quarter earlier. The consolidated value of these stakes is over $8.5 billion, reflecting growth from $5.3 billion worth of stakes held by hedge funds in Q4 2021.
Saturna Capital mentioned Exxon Mobil Corporation in its Q4 2021 investor letter. Here is what the firm has to say:
“Few companies maintain their position at the top for more than a decade or two. One that did was Exxon, which appeared decennially from 1980 through 2010. In 2019 it was ranked 10th, but as of writing has dropped to 39th place.”
2. Philip Morris International Inc. (NYSE:PM)
Number of Hedge Fund Holders: 55
Dividend Yield as of May 30: 4.67%
Gardner Russo & Gardner’s Stake Value: $658,103,000
An American multinational tobacco company, Philip Morris International Inc. (NYSE:PM) was the seventh-largest holding of Gardner Russo & Gardner at the end of Q1 2022. The hedge fund owned over 7 million shares in the company, worth over $658 million, which accounted for 6.33% of Tom Russo’s portfolio.
As per Insider Monkey’s Q1 2022 database, 55 hedge funds reported owning stakes in Philip Morris International Inc., valued at over $6.6 billion. In the previous quarter, 47 hedge funds owned a collective stake worth over $6.1 billion in the company. Among these hedge funds, GQG Partners was the largest shareholder of the New York-based company in Q1 2022, owning roughly 30 million shares, valued at over $2.8 billion.
In March, Philip Morris International Inc. announced a quarterly dividend of $1.25 per share, in line with its previous dividend. The company has been raising its dividend ever since becoming a public company in 2008. As of May 30, the stock’s dividend yield was recorded at 4.67%.
Broyhill Asset Management mentioned Philip Morris International Inc. in its Q2 2021 investor letter. Here is what the firm has to say:
“Philip Morris (PM) shook off the prospects of a ban on menthol and a potential cap on nicotine and gained 23%. We shared our thoughts on these regulations during the quarter, which are available here.
‘PM Valuation. PM is up ~ 15% YTD and would have the most to gain under a nicotine cap. A cap would likely accelerate conversion to iQOS, which is 100% incremental for PM (PM also has zero exposure to combustible cigarettes in the U.S. and licenses its IQOS product for MO to distribute domestically). As such, the decline in PM was much more muted, with the stock hitting new 52 week highs a day after the Biden headline, driven by yesterday’s earnings release. It didn’t take long for investors to shift their attention back to fundamentals and the fundamentals here are best in class. In short, results beat estimates across the board (a recurring theme here), and management raised guidance for the full year (another recurring theme). IQOS continued to deliver impressive growth, recording continued market share gains on the heels of continued user acquisition growth, up 1.5M to 19.1M total users. Importantly, IQOS now represents nearly 30% of PM net revenues (management expects “smoke-free” products to represent more than half of their business by 2025, which should make the ESG folks happy), which is driving top-line growth and margin expansion. Hard to believe that they have created a product with higher margins than combustible cigarettes!! We expect PM operating margins to increase by 100bps – 200bps annually as IQOS continues to gain share. The stock trades at ~ 15x today or 2/3 of the market’s multiple for a business likely to generate $35B in cash flow – or 25% of the market cap – in just the next three years. Over the last decade, shares have traded at an average multiple of 18x and within a range of ~ 14x – 22x (+/-1 standard deviation). The stock yields 5.1% at the current price, and we expect management to resume share purchases in the back half of this year.’”
1. Altria Group, Inc. (NYSE:MO)
Number of Hedge Fund Holders: 47
Dividend Yield as of May 30: 6.61%
Gardner Russo & Gardner’s Stake Value: $17,323,000
Altria Group, Inc. (NYSE:MO) is an American manufacturing company, that produces tobacco, cigarettes, and other related products. Gardner Russo & Gardner increased its position in the company by 1% during the first quarter of 2022, owning shares worth $17.3 million. The company constituted 0.16% of Tom Russo’s portfolio.
In May, Altria Group, Inc. declared a quarterly dividend of $0.90 per share, in line with its previous dividend. The company has raised its dividend 56 times in the past 52 years. As of May 30, the stock’s dividend yield stood at 6.61%.
In Q1 2022, Altria Group, Inc. reported stable earnings, posting an EPS of $1.12, which beat the market estimates by $0.03. However, the company’s revenue of $4.82 billion missed the expectations by $60 million. Following its quarterly results, in April, Deutsche Bank lifted its price target on Altria Group, Inc. to $60, while maintaining a Buy rating on the shares.
At the end of March 2022, 47 hedge funds tracked by Insider Monkey reported owning stakes in Altria Group, Inc., up from 39 in the previous quarter. The collective value of these stakes is roughly $2 billion, compared with over $1.05 billion worth of stakes held by hedge funds in Q4 2021.
Broyhill Asset Management also mentioned Altria Group, Inc. in its Q2 2021 investor letter. Here is what the firm had to say:
“Altria (MO) shook off the prospects of a ban on menthol and a potential cap on nicotine and gained 20%. We shared our thoughts on these regulations during the quarter, which are available here.
MO Valuation. MO is up ~ 18% YTD (even accounting for the recent sell-off). We expect MO to generate close to $5 in annual FCF per share over the next few years, putting the stock at ~ 10x, which is less than half the market’s multiple today. Over the last decade, shares have traded at an average multiple of 15x and within a range of ~ 10x – 20x (+/-1 standard deviation). The stock yields 7.2% at the current price, close to a 6% premium to treasuries. Historically, shares have traded closer to a 3% premium to the 10Y, which would imply a ~ $75 share price.”
You can also take a look at 15 Best Undervalued Stocks to Buy Now and 10 Best Mid-Cap Stocks To Buy Now
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This article is originally published at Insider Monkey.
