In this article, we discuss 10 best dividend stocks to buy according to John Rogers’ Ariel Investments.
Famous American investor and hedge fund manager John W. Rogers last year gave a skeptical stance about cryptocurrency, calling it a ‘hot dot’ of the moment. According to Rogers, investors should always consider markets through which they can reap long-term benefits, and cryptocurrencies do not meet these conditions. Rogers’ comments proved to be prescient as cryptocurrencies are going through a bloodbath in 2022.
In 1983, John Rogers founded Ariel Investments, a global value-based asset management firm. He is currently serving as the Co-CEO, Chairman, and CIO of the firm. Following the strategy of value investing, Ariel Investments invests in small and mid-cap undervalued companies, exhibiting strong growth potential. While investing, the fund’s main focus remains on strong cash flows, low debt, and strong business fundamentals.
Ariel Investments’ flagship Ariel Fund returned 14.9% annually from 2000 to 2010, compared with an 11.6% per year gain of the Russell 2500 index, as reported by Forbes. In 2021, the Ariel Fund gained 2.38%, while its 5-year returns came in at 6.52%. Moreover, since its inception in 2011, Ariel International Fund delivered a return of 4.93%.
Some of the hedge fund’s major holdings in Q1 included Microsoft Corporation (NASDAQ:MSFT), Johnson & Johnson (NYSE:JNJ), and The Goldman Sachs Group, Inc. (NYSE:GS).
John Rogers of Ariel Investments
Our Methodology:
In this article, we discuss the best dividend stocks in John Rogers’ portfolio. The data mentioned in this list is taken from Ariel Investments’ Q1 2022 13F portfolio.
10 Best Dividend Stocks to Buy According to John Rogers’ Ariel Investments
10. KKR & Co. Inc. (NYSE:KKR)
Number of Hedge Fund Holders: 54
Dividend Yield as of May 26: 1.23%
Ariel Investments’ Stake Value: $187,477,000
KKR & Co. Inc. is an American global investment company that manages multiple asset classes through its strategic partners.
On May 12, KKR & Co. Inc. announced a 6.9% hike in its quarterly dividend to $0.155 per share, which takes its annual dividend to $0.62 per share. The stock’s dividend yield was recorded at 1.23% on May 26. In its May investors’ note, Deutsche Bank mentioned that it sees a buying opportunity in KKR & Co. Inc. and set a $79 price target on the stock, with a Buy rating on the shares.
Ariel Investments initiated its position in KKR & Co. Inc. during the third quarter of 2018, investing roughly $161 million. During Q1 2022, the hedge fund increased its position in the company by 11%. Along with KKR, Microsoft Corporation, Johnson & Johnson, and The Goldman Sachs Group, Inc. are some other major holdings of Ariel Investments in Q1 2022.
At the end of Q1 2022, 54 hedge funds tracked by Insider Monkey held stakes in KKR & Co. Inc., down from 55 in the previous quarter. These stakes hold a collective value of over $4.04 billion. ValueAct Capital held the largest stake in the company in Q1 2022, worth over $1.3 billion.
Vulcan Value Partners mentioned KKR & Co. Inc. in its Q1 2022 investor letter. Here is what the firm has to say:
“KKR & Co. Inc. is a global investment firm that manages multiple alternative asset classes. The company’s operating profits grew approximately 45% during the fourth quarter of 2021 and roughly 55% for the year. In contrast, its stock price declined over 20% during the quarter. KKR generates robust free cash flow, and its value growth has been strong throughout the last year. It is unclear to us why KKR’s stock price has declined. However, we feel the company is positioned for long-term success and are pleased to own it with a discount to our estimate of its intrinsic value.”
9. Johnson & Johnson (NYSE:JNJ)
Number of Hedge Fund Holders: 83
Dividend Yield as of May 26: 2.52%
Ariel Investments’ Stake Value: $136,834,000
Johnson & Johnson is an American multinational corporation that deals in medical devices and consumer health goods. In its Q1 2022 results, the company reported a 5% year-over-year growth in its total sales, with operational growth of 7.7%. The company’s EPS of $2.67 beat the estimates by $0.10.
The number of hedge funds in Insider Monkey’s database holding stakes in Johnson & Johnson stood at 83 in Q1 2022, the same as in the previous quarter. The consolidated value of these stakes is over $7.4 billion, showing modest growth from $7.3 billion worth of stakes held by hedge funds in Q4 2021.
In April, Johnson & Johnson declared a quarterly dividend of $1.13 per share, up 6.6% from its previous dividend. This marked the company’s 60th consecutive year of dividend growth. The stock’s dividend yield came to be recorded at 2.52%, as of May 26. Appreciating the consistent earnings growth of Johnson & Johnson, in May, SVB Leerink assumed its coverage on the stock with an Outperform rating and a $200 price target. The firm further added that it sees growth in the company’s medical devices sales.
At the end of Q1 2022, Ariel Investments held shares worth roughly $137 million in Johnson & Johnson, which represented 1.21% of John Rogers’ portfolio.
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.”
8. Northern Trust Corporation (NASDAQ:NTRS)
Number of Hedge Fund Holders: 25
Dividend Yield as of May 26: 2.60%
Ariel Investments’ Stake Value: $241,153,000
Northern Trust Corporation (NASDAQ:NTRS) has been a part of Ariel Investments’ portfolio since 2010. The hedge fund initiated its position in the company with shares worth over $74.2 million. At the end of Q1 2022, the fund held a $241 million worth of stake in Northern Trust Corporation, which accounted for 2.13% of John Rogers’ portfolio.
In Q1 2022, Northern Trust Corporation posted a GAAP EPS of $1.77, which beat the market estimates by $0.13. The company generated revenue of $1.72 billion, presenting an 8.2% growth from the same period last year. In May, Deutsche Bank affiliated the company’s strong quarterly results with the rising interest rates and a set a $116 price target on Northern Trust Corporation, with a Buy rating on the shares.
On April 26, Northern Trust Corporation announced a quarterly dividend of $0.70 per share, in line with its previous dividend. As of May 26, the stock’s dividend yield stood at 2.60%.
As per Insider Monkey’s database for Q1 2022, 25 hedge funds held stakes in Northern Trust Corporation, down from 37 in the previous quarter. These stakes hold a total value of roughly $580 million.
7. The J. M. Smucker Company (NYSE:SJM)
Number of Hedge Fund Holders: 29
Dividend Yield as of May 26: 3.11%
Ariel Investments’ Stake Value: $172,769,000
The J. M. Smucker Company (NYSE:SJM) is an American manufacturer of food products that deals in consumer foods, pet foods, and coffee. The company currently pays a quarterly dividend of $0.99 per share, having raised it by 10% in 2021. This was the company’s 20th consecutive year of a dividend hike. Moreover, from 2016 to 2020, The J. M. Smucker Company has raised its dividend at a CAGR of 7%.
At the end of Q1 2022, Ariel Investments held over 1.2 million shares in The J. M. Smucker Company, worth over $172.7 million. The company constituted 1.53% of John Rogers’ portfolio. This April, Credit Suisse set a $130 price target on The J. M. Smucker Company, with a Neutral rating on the shares, as the company lowered its fiscal 2022 sales guide.
According to Insider Monkey’s Q1 2022 database, 29 hedge funds held stakes in The J. M. Smucker Company, worth roughly $670 million. In comparison, 32 hedge funds held positions in the Ohio-based company in the previous quarter, with stakes valued at over $678 million. Along with Ariel Investments, Renaissance Technologies was also one of the major shareholders of the company, with shares worth over $129 million.
6. First American Financial Corporation (NYSE:FAF)
Number of Hedge Fund Holders: 31
Dividend Yield as of May 26: 3.43%
Ariel Investments’ Stake Value: $265,875,000
First American Financial Corporation (NYSE:FAF) is an American insurance company that provides comprehensive title insurance protection and professional settlement services to consumers.
Ariel Investments has been investing in the company since the first quarter of 2011, initiating a position with shares worth over $70.8 million. At the end of Q1 2022, the hedge fund held over 4 million shares in the company, worth roughly $266 million. The company represented 2.35% of the hedge fund’s 13F portfolio. Microsoft Corporation, Johnson & Johnson, and The Goldman Sachs Group, Inc. also made up considerable portions of John Rogers’ portfolio in Q1 2022.
First American Financial Corporation hiked its quarterly dividend by 11% in 2021 to $0.51 per share. As of May 26, the stock’s dividend yield stood at 3.43%. This April, BTIG set an $86 price target on First American Financial Corporation, with a Buy rating on the shares, and noted that the company could suffer due to the declining mortgage volumes in the first half of the year.
At the end of Q1 2022, 31 hedge funds tracked by Insider Monkey were bullish on First American Financial Corporation, up from 30 in the previous quarter. The consolidated value of these stakes is over $1.45 billion.
5. The Interpublic Group of Companies, Inc. (NYSE:IPG)
Number of Hedge Fund Holders: 32
Dividend Yield as of May 26: 3.76%
Ariel Investments’ Stake Value: $265,327,000
The Interpublic Group of Companies, Inc. (NYSE:IPG) is an American advertising company and a global provider of marketing solutions. Recently, the company acquired a stake in The Famous Group for better client and media partner experiences. In Q1 2022, The Interpublic Group of Companies, Inc. reported an 11.5% growth in its net revenue in the US and a growth of 10.2% internationally.
At the end of Q1 2022, the number of hedge funds tracked by Insider Monkey holding stakes in The Interpublic Group of Companies, Inc. grew to 32, from 24 in the previous quarter. These stakes hold a consolidated value of $650.4 million, up from $601.5 million worth of stakes held by hedge funds in Q4 2021. Harris Associates was the company’s largest shareholder in Q1 2022, holding stakes worth over $467.2 million.
This February, The Interpublic Group of Companies, Inc. announced a 7.4% increase in its quarterly dividend to $0.29 per share. The company has been raising its dividend consecutively for the past 11 years. The stock’s dividend yield stood at 3.76% on May 26.
At the end of Q1 2022, Ariel Investments held roughly 7.5 million shares in The Interpublic Group of Companies, Inc., valued at $265.3 million. The company represented 2.35% of John Rogers’ portfolio. The firm also mentioned the company in its Q3 2021 investor letter. Here is what Ariel Investments has to say:
“Marketing communication company, Interpublic Group of Companies, Inc. (IPG) was the top contributor over the trailing one-year period. Notably, IPG is delivering a stronger than expected revenue mix between Technology and Healthcare relative to its peer group, solid cost containment and margin expansion. Meanwhile, the company continued to focus on de-levering the balance sheet. In our view, IPG’s Acxiom acquisition for data has proven to be a winner, helping the company increase their revenue across all eight major advertising sectors by industry. We believe these results continue to demonstrate the strength and resiliency of the business model and expect IPG to be a beneficiary of increasing advertising and marketing budgets across an improving global economy.”
4. Walgreens Boots Alliance, Inc. (NASDAQ:WBA)
Number of Hedge Fund Holders: 38
Dividend Yield as of May 26: 4.50%
Ariel Investments’ Stake Value: $66,969,000
Walgreens Boots Alliance, Inc. (NASDAQ:WBA) is an Anglo-Swiss-American company that mainly deals in pharmaceutical products. Ariel Investments held stakes worth roughly $67 million in the company at the end of Q1 2022, making up 0.59% of John Rogers’ portfolio. The hedge fund first bought shares worth $29.2 million in the company during the second quarter of 2020.
Walgreens Boots Alliance, Inc. currently pays a quarterly dividend of $0.4775 per share, with a dividend yield of 4.50%, as of the close of May 26. The company has consecutively paid dividends to shareholders for 89 years, while maintaining a 46-year track record of dividend growth. This April, Cowen set a $50 price target on Walgreens Boots Alliance, Inc., with an Outperform rating on the shares.
As per Insider Monkey’s Q1 2022 data, 38 hedge funds held stakes in Walgreens Boots Alliance, Inc., down from 42 in the previous quarter. The collective value of these stakes is roughly $737 million. With stakes worth roughly $107.4 million, Camber Capital Management held one of the largest positions in the Illinois-based company in Q1 2022.
Miller Howard Investments mentioned Walgreens Boots Alliance, 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 took a position in Walgreens (WBA) based on its low valuation, high dividend yield, and stable business model.”
3. Philip Morris International Inc. (NYSE:PM)
Number of Hedge Fund Holders: 55
Dividend Yield as of May 26: 4.61%
Ariel Investments’ Stake Value: $344,868,000
Philip Morris International Inc. (NYSE:PM) is a multinational tobacco company, selling products in over 180 countries. In Q1 2022, the company posted an EPS of $1.56, which beat analysts’ expectations by $0.07. Moreover, the company’s revenue of $7.7 billion presented a 2.1% year-over-year growth.
In 2021, Philip Morris International Inc. announced a 4.2% growth in its quarterly dividend to $1.25 per share. The company has raised its dividend every year since its IPO in 2008. The stock’s dividend yield, as of May 26, stood at 4.61%.
Ariel Investments initiated its position in Philip Morris International Inc. during the third quarter of 2013, purchasing shares worth $957,000. In Q1 2022, the company was the fourth-largest holding of Ariel Investments and represented 3.05% of John Rogers’ portfolio. The hedge fund held shares worth roughly $345 million in the company.
At the end of March 2022, 55 hedge funds in Insider Monkey’s database held stakes in Philip Morris International Inc., valued at $6.6 billion. In comparison, 47 hedge funds held stakes in the company in the previous quarter, worth $6.2 billion.
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.’”
2. Lazard Ltd (NYSE:LAZ)
Number of Hedge Fund Holders: 14
Dividend Yield as of May 26: 5.45%
Ariel Investments’ Stake Value: $295,335,000
Lazard Ltd (NYSE:LAZ) is an American financial services company that provides banking, investment management, and other financial services to its consumers. In Q1 2022, the company generated revenue of $700 million, reflecting an 8% growth from the same period last year.
As per Insider Monkey’s Q1 2022 data, 14 hedge funds tracked by Insider Monkey reported owning stakes in Lazard Ltd, down from 15 in the previous quarter. These stakes hold a consolidated value of roughly $631 million. Southeastern Asset Management was one of the largest shareholders of the company in Q1 2022, with shares worth over $182.6 million.
Ariel Investments started building its position in the company during the fourth quarter of 2010, purchasing shares worth roughly $185 million. The hedge fund held shares worth $295.3 million in the company after increasing its position by 6% during Q1 2022. The company represented 2.61% of John Rogers’ portfolio.
Lazard Ltd currently pays a quarterly dividend of $0.47 per share, with a dividend yield of 5.45%, as of the close of May 26. This April, Piper Sandler set a $45 price target on the stock, with an Overweight rating on the shares.
Longleaf Partners Fund mentioned Lazard Ltd in its Q4 2021 investor letter. Here is what the firm has to say:
“In Financials, we own asset manager Lazard and two newer companies, all three of which are harder to understand than the simpler banks that drove the sector. We are confident that this differentiated positioning that caused the relative drag this year will be the very driver of future absolute and relative outperformance.”
1. Janus Henderson Group plc (NYSE:JHG)
Number of Hedge Fund Holders: 28
Dividend Yield as of May 26: 5.81%
Ariel Investments’ Stake Value: $119,470,000
Janus Henderson Group plc (NYSE:JHG) is a British global asset management company that offers a range of financial services to its consumers. In May, the company announced a 3% hike in its quarterly dividend to $0.39 per share. The stock’s dividend yield, as of May 26, stood at 5.81%.
In Q1 2022, Janus Henderson Group plc (NYSE:JHG) reported revenue of $620 million, while its adjusted operating income stood at 178.8 million. At the end of Q1 2022, Ariel Investments held shares worth roughly $120 million in the company, after increasing its position by 2%. Janus Henderson Group plc (NYSE:JHG) represented 1.05% of John Rogers’ portfolio.
The number of hedge funds tracked by Insider Monkey holding stakes in Janus Henderson Group plc (NYSE:JHG) increased to 28 in Q1 2022, up from 26 in the previous quarter. The consolidated value of these stakes is over $1.45 billion.
You can also take a look at Top Stock Picks of Michael Burry and 10 Low Beta Dividend Stocks with High Yields
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This article is originally published at Insider Monkey.
