In this article, we will discuss the 10 best dividend stocks to buy according to Arosa Capital Management.
Arosa Capital Management is a New York-based alternative investment management firm co-founded by Till Bechtolsheimer and Abraham Joseph in 2013. The hedge fund started making investments in oil and gas companies after its inception. After a few years, the hedge fund started focusing on clean energy stocks considering the climate change impacts.
Arosa Capital invests in both traditional and alternative energy companies through research, analysis, and holistic evaluation of the industry. Moreover, the firm also invests in private companies, commodities, and real assets. It focuses on research as it plays an important role in identifying transformative market trends. Through these investments, the hedge fund aims to generate positive, risk-adjusted returns for shareholders. Before founding Arosa Capital, Bechtolsheimer graduated with honors from The University of Dublin, Trinity College. After that, he used to cover the energy sector at O’Connor Fundamental Long/Short Directional Fund.
As of Q4 2021, Arosa Capital Management holds a 13F portfolio value of $405.3 million. The hedge fund invests heavily in the basic materials and utility sectors. Some of the firm’s major holdings in Q4 included Chevron Corporation (NYSE:CVX), BP p.l.c. (NYSE:BP), and ConocoPhillips (NYSE:COP).
Photo by Sharon McCutcheon on Unsplash
Our Methodology:
In this article, we will focus on the best dividend stocks according to Arosa Capital. For this list, we took into account Arosa Capital’s 13F portfolio as of Q4.
10 Best Dividend Stocks To Buy According to Arosa Capital Management
10. Diamondback Energy, Inc. (NASDAQ:FANG)
Number of Hedge Fund Holders: 51
Dividend Yield as of February 16: 1.52%
Arosa Capital’s Stake Value: $8,178,000
Diamondback Energy, Inc. (NASDAQ:FANG) is an American energy company that is engaged in the exploration of hydrocarbons. The company has increased its dividend consistently for the past three years, growing it by 11% in November 2021. Currently, Diamondback Energy, Inc. pays a quarterly dividend of $0.50 per share, with a dividend yield of 1.52%.
In Q4 2021, Arosa Capital increased its position in Diamondback Energy, Inc. by 2% and held shares worth over $8 million. The company accounted for 2.01% of the hedge fund’s 13F portfolio. This January, Barclays appreciated the company’s strong Q4 results and lifted its price target on the stock to $127. The firm maintained an Equal Weight rating on the shares.
Insider Monkey’s Q3 data shows that the hedge fund interest spiked in Diamondback Energy, Inc., as 51 hedge funds held stakes in the company, worth over $802.2 million. In comparison, 38 hedge funds held stakes in the company in Q2, valued at $443.2 million.
Like Chevron Corporation, BP p.l.c. (NYSE:BP), and ConocoPhillips, Diamondback Energy, Inc. is also one of the most prominent holdings of Arosa Capital in Q4.
Miller Value Partners mentioned Diamondback Energy, Inc. in its Q4 2021 investor letter. Here is what the firm has to say:
“Diamondback Energy (FANG) returned 14.4% in the quarter as oil price rose and fell during the quarter ending the period largely in the same place that it started. The company reported strong 3Q results beating on the top and bottom line. The company reported revenue of $1.9B beating consensus of $1.5B with EPS of $2.94 beating expectations for $2.79. The beat was driven by a combination of higher volumes, higher realizations, and efficiency gains. The company increased its total production guidance for the year to 370-372mboe/d1 (up from 363-370mboe/d) while lowering Capital Expenditure (CAPEX) guidance for the second time this year to $1.49-1.53B. The company raised the dividend for the third time this year to $2/share annually while authorizing a new $2B share repurchase program. Starting in 4Q21, the company plans to return 50% of Free Cash Flow to shareholders through the base dividend and a combination of buybacks and special dividends. Finally, the CEO Travis Stice announced plans to reduce methane emissions by 70% as part of the firm’s ESG initiative.”
9. ConocoPhillips (NYSE:COP)
Number of Hedge Fund Holders: 49
Dividend Yield as of February 16: 2.01%
Arosa Capital’s Stake Value: $14,436,000
ConocoPhillips, an American natural gas company, was the fourth-largest holding of Arosa Capital in Q4. The hedge fund held a stake worth over $14.4 million in the company, after increasing its position by 100% during the quarter. ConocoPhillips represented 3.56% of the hedge fund’s portfolio.
In 2021, ConocoPhillips increased its quarterly dividend by 7% at $0.46 per share, with a dividend yield of 2.01%. Along with this, on February 3, the company also announced a variable dividend of $0.30 per share, which presented a 50% growth from the previous variable dividend. In February, Mizuho presented a positive outlook on the exploration and production industry and lifted its price target on ConocoPhillips to $155, while maintaining a Buy rating on the shares.
By the end of Q3 2021, 49 hedge funds tracked by Insider Monkey held stakes in ConocoPhillips, down from 50 in the previous quarter. These stakes hold a consolidated value of over $1.37 billion. Among these hedge funds, Fisher Asset Management was the company’s largest shareholder in Q3, owning stakes over $403.5 million.
ClearBridge Investments mentioned ConocoPhillips in its Q3 2021 investor letter. Here is what the firm has to say:
“We also seized the opportunity to add to our position in energy producer ConocoPhillips at what we considered an attractive valuation. The market rewarded this move late in the quarter after ConocoPhillips announced its purchase of Permian Basin assets from Shell, making the company the second-largest oil and gas producer in the contiguous U.S. We view this as a positive strategic transaction for a well-run, ESG-cognizant oil producer. With this and prior transactions, the company continues to press its cost advantage and is well-positioned to benefit from ongoing energy demand recovery to pre-pandemic levels.”
8. EQT Corporation (NYSE:EQT)
Number of Hedge Fund Holders: 57
Dividend Yield as of February 16: 2.09%
Arosa Capital’s Stake Value: $8,070,000
An American energy company, EQT Corporation (NYSE:EQT) experienced a positive hedge fund sentiment in Q3, as 57 hedge funds tracked by Insider Monkey held stakes in the company, showing noticeable growth from 43 hedge funds in the previous quarter. These stakes are valued at over $838.2 million.
EQT Corporation currently offers a quarterly dividend of $0.125 per share, with a dividend yield of 2.09%. In its recent investors’ note, Truist raised the oil price targets for 2022 and 2023, presenting a positive stance on the sector. The firm also set a $31 price target on EQT Corporation in January, while maintaining a Buy rating on the shares.
EQT Corporation was one of the latest acquisitions of Arosa Capital in Q4, holding a stake worth over $8 million. The company made up 1.99% of the hedge fund’s portfolio.
7. Caterpillar Inc. (NYSE:CAT)
Number of Hedge Fund Holders: 46
Dividend Yield as of February 16: 2.17%
Arosa Capital’s Stake Value: $9,735,000
Caterpillar Inc. (NYSE:CAT) is one of the leading manufacturers of mining and construction equipment. The company pays a quarterly dividend of $1.11 per share. Caterpillar Inc. maintains a 28-year track record of consistent dividend growth.
As commodity prices and construction demand are increasing owing to the post-pandemic recovery, Tigress Financial in February raised its price target on Caterpillar Inc. to $278, with a Buy rating on the shares. In Q4 2021, Arosa Capital held shares worth over $9.7 million in Caterpillar Inc., which accounted for 2.4% of its 13F portfolio.
In Q3 2021, Bill & Melinda Gates Foundation held a stake worth roughly $1.9 billion in Caterpillar Inc., becoming its largest shareholder. On the whole, 46 hedge funds tracked by Insider Monkey held positions in the company in Q3, down from 62 in the previous quarter. These stakes are valued at over $4.77 billion.
Oakmark Funds mentioned Caterpillar Inc. in its Q2 2021 investor letter. Here is what the firm has to say:
“Having followed the company closely for north of a decade, Caterpillar Inc. is a name we know well. For much of its history, the operating efficiency of the company left much to be desired, but its underlying competitive position was rarely in doubt. A series of actions over the past decade (e.g., LEAN implementation, improved service mix, optimized manufacturing footprint) helped to narrow the gap between Caterpillar Inc.’s potential and its realized results, driving material margin expansion and strong share price performance. In our view, the company remains among the highest quality industrials in the market, but its underlying business is cyclical, which can translate to large swings in both performance and investor sentiment over short time periods. Our ability to focus on the long-term, sustainable earnings power of a business (rather than getting distracted by near-term fluctuations) is our most significant edge when investing in cyclical businesses. Due to the inherent volatility in Caterpillar Inc.’s end markets and operating performance, we suspect we’ll have a future opportunity to own this high-quality business at a more attractive price once the cycle turns and today’s enthusiasm wears off.”
6. Targa Resources Corp. (NYSE:TRGP)
Number of Hedge Fund Holders: 26
Dividend Yield as of February 16: 2.21%
Arosa Capital’s Stake Value: $3,396,000
Targa Resources Corp. (NYSE:TRGP) is a Texas-based midstream energy infrastructure company. This January, Barclays appreciated the company’s refining results and strong execution and lifted its price target on the stock to $72, while keeping an Overweight rating on the shares.
The number of hedge funds tracked by Insider Monkey having stakes in Targa Resources Corp. stood at 26 in Q3, the same as in the previous quarter. These stakes are valued at $567.2 million, up from $388 million in Q2.
Though Targa Resources Corp. cut its dividend by a third in 2020 in the face of the pandemic, the company recently announced a 250% increase in its dividend at $0.35 per share. The stock’s current dividend yield stands at 2.21%. In Q4 2021, Targa Resources Corp. represented 0.83% of Arosa Capital’s portfolio.
In addition to Targa Resources Corp., hedge funds are also bullish on Chevron Corporation, BP p.l.c. (NYSE:BP), and ConocoPhillips.
5. Baker Hughes Company (NYSE:BKR)
Number of Hedge Fund Holders: 37
Dividend Yield as of February 16: 2.42%
Arosa Capital’s Stake Value: $8,045,000
Baker Hughes Company (NYSE:BKR) is an American industrial service company that offers oil field services to consumers. In Q4 2021, Arosa Capital increased its stake by 12% in the company and held shares worth over $8 million. Baker Hughes Company represented 1.98% of the hedge fund’s 13F portfolio.
Baker Hughes Company pays a quarterly dividend of $0.18 per share, with a dividend yield of 2.42%. The company pays over $647 million in dividends annually to shareholders. In January, Cowen acknowledged the company’s role in its use of green energy and lifted its price target on Baker Hughes Company to $35, with an Outperform rating on the shares.
Insider Monkey’s data for Q3 shows that 37 hedge funds were bullish on Baker Hughes Company, down from 40 in the previous quarter. These stakes hold a value of over $1 billion. Pzena Investment Management was the company’s leading shareholder in Q3, holding a stake worth roughly $599 million.
Madison Funds mentioned Baker Hughes Company in its Q3 2021 investor letter. Here is what the investment management firm has to say:
“BKR is a leading oilfield services provider that helps its customers with oil and gas exploration and production. Its customers include companies that discover oil, energy data management firms, drilling companies, well construction, and production and completion firms. The firm is also synonymous with the U.S. rig count. BKR also helps make energy cleaner and more efficient, and is a leader in energy transition businesses, including carbon capture and hydrogen, along with being a market leader in supplying equipment for liquified natural gas (LNG) projects….”
4. BP p.l.c. (NYSE:BP)
Number of Hedge Fund Holders: 29
Dividend Yield as of February 16: 3.98%
Arosa Capital’s Stake Value: $6,514,000
A British multinational oil and gas company, BP p.l.c. (NYSE:BP) recently announced its Q4 results and reported a 73% growth in its quarterly revenue at $52.2 billion. Given this, Wall Street analysts remained positive on the company, as recently, both Morgan Stanley and JPMorgan raised their price targets on the stock to 465 GBP and 600 GBP, respectively.
In August 2021, BP p.l.c. (NYSE:BP) hiked its quarterly dividend by 4% at $0.3276 per share. The stock’s current dividend yield stands at 3.98%. BP p.l.c. (NYSE:BP) expects to increase its dividend by 4% annually through 2025. Arosa Capital made its first investment in the company during the first quarter of 2016. In Q4 2021, the hedge fund held shares worth over $6.5 million in BP p.l.c. (NYSE:BP), which represented 1.6% of its 13F portfolio.
By the end of Q3 2021, 29 hedge funds tracked by Insider Monkey reported owning stakes in BP p.l.c. (NYSE:BP), compared with 30 in the preceding quarter. These stakes hold a consolidated value of over $1 billion.
3. Clearway Energy, Inc. (NYSE:CWEN)
Number of Hedge Fund Holders: 17
Dividend Yield as of February 16: 4.16%
Arosa Capital’s Stake Value: $5,405,000
Clearway Energy, Inc. (NYSE:CWEN) is an American energy company that is also one of the largest operators of clean energy in the country. In Q3 2021, the company announced a 1.6% increase in its quarterly dividend at $0.34 per share. The stock’s dividend yield stands at 4.16%.
The number of hedge funds in Insider Monkey’s database having stakes in Clearway Energy, Inc. stood at 17 in Q3 2021, down from 21 in the previous quarter. The total value of these stakes is over $151.6 million. Jim Simons’ Renaissance Technologies held the largest stake in the company in Q3, worth $34.5 million.
In Q4 2021, Arosa Capital Management held a stake worth over $5.4 million in Clearway Energy, Inc., after increasing its position in the company by 50%. The company made up 1.33% of the hedge fund’s portfolio. This December, Morgan Stanley raised its price target on Clearway Energy, Inc. to $37, with an Equal Weight rating on the shares, as the firm upgraded its Clean Tech industry view to Attractive.
2. Chevron Corporation (NYSE:CVX)
Number of Hedge Fund Holders: 51
Dividend Yield as of February 16: 4.20%
Arosa Capital’s Stake Value: $11,002,000
Chevron Corporation, an American multinational energy company, experienced a slight growth in the number of hedge funds having stakes in it in Q3. 51 hedge funds tracked by Insider Monkey were bullish on the company in the third quarter, up from 50 in the previous quarter. The total value of these stakes is over $4.44 billion.
Chevron Corporation gained ground among analysts as the company managed to increase its dividend during the last year’s oil crash, unlike its counterparts, who slashed their dividends during this time. On January 26, Chevron Corporation announced a 6% increase in its quarterly dividend at $1.42 per share, with a yield of 4.20%. Moreover, the company maintains a 35-year track record of consistent dividend growth. In February, Barclays raised its price target on Chevron Corporation to $148, with an Overweight rating on the shares.
In Q4 2021, Chevron Corporation was the sixth-largest holding of Arosa Capital. The hedge fund held 93,750 million shares in the company, valued at over $11 million. Chevron Corporation accounted for 2.71% of the fund’s portfolio.
Goehring & Rozencwajg Associates mentioned Chevron Corporation in its Q3 2021 investor letter. Here is what the firm has to say:
“After successfully replacing 25% of Exxon’s board of directors despite owning just 0.02% of the outstanding equity, Engine No. 1, the climate-focused activist hedge fund, met with Chevron’s management late last summer. In discussions that were later described as “cordial,” Chevron executives shared their plan to reduce carbon emissions. Subsequently, Chevron announced new plans to further reduce carbon output, along with their intention to appoint a new director with “environmental expertise.” Although it remains unclear exactly what Engine No. 1 is planning, rumors suggest the fund has contacted other investors, strongly suggesting they intend to launch a second campaign in the not-too-distant future.
What should Chevron expect?
It was recently reported by The Wall Street Journal that Exxon was considering abandoning two massive natural gas projects: the 75 trillion cubic foot (tcf ) Rovuma LNG project (capital cost $30 bn) and the 5 tcf Ca Voi Xanh offshore-Vietnam gas project (capital cost $10 bn). Exxon board members (most likely including the three supported by Engine No. 1) have publically expressed concerns about both projects. According to internal reports, these projects are among the highest CO2 producers in Exxon’s pipeline; it is no surprise these projects have been called into question. However, we find the plight of both fields to be perplexing since production would almost certainly be used to displace coal in electricity generation, cutting CO2 emissions by nearly 50%. This fact seems to be lost on the new Exxon board members.”
1. Valero Energy Corporation (NYSE:VLO)
Number of Hedge Fund Holders: 32
Dividend Yield as of February 16: 4.35%
Arosa Capital’s Stake Value: $2,536,000
Valero Energy Corporation (NYSE:VLO) is a Texas-based energy company that manufactures fuels, petrochemical products, and power. In Q4 2021, the company represented 0.62% of Arosa Capital, as the hedge fund held a stake worth over $2.5 million in the company.
Valero Energy Corporation managed to sustain its dividend throughout the pandemic and currently pays a quarterly dividend of $0.98 per share. The stock’s dividend yield stands at 4.35%. On January 25, Piper Sandler raised its price target on Valero Energy Corporation to $95, with an Overweight rating on the shares, as the firm sees an increased demand for crude oil in 2022.
At the end of Q3 2021, 32 hedge funds tracked by Insider Monkey reported owning positions in Valero Energy Corporation, down from 38 in the previous quarter. These stakes hold a value of over $289 million.
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This article is originally published at Insider Monkey.
