In this article we will take a look at the 10 best dividend stocks to buy according to billionaire Philippe Laffont.
Philippe Laffont is one of the most successful investors and hedge fund managers in the world. He founded his hedge fund Coatue Management in 1999 with $45 million starting capital. Since then, the fund has grown exponentially and manages a $16 billion portfolio as of today.
Coatue’s success is mainly due to its decision to focus on tech stocks, tech startups, and private technology companies. The fund has generated 10.1% annualized returns in the last ten years. Laffont’s net worth is currently estimated at around $1.4 billion. He also has a long-only fund, which invests in technology and specific themes such as facial recognition technology and artificial intelligence.
An analysis of Laffont’s investments reveals that he has a particular liking for the best dividend stocks in the market. However, he has also diversified his portfolio by building stakes in high-growth companies that have a long-term growth potential.
Billionaire Philippe Laffont’s Notable Holdings
For example, Laffont owns a stake in chip company Micron Technology, Inc. (NASDAQ: MU). In the fourth quarter, his fund reported owning 1.9 million shares of the company, worth $137.6 million. Micron Technology, Inc. (MU) shares are rising after the company posted better-than-expected results for its fiscal second quarter and provided an upbeat Q3 guidance. Revenue in the period jumped 30%. DRAM, which is currently in severe shortage worldwide, accounted for about 71% of the Q2 sales.
Micron Technology, Inc. said that the NAND market is showing signs of stabilization in the near term.
The billionaire is also bullish on payments giant Square Inc (NYSE: SQ). He increased his stake in the company by 12% in the fourth quarter, ending the period with 6.14 million shares of the company, worth $1.34 billion. Investors are closely watching Square Inc as the company is scheduled to announce Q1 results on May 6. BofA Securities analyst Jason Kupferberg expects the company to crush Q1 estimates. One of the reasons why the analyst is bullish on Square Inc (SQ) earnings is an uptick in spending via Square’s Seller ecosystem, driven by food & drink and retail.
Another good example of a tech company that Laffont’s fund has invested in is DoorDash, Inc. (NYSE: DASH), in which the fund owns more than 8.7 million shares. The huge investment covers an impressive 4.67% of the fund’s portfolio. Food delivery company DoorDash, Inc. (NYSE: DASH) has a lot of room to run, thanks to the rise in the food delivery trend worldwide. The company is in an expansion mode. Recently, Bloomberg reported that DoorDash, Inc. (DASH) has made inquiries about possible delivery candidates in Europe. The news comes at a time when Uber is also expanding its footprint in the European market to take on rival JustEat.
Last week, Needham & Company’s analyst Bernie McTernan, initiated a coverage on the stock and has a target of $175, rating the stock as “Buy.”
Another company in the billionaire’s portfolio that not only operates in a growth market (semiconductors) but also pays a dividend is Broadcom Inc. (NASDAQ: AVGO) which has a significant presence in the semiconductor industry. Broadcom Inc. (NASDAQ: AVGO) is one of the best dividend stocks currently considering the fast-tracked semiconductor demand, especially from the consumer electronics segment. The segment has a lot of growth potential, considering that demand has lately been outperforming supply.
Broadcom Inc. recently announced a strategic partnership with Alphabet Inc. (NASDAQ: GOOG). The partnership aims better to integrate cloud services within Broadcom’s main software franchises, while also accelerating innovation. The partnership will allow Broadcom Inc. to deliver its enterprise and security software via Alphabet Inc. (NASDAQ: GOOG)’s Google Cloud which will in turn allow businesses to securely deploy those solutions.
But in this article, instead of growth companies, we will keep our focus on some of the best dividend stocks to buy now based on billionaire Philippe Laffont’s Q4’2020 portfolio.
Laffont’s stock portfolio had a $26.73 billion market value in Q4 2020 compared to $19.053 billion in the previous quarter. His hedge fund added 17 stocks to the portfolio in Q4, purchased an additional stake in 26 stocks, sold off 14 stocks, and slashed its stake in 20 stocks. Its performance in Q4 was up 30.82% and 98.91% for the full year.
Laffont’s portfolio allocation targets various segments, including information technology at 31.97%, consumer discretionary at 28.11%, communications at 26.67%, energy at 4.85%, finance at 5.64%, and healthcare at 2.62%.
Philippe Laffont of Coatue Management
The demand for dividend stocks has also been gaining traction as more people look for consistent revenue sources now that there is so much market uncertainty. Finding the best dividend stocks is not exactly a walk in the park, and it requires a lot of research. Even the hedge funds are struggling at finding valuable stocks amid the increasing financial volatility. The entire hedge fund industry is feeling the reverberations of the changing financial landscape. Its reputation has been tarnished in the last decade, during which its hedged returns couldn’t keep up with the unhedged returns of the market indices. On the other hand, Insider Monkey’s research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 124 percentage points since March 2017. Between March 2017 and February 26th 2021 our monthly newsletter’s stock picks returned 197.2%, vs. 72.4% for the SPY. Our stock picks outperformed the market by more than 124 percentage points (see the details here). We were also able to identify in advance a select group of hedge fund holdings that significantly underperformed the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 16th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to. You can subscribe to our free newsletter on our homepage to receive our stories in your inbox.
Let’s now start our list of the 10 best dividend stocks to buy according to billionaire Philippe Laffont.
Best Dividend Stocks to Buy According to Billionaire Philippe Laffont
10. Lam Research Corporation (NASDAQ: LRCX)
Value: $449,692,000
Percent of Philippe Laffont’s 13F Portfolio: 1.68%
No. of Hedge Fund Holders: 56
Dividend Yield: 0.84%
Lam Research Corporation (NASDAQ: LRCX) is another major player in the semiconductor industry. Morgan Stanley increased its price target for the company to $726 from $568 mainly due to Lam Research’s commitment to strong NAND spending in addition to the strength of wafer fab equipment. Morgan Stanley is convinced that growth in the company’s customer support business should facilitate growth sustainability.
Stifel also raised its price target for Lam Research to $780 from $740 after the semiconductor company’s latest earnings report. Lam’s $3.85 billion fiscal Q3 revenue represents a 55% gain during the year. The company also reported a $7.49 EPS for the same quarterly period, surpassing the consensus target by $0.88. Lam reported $2.6 billion in system sales, which represents a 55% gain on the year. It ranks 10th in our list of best dividend stocks to buy now based on billionaire Philippe Laffont’s portfolio.
The company’s gross margin in Q3 was 46.3% which was slightly higher than the 46.1% consensus estimate. Its operating margin was 31.1%. Lam Research Corporation positive performance makes it attractive to investors on the hunt for the best dividend stocks.
9. Microsoft Corporation (NASDAQ: MSFT)
Value: $101,765,000
Percent of Philippe Laffont’s 13F Portfolio: 0.38%
No. of Hedge Fund Holders: 258
Dividend Yield: 0.89%
Microsoft Corporation (NASDAQ: MSFT) latest developments have been a mixed bag as far of favorable and unfavorable events. For example, the company was victim of the suspected Russian hacks that affected numerous U.S government agencies. Its planned acquisition of Discord for an estimated $12 billion failed to materialize after Discord allegedly turned down Microsoft’s bid.
On the other hand, Microsoft Corporation reportedly secured a partnership program with the Malaysian government to invest $1 billion within the next five years. The investment will help Malaysian citizens to acquire digital skills rapidly. Microsoft secured a partnership with cloud-based contact center, Talkdesk, to deliver more efficient ways in which contact centers deliver superior customer experiences. The partnership will facilitate the integration of Microsoft Dynamics experience into Talkdesk’s offerings.
Microsoft Corporation (MSFT) also recently announced that it will reduce its share of revenue from selling independent games on its games store to 12% from 30%. The cut could make the platform more appealing to game developers.
8. The TJX Companies, Inc. (NYSE: TJX)
Value: $65,849,000
Percent of Philippe Laffont’s 13F Portfolio: 0.24%
No. of Hedge Fund Holders: 68
Dividend Yield: 1.46%
TJX Companies, Inc (NYSE: TJX) is off to a great start in 2021, highlighting the potential for a great year as far as its performance is concerned. The company’s clothing and accessories segment experienced an 18.3% sales increase in March on a month-to-month basis and a 101% jump compared to its performance in March 2020.
The performance highlights a strong recovery in the retail apparel segment, which took a huge hit in 2020 due to the pandemic. However, the vaccine rollouts and the improving situation have encouraged Americans to resume regular activities, thus recovering the apparel segment. TJX ranks 8th in our list of best dividend stocks to buy now based on billionaire Philippe Laffont’s portfolio.
TJX Companies, Inc declared a $0.26 per share quarterly dividend towards the end of March, which is healthy enough to retain its position as one of the best dividend stocks. The company also revealed that it generated $10.94 billion revenue in Q4 2020, which represents a 10.4% drop YoY. The revenue figure also missed analyst estimates by $530 million. Its non-GAAP EPS in Q4 was $0.50, which was shy of consensus estimates by $0.12. Its GAAP EPS during the same period was $0.27, which was off the consensus target by $0.34.
7. American Eagle Outfitters, Inc. (NYSE: AEO)
Value: $34,326,000
Percent of Philippe Laffont’s 13F Portfolio: 0.12%
No. of Hedge Fund Holders: 39
Dividend Yield: 1.52%
American Eagle Outfitters, Inc. (NYSE: AEO) is a notable player in the lifestyle, apparel, and accessories market. The company recently declared a quarterly dividend of $0.1375 per share, priced similarly to the previous dividend payout in March 2020. Telsey Advisory Group, a financial company analyzing American Eagle Outfitters’ performance, recently adjusted its price target for the stock from $28 to $35 after the retailer’s Q1 update.
Dana Telsey of Telsey Advisory Group noted that American Eagle Outfitters, Inc. was off to a great start in the 2021 financial year, during which it announced a 3-year strategic plan earlier during the year. The company targets higher efficiencies for its supply chain and inventory productivity to support overall productivity. Telsey was upbeat about the company’s performance moving forward, considering that it has a lot of room for growth and revenue generation looks healthy and promising for the long-term, which is great news for its status as one of the best dividend stocks.
Telsey’s current price target for American Eagle Outfitters is 17.5 times the company’s EPS estimate for FY22. As far as financial performance is concerned, the retailer’s comparable sales in Q4 2020 dropped by 1%, likely due to store weakness. The decline was offset by a 35% increase in digital revenue. The Aerie brand performed exceptionally well, with sales coming in at $337 million after a 25% gain. Its gross margin grew by 300 basis points in Q4, supported by lower rent expenses.
American Eagle Outfitters, Inc. operating cash flow in Q4 was $213 million, while full-year 2020 operating cash flow was $202 million.
6. Best Buy Co., Inc. (NYSE: BBY)
Value: $123,993,000
Percent of Philippe Laffont’s 13F Portfolio: 0.46%
No. of Hedge Fund Holders: 38
Dividend Yield: 2.41%
Best Buy Co., Inc. (NYSE: BBY) is one of the most popular retail consumer spaces. While many companies have been reducing their quarterly dividends, Best Buy is one of the few increasing it. It announced in February 2021 that its quarterly dividend would be increased by 27%.
Best Buy recently announced the launch of a new membership service called Best Buy Beta, which offers some benefits over the regular services. One of the most compelling benefits of the new service is that it will provide customers with free shipping without limited order requirements. It will also provide round-the-clock geek squad support and exclusive pricing for members. Free installation will also be provided on various products and appliances.
Best Buy Co., Inc. managed to deliver record profits and a healthy share price during the pandemic, outpacing most of its rivals in the retail electronics segment. Best Buy Co., Inc. (BBY) dividend payouts have also been healthy and consistent enough to earn it a spot in the list of the best dividend stocks.
5. Broadcom Inc. (NASDAQ: AVGO)
Value: $164,863,000
Percent of Philippe Laffont’s 13F Portfolio: 0.61%
No. of Hedge Fund Holders: 59
Dividend Yield: 3.16%
Broadcom Inc. has a strong presence in the semiconductor industry. Its products are used in multiple industrial segments, including industrial markets, storage, wireless technology, broadband, software, networking, and data centers.
Ecommerce giant Amazon is reportedly developing its chip for its networking solutions, and the decision is based on its need to rely less on expensive networking components from companies like Broadcom and Cisco. Despite this shift, Broadcom is still one of the best dividend stocks to buy, considering its strategic position in an industry with a lot of demand for semiconductors.
Broadcom announced that there was healthy early participation in its $5 billion private note offer. $2 billion of the new notes are due in 2033, while the remaining $3 billion worth of notes are due in 2034. The company has 3.125% senior notes due in 2025, which are currently in pool 1’s top acceptance priority. It also has 4.7% senior notes that will be due in 2025. Broadcom Inc. latest financials revealed that its long-term debt is slightly more than $41 billion while its cash and cash equivalents amount to $9.55 billion.
4. Wynn Resorts, Limited (NASDAQ: WYNN)
Value: $120,805,000
Percent of Philippe Laffont’s 13F Portfolio: 0.45%
No. of Hedge Fund Holders: 52
Dividend Yield: 3.12%
Wynn Resorts, Limited (NASDAQ: WYNN) has casinos in Boston, Macau and Las Vegas. The stock has been recovering from COVID-19. The company is growing its WynnBET service, an online sports and casino betting
In Macau, gaming revenue was down 63.7% YoY, while in February it up 135.6% YoY. In March it grew by 58%. For the year 2020, revenue was down 79.3%. However, the economic recovery is going to help boost the profit of Wynn. In November 2020, Wynn purchased 71% of BetBull a UK based betting firm thus bringing its presence into online gaming. This market is expected to grow at 7.91% CAGR and hit $77.42 billion by 2026.
Laffont owns 1.07 million shares of Wynn Resorts, Limited. The stock was in 52 hedge fund portfolios at the end of Q4 2020, up from 43 Q3 2020.
3. The Gap, Inc. (NYSE: GPS)
Value: $149,277,000
Percent of Philippe Laffont’s 13F Portfolio: 0.55%
No. of Hedge Fund Holders: 38
Dividend Yield: 2.93%
US apparel company Gap is one of the best dividend stocks to buy based on billionaire Philippe Laffont’s portfolio. The Gap, Inc. (NYSE: GPS) will open 20-30 new Athleta stores, after scoring 29% growth in sales in Q4. Athleta will also enter Canadian market this year and will also launch e-commerce. This expansion will help company hit $2 billion in net sales by 2023.
The American clothes and clothing accessories sales for March grew 18.3% MoM and 101% YoY, while department sales surged 13% MoM and 25.6% YoY. This will further boost Gap pick up on its sales.
The stock of The Gap, Inc. has more than doubled over the past year. The company’s Q4 revenue was $4.42 billion down 5.4% YoY, while GAAP EPS was $0.61. For FY 2021 operating margin is expected to be 5%, and EPS is expected to be in the range of $1.20 – $1.35
2. L Brands, Inc. (NYSE: LB)
Value: $235,417,000
Percent of Philippe Laffont’s 13F Portfolio: 0.88%
No. of Hedge Fund Holders: 52
Dividend Yield: 1.82%
Bank of America has rated the stock of L Brands, Inc. (NYSE: LB) as “Buy” with a price target of $75. This is after the company restarted talks with Victoria’s Secret. On the other hand, UBS has a “Buy” rating on the stock. L Brands is a top retail pick of BMO Capital Markets.
For Q4 2020 the company reported earnings of $3.03 per share comparted to $1.88 per share in Q4 2019. L Brands Q1 profit is expected to be in the range of 35 cents per share to 45 cents per share, up from consensus forecast of 12 cents per share.
The increase in sales of American clothes and clothing accessories in the recent months will further help boost the company’ sales.
L Brands, Inc. stock was in 52 hedge fund portfolio at the end of Q4 2020, up from 45 in Q3 2020.
1. The Boeing Company (NYSE: BA)
Value: $44,815,000
Percent of Philippe Laffont’s 13F Portfolio: 0.16%
No. of Hedge Fund Holders: 55
Dividend Yield: 3.51%
The Boeing Company (NYSE: BA) was founded in 1916 by William E. Boeing. Initially it sold military aircrafts to the U.S. Army, but later shifted to building commercial aircrafts and further diversified agriculture and energy production marine craft. Its core business is still aerospace.
Boeing was also hit by COVID-19 crisis, as orders dropped after restrictions on air travel. The company has improved its quality of airplanes after the safety concern controversy. The company has resumed Dreamliner deliveries in Q1 2021, and the prospects look better. Boeing 787, after being grounded post two crashes, has resumed operation and is expected to generate a good amount of cash flow. The Boeing Company is still a cash cow.
BA is in 55 hedge fund portfolios at the end of Q4 2020, up from 43 Q3 2020. Fisher Asset Management also owns 2.23 million shares of the company.
You can also take a peek at 10 Best Dividend Stocks to Buy According to Billionaire Andreas Halvorsen and Bill Gates’ Top 10 High Dividend Stocks.
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This article is originally published at Insider Monkey.
