In this article, we discuss the 10 best dividend stocks to buy according to Cliff Asness’ AQR Capital Management.
Cliff Asness is the co-founder of Applied Quantitative Research, or AQR Capital Management, which is one of the very first quantitative funds in the U.S. The hedge fund focuses on factor-based investing and aims to build highly diversified investments while controlling risks attached to them. Asness is currently serving as a Managing Principal and Chief Investment Officer of AQR Capital Management. As of January 2022, Asness’ real-time net worth stands at $1.4 billion.
Cliff Asness supports value investing and believes that cheap stocks tend to perform better than expensive stocks and generate positive returns over the years. The hedge fund uses algorithms to track the market trends and build a portfolio accordingly. Following the value investing strategy, the fund managed to generate solid returns over the years. The hedge fund’s Long-Short Equity Fund returned 11.17% in 2013, followed by 16.15% in 2014 and 17.03% in 2015. AQR Capital Management’s Absolute Return Fund gained 16.8% in 2021, which has boosted investors’ confidence in Asness’ strategies. Moreover, the Absolute Return Fund started 2022 on a positive note, posting double-digit gains in the initial days of the year. The fund reported a 10.4% return to shareholders, marking its strongest five-day performance since its inception some 23 years ago, according to a report published by Financial Times.
Recently, realizing the hedge fund managers’ inclination toward climate-centric strategies, AQR Capital has announced the development of a new ESG-focused mutual fund, The AQR Sustainable Long-Short Equity Carbon Aware Fund. The fund’s portfolio will include the U.S. and foreign companies following the ESG criteria and will also focus on achieving the net-zero target.
As of Q3 2021, Asness’ AQR Capital Management’s 13F portfolio holds a value of roughly $54 billion. The fund invests heavily in the technology, finance, healthcare, and services sector. Some of the major holdings of AQR Management in Q3 are Apple Inc. (NASDAQ:AAPL), Microsoft Corporation (NASDAQ:MSFT), Amazon.com, Inc. (NASDAQ:AMZN), Alphabet Inc. (NASDAQ:GOOG), and Meta Platforms, Inc. (NASDAQ:FB).
Cliff Asness of AQR Capital Management
Our Methodology:
In this article, we will focus on the dividend stocks in Cliff Asness’ portfolio. We used AQR Capital Management’s 13F portfolio as of Q3.
10 Best Dividend Stocks to Buy According to Cliff Asness’ AQR Capital Management
10. AbbVie Inc. (NYSE:ABBV)
Number of Hedge Fund Holders: 81
Dividend Yield as of January 17: 4.15%
An American pharmaceutical company, AbbVie Inc. (NYSE:ABBV) increased its quarterly dividend by 9% on October 27 to $1.41 per share. The stock’s current dividend yield stands at 4.15%. The company is a member of the S&P 500’s Dividend Aristocrats Index, which lists the companies with over a 25-year track record of consistent dividend growth.
In Q3 2021, AQR Capital Management increased its stake in AbbVie Inc. by 6% and now holds shares worth $212.7 million. The company represented 0.39% of Cliff Asness’ portfolio. As the FDA approved the company’s drug for atopic dermatitis, recently, Piper Sandler lifted its price target on AbbVie Inc. to $160, while maintaining an Overweight rating on the shares.
As per Insider Monkey’s data for Q3, 81 hedge funds held stakes in AbbVie Inc., compared with 82 in the previous quarter. The total value of these stakes is over $4.14 billion. Warren Buffett’s Berkshire Hathaway was the company’s largest shareholder in Q3, with shares worth over $1.5 billion.
Like famous stocks, such as Apple Inc., Microsoft Corporation, Amazon.com, Inc., Alphabet Inc., and Meta Platforms, Inc., AbbVie Inc. is one of the prominent holdings of Cliff Asness’ portfolio.
Miller Howard Investments mentioned AbbVie Inc. in its recently published Q3 2021 investor letter. Here is what the firm has to say:
“While optimistic about a recovery, we continue to balance our cyclical holdings with dividend-payers in stable, less economically-sensitive industries. We hold three pharmaceutical companies, (which includes) AbbVie (ABBV). All three have strong cash flows and balance sheets, making their high dividends reasonably safe. The investment controversy surrounding these pharma companies is whether they can develop or acquire new products to replace their current blockbuster drugs. The low valuations on these stocks reflects what we believe to be undue pessimism by investors on the prospects for new drugs.”
9. 3M Company (NYSE:MMM)
Number of Hedge Fund Holders: 46
Dividend Yield as of January 17: 3.31%
3M Company (NYSE:MMM) is an American multinational manufacturing company that specializes in products belonging to different industries, including healthcare, consumer goods, etc.
3M Company is one of the best dividend stocks in Cliff Asness’ portfolio as the company has been paying dividends for the past 100 years while maintaining a 63-year record of consistent dividend growth. Moreover, 3M Company offers solid business fundamentals to investors with growing revenue and EPS, which fuels the dividend growth. AQR Capital Management has been investing in 3M Company since the fourth quarter of 2010. In Q3 2021, the hedge fund increased its position in the company by 11%, which now represents 0.42% of its 13F portfolio.
Recently, Bernstein initiated its coverage on 3M Company with a Market Perform rating and a $175 price target, as the company recovers from supply chain issues.
In Q3 2021, 3M Company experienced a positive hedge fund sentiment as 46 hedge funds tracked by Insider Monkey were bullish on the company, up from 42 in the previous quarter. The total value of these stakes is over $1.62 billion.
8. Pfizer Inc. (NYSE:PFE)
Number of Hedge Fund Holders: 74
Dividend Yield as of January 17: 2.91%
An American multinational pharmaceutical and biotech company, Pfizer Inc. (NYSE:PFE) saw growth in the number of hedge funds having stakes in it in Q3. 74 hedge funds tracked by Insider Monkey reported owning stakes in the company in Q3, up from 67 in the previous quarter. The total value of these stakes is over $2.66 billion.
On December 10, Pfizer Inc. reported a 2.6% increase in its quarterly dividend at $0.40 per share, with a dividend yield of 2.91%. The company’s five-year average dividend growth rate (DGR) stands at 5.4%.
In Q3, AQR Capital Management increased its position in Pfizer Inc. by 5%, which represented 0.45% of the hedge fund’s 13F portfolio.
Recently, BMO Capital added Pfizer Inc. to its list of the Top Picks for 2022 and believes that the company could be the first in the industry to reach $100 billion in revenues, fueled by Paxlovid sales in 2022. The firm lifted its price target on the stock to $76, while keeping an Outperform rating on the shares.
In addition to Pfizer Inc., AQR has stakes in other major names like Apple Inc., Microsoft Corporation, Amazon.com, Inc., Alphabet Inc., and Meta Platforms, Inc..
In its Q3 2021 investor letter, Saturna Capital mentioned Pfizer Inc. among other stocks. Here is what the firm has to say:
“The Fund’s strongest performer during the quarter was pharmaceutical manufacturer Pfizer. The company submitted trial data to the FDA for use of its COVID-19 vaccine for younger children, and it is widely expected that the FDA will approve it. Health authorities also began recommending booster shots of the Pfizer vaccine for select populations, further increasing demand for vaccinations.”
7. PepsiCo, Inc. (NASDAQ:PEP)
Number of Hedge Fund Holders: 61
Dividend Yield as of January 17: 2.45%
PepsiCo, Inc. (NASDAQ:PEP) is an American multinational food and beverage company that deals in the marketing and distribution of its products. AQR Capital Management started investing in the company during the fourth quarter of 2010, with shares worth $28.5 million. In Q3 2021, the hedge fund held a $292.2 million worth of stake in PepsiCo, Inc., which accounted for 0.54% of its 13F portfolio.
Acknowledging the company’s solid growth even during consumer staples’ fall due to the pandemic, Argus lifted its price target on PepsiCo, Inc. to $195, while keeping a Buy rating on the shares. Over the past 10 years, the company’s quarterly dividend has more than doubled at $1.075 per share in 2021 from $0.45 per share in 2010.
As per Insider Monkey’s Q3 data, the number of hedge funds having stakes in PepsiCo, Inc. declined to 61, from 66 in the previous quarter. The consolidated value of these stakes is over $4.43 billion. With shares worth over $1.5 billion, Fundsmith LLP was the company’s largest shareholder in Q3.
6. Merck & Co., Inc. (NYSE:MRK)
Number of Hedge Fund Holders: 77
Dividend Yield as of January 17: 3.39%
Merck & Co., Inc. is an American pharmaceutical company that provides health solutions through its related products. This December, Goldman Sachs added the company to its Conviction List as it is well-positioned to grow commercially. The firm initiated its coverage on Merck & Co., Inc. with a Buy rating and a $93 price target.
Merck & Co., Inc. has an 11-year track record of consistent dividend growth and in the past five years, the company’s dividend growth rate was recorded at 7.4%. Currently, the company pays a quarterly dividend of $0.69 per share, a 6.2% increase from its prior dividend. In Q3 2021, AQR Capital Management owned over 4.8 million shares in Merck & Co., Inc., worth $364.2 million. The company accounted for 0.67% of the hedge fund’s 13F portfolio.
With stakes worth over $4.5 billion, 77 hedge funds tracked by Insider Monkey had positions in Merck & Co., Inc. in Q3, down from 79 in the previous quarter. Fisher Asset Management held shares worth $798.6 million in the company, becoming its largest shareholder in Q3.
Merck & Co., Inc. is one of the notable holdings of AQR Capital Management in Q3, like Apple Inc., Microsoft Corporation, Amazon.com, Inc., Alphabet Inc., and Meta Platforms, Inc.
Miller Howard Investments mentioned Merck & Co., Inc. in its Q3 2021 investor letter. Here is what the firm has to say:
“While optimistic about a recovery, we continue to balance our cyclical holdings with dividend-payers in stable, less economically-sensitive industries. We hold three pharmaceutical companies, (which includes) Merck (MRK). All three have strong cash flows and balance sheets, making their high dividends reasonably safe. The investment controversy surrounding these pharma companies is whether they can develop or acquire new products to replace their current blockbuster drugs. The low valuations on these stocks reflects what we believe to be undue pessimism by investors on the prospects for new drugs.”
5. The Allstate Corporation (NYSE:ALL)
Number of Hedge Fund Holders: 27
Dividend Yield as of January 17: 2.61%
An American insurance company, The Allstate Corporation (NYSE:ALL) has an 11-year track record of consistent dividend growth. Currently, the company pays a quarterly dividend of $0.80 per share, with a dividend yield of 2.61%, compared with the insurance industry’s average yield of 1.51%. Due to the company’s strong business fundamentals, the analysts expect a 7.5% annual dividend growth rate for the stock in the coming years.
AQR Capital Management made its first investment in The Allstate Corporation during the fourth quarter of 2010, worth $4 million. In Q3 2021, the hedge fund owned roughly 3 million shares in the company, valued at over $377 million. The Allstate Corporation constituted 0.69% of Cliff Asness’ portfolio in Q3. Recently, JPMorgan set a $140 price target on The Allstate Corporation, with an Outperform rating on the shares.
Of the 867 elite funds tracked by Insider Monkey, 27 hedge funds held positions in The Allstate Corporation in Q3, down from 33 in the preceding quarter. The total value of these stakes is over $821.1 million.
Appleseed Fund mentioned The Allstate Corporation in its Q2 2021 investor letter. Here is what the firm has to say:
“Allstate is the second-largest personal insurance company in the United States with a 9.3% share in auto insurance (4th largest) and an 8.0% share in homeowner’s insurance (2nd largest). The company sells products primarily through its captive agents though this business line is shrinking as the company’s direct (Esurance.com and, more recently, Allstate.com) and independent agent businesses grow more quickly. The personal insurance industry is relatively consolidated, and competition has historically been rational, allowing Allstate to earn attractive mid-teen returns on equity in this business over the past decade. Allstate also recently announced plans to divest their low-growth, low-return life and annuity businesses. This will free up capital to reinvest into the more attractive personal insurance segment and result in improvements on consolidated returns on equity of approximately 2.5%.
Despite the attractive industry dynamics of the personal insurance business and the steps that Allstate has taken to dispose of lower return businesses, the company’s stock currently trades as if Allstate will never be able to grow its earnings. At our purchase price, Allstate’s stock was trading for less than 10.0x forward earnings estimates. While Allstate does face tough competition in the auto insurance business from GEICO and Progressive, their market position, strong brand, and increased investment into the direct insurance business should allow them to grow earnings. Overall, we believe this entry price is attractive for an industry leader in a high-return, consolidating industry. Further, downside risk management should be positively impacted by the dividend yield, a strong balance sheet, and a management team that has historically increased share repurchases when they view the stock to be trading below its intrinsic value.”
4. Cisco Systems, Inc. (NASDAQ:CSCO)
Number of Hedge Fund Holders: 63
Dividend Yield as of January 17: 2.41%
Cisco Systems, Inc. (NASDAQ:CSCO), an American multinational technology company, declared a quarterly dividend of $0.37 per share on December 13. The stock’s current dividend yield stands at 2.41%. Cisco Systems, Inc. has been increasing its dividend for the past 11 years consecutively.
In Q3 2021, AQR Capital Management held over 7.3 million shares in Cisco Systems, Inc., worth over $398 million. The company represented 0.73% of Cliff Asness’ portfolio. Tigress Financial expects the company to benefit from the spending on the IT sector and its strategic acquisitions. Recently, the firm initiated a 12-month price target on Cisco Systems, Inc., with a Buy rating on the shares. As of the close of January 17, the stock’s 12-month returns stood at 35.7%.
The number of hedge funds tracked by Insider Monkey having stakes in Cisco Systems, Inc. grew to 63 in Q3, from 60 in the previous quarter. The consolidated value of these stakes is roughly $4 billion.
ClearBridge Investments mentioned Cisco Systems, Inc. in its Q3 2021 investor letter. Here is what the firm has to say:
“We reinvested a portion of the proceeds into existing holding Cisco Systems, which also has highly valuable technology and an improving secular growth story with its leading position in core networking hardware, as well as in its growing software and services business. Cisco has refocused on winning share in the large and growing hyperscale market and has been investing aggressively in R&D to support growth. We believe Cisco has found new legs after previously ceding some growth opportunities in cloud while maintaining its strong presence in the carrier and enterprise markets. Cisco boasts a strong balance sheet and accelerating multiyear growth while trading at a modest multiple of earnings.”
3. Intel Corporation (NASDAQ:INTC)
Number of Hedge Fund Holders: 66
Dividend Yield as of January 17: 2.50%
Intel Corporation (NASDAQ:INTC) is an American semiconductor and technology company. AQR Capital Management has been investing in the company since the fourth quarter of 2010. In Q3 2021, the hedge fund held a $401.1 million worth of stake in the company, which represented 0.74% of its 13F portfolio.
Fisher Asset Management was the largest shareholder of Intel Corporation in Q3, owning shares worth over $1.73 billion. Overall, 66 hedge funds tracked by Insider Monkey held stakes in the company in Q3, down from 78 in the previous quarter. These stakes hold a value of over $6.4 billion.
Recently, Northland appreciated Intel Corporation’s strategies and execution and upgraded the shares to Outperform while maintaining a $62 price target on the stock. Currently, Intel Corporation pays a quarterly dividend of $0.3475 per share, with a dividend yield of 2.50%. 2021 marked the company’s 7th consecutive annual dividend increase. Moreover, its 5-year dividend growth rate (DGR) stands at 6%.
Andaz Private Investments mentioned Intel Corporation in its Q3 2021 investor letter. Here is what the firm has to say:
“Intel (INTC) is trading on a high single digit earnings multiple and is essentially: 1) an oligopolistic foundry set to benefit from large government incentives; and 2) a semiconductor business that is returning to competitiveness after years of being a laggard.”
2. Johnson & Johnson (NYSE:JNJ)
Number of Hedge Fund Holders: 88
Dividend Yield as of January 17: 2.53%
An American healthcare company, Johnson & Johnson is among the 35 members of Dividend Kings list, increasing its dividend consistently for the past 59 years, making it one of the best dividend stocks in Cliff Asness’ portfolio. Currently, the company pays an annual dividend of $1.06 per share, with a dividend yield of 2.53%. Johnson & Johnson’s (NYSE:JNJ) five-year average annual dividend growth rate stands at 6%.
In Q3 2021, AQR Capital Management held shares worth $491.8 million in Johnson & Johnson, which accounted for 0.91% of its 13F portfolio. Acknowledging the efficacy of the company’s vaccine against Omicron, recently, Credit Suisse lifted its price target on Johnson & Johnson to $200, while maintaining an Outperform rating on the shares.
As per Insider Monkey’s data for Q3, 88 hedge funds held stakes in Johnson & Johnson, the same as in the previous quarter. These stakes hold a consolidated value of over $6.8 billion.
Distillate Capital mentioned Johnson & Johnson in its Q2 2021 investor letter. Here is what the firm has to say:
“The largest additions in the rebalance, Johnson & Johnson was around 50 and 40 basis points incrementally. J&J underperformed in the quarter while its normalized free cash flows held steady and so its position size was topped off to match the stable cash flows.”
1. The Procter & Gamble Company (NYSE:PG)
Number of Hedge Fund Holders: 69
Dividend Yield as of January 17: 2.18%
An American consumer goods company, The Procter & Gamble Company was the ninth-largest holding of AQR Capital Management in Q3, representing 0.97% of its 13F portfolio.
The Procter & Gamble Company has been paying dividends to shareholders for the past 131 years and 2021 marked its 65th consecutive year of dividend growth. Currently, the company pays a quarterly dividend of $0.8698 per share, with a dividend yield of 2.18%. This December, The Royal Bank of Canada set a $150 price target on The Procter & Gamble Company, appreciating the company’s solid fiscal Q1 2022 results.
At the end of Q3 2021, 69 hedge funds tracked by Insider Monkey held stakes in The Procter & Gamble Company up from 68 in the preceding quarter. These stakes are valued at over $6.41 billion.
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This article is originally published at Insider Monkey.
