In this article we discuss the 10 best dividend stocks to buy according to Stanley Druckenmiller.
With the present economic uncertainty caused by the COVID-19 outbreak, investors are leaning towards investing in dividend-paying growth firms that are more predictable and less volatile. According to a study published by investment bank and wealth management firm Morgan Stanley, dividend-growth portfolios may generate notable long-term returns regardless of the market cycle. Data in the study also suggests that from 1991 to 2015, non-dividend paying equities gained +4.18% per year, while dividend-paying stocks posted an average annual return of +9.7%.
According to a separate study from Janus Henderson Global Index, the forecast for dividends in 2021 is expected to improve in April. The report forecasts that dividends will climb by 5% on a headline basis to $1.32 trillion in 2021, with an underlying rise of 2%.
Many investors are leaning towards dividend-paying stocks because they provide investors regular income even when the market is volatile and capital gains are difficult to achieve. For instance, amidst the pandemic in April 2020, healthcare manufacturer Johnson & Johnson (NYSE:JNJ) announced a 6.3% rise in its quarterly dividend to $1.01 per share, marking the 58th consecutive year of dividend increases. Johnson & Johnson (NYSE:JNJ) currently has a market cap of $445 billion and offers a dividend yield of 2.51%. Shares of JNJ increased 13% over the last twelve months. The company’s net revenue in the first quarter of 2021 came in at $22.3 billion, up 7.9% compared to the first quarter of 2020.
Another dividend stock with decent yield and strong history is International Business Machines Corporation (NYSE:IBM). During the pandemic, the company marked its 25th year of paying dividends. International Business Machines Corporation (NYSE:IBM) currently offers a dividend yield of 4.56% and has a market cap of $128.4 billion. Shares of International Business Machines Corporation (NYSE:IBM) rose 15% over the last twelve months. On April 20, Credit Suisse maintained an Outperform rating on International Business Machines Corporation (NYSE:IBM) and raised the price target to $165.
Another notable stock that raised its dividends in April 2020 is the wholesale distributor of swimming pool supplies Pool Corporation (NASDAQ:POOL). Pool Corporation increased its dividend by 5.5% in April, marking the tenth consecutive year of increases. The company has a market cap of $17.5 billion and currently offers a dividend yield of 0.73%. Shares of Pool Corporation (NASDAQ:POOL) rose 62% over the last twelve months. On May 18, Goldman Sachs initiated coverage On Pool Corporation (NASDAQ:POOL) with a Buy rating and announced a price target of $535.
Legendary investor Stanley Druckenmiller bought a new stake in JPMorgan Chase & Co. (NYSE:JPM) in the first quarter. The New York-based firm is engaged in serving individuals, organizations, institutions, and governments across the world. The company’s services include consumer banking, investment banking, commercial banking, and asset management. JPMorgan Chase & Co. (NYSE:JPM)’s net income came in at $8.1 billion in the first quarter of 2021, up from $4.0 billion in the first quarter of 2020. JPMorgan Chase & Co. (NYSE:JPM) currently offers a dividend yield of 2.19%. The shares of JPM surged 68% over the last three months
Stanley Druckenmiller likes to diversify his portfolio. As of the end of the first quarter of 2021, Druckenmiller’s hedge fund Duquesne Capital has stakes in stocks like Microsoft Corporation (NASDAQ:MSFT), Starbucks Corporation (NASDAQ:SBUX), and Amazon.com, Inc. (NASDAQ:AMZN). But in this article, our focus will be on the best dividend stocks in Druckenmiller’s portfolio.
Investing in dividend stocks offers a high potential for capital gains during the most difficult times. 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.
With this context in mind, here is our list of the 10 best dividend stocks to buy according to Stanley Druckenmiller. We used Duquesne Capital’s Q1 portfolio for this analysis.
Best Dividend Stocks to Buy According to Stanley Druckenmiller
10. First Horizon Corporation (NYSE:FHN)
Number of Hedge Fund Holders: 27
We start our list of the 10 best dividend stocks to buy according to Stanley Druckenmiller with bank holding company First Horizon Corporation (NYSE:FHN). First Horizon Corporation operates as one of the largest banks in Tennessee with over 250 bank locations across the Southeast. In 2020, the company increased its number of locations by acquiring 30 branches of Truist Financial Corporation (NYSE:TFC). The acquisition strengthened the bank’s presence in important growing regions such as Durham, Chapel Hill, Winston-Salem, Virginia, and Georgia. On January 27, 2021, First Horizon’s board declared a $0.15 per share quarterly common stock dividend. The dividend will be paid on April 1, 2021, to stockholders who were on the books on March 12, 2021.
First Horizon Corporation (NYSE:FHN) has a market cap of $10.53 billion and currently offers a dividend yield of 3.15%.
9. Vale S.A. (NYSE:VALE)
Number of Hedge Fund Holders: 31
Ranking 9th in our list of the 10 best dividend stocks to buy according to Stanley Druckenmiller is Vale S.A. (NYSE:VALE), a metals and mining company that operates in over 30 countries worldwide. Earlier this year, Vale S.A. (NYSE: VALE) agreed to buy Mitsui & Co’s investment in the Moatize metallurgical and thermal coal mine and port project in Mozambique. The acquisition is part of the Brazilian miner’s plan to phase out fossil fuels by 2050.
Vale S.A. (NYSE: VALE) has a market cap of $110.4 billion and currently offers a dividend yield of 5.61%. Vale S.A.’s net operating revenue in the first quarter of 2021 came in at $12.6 billion, an 81% increase year over year. Shares of VALE surged 120% over the past twelve months. On March 12, BNP Paribas downgraded Vale S.A. to an Underperform rating and announced a price target of $18.3.
8. Cummins Inc. (NYSE:CMI) VGI Partners
Number of Hedge Fund Holders: 37
Indiana-based electric power generation manufacturer Cummins Inc. (NYSE:CMI) ranks 8th on 10 best dividend stocks to buy according to Stanley Druckenmiller list. The company was founded in 1919 and has over 5,000 facilities in 197 countries worldwide. On May 11, Cummins Inc.’s board of directors announced a cash dividend of $1.35 per share on the common stock, payable on June 3, 2021, to shareholders of record on May 21, 2021. In 2019, the company made one of its biggest acquisitions when it purchased fuel-cell maker Hydrogenics in a $290 million deal. The acquisition allowed the firm to provide a complete, distinctive hydrogen solution for its clients.
Cummins Inc. (NYSE:CMI) has a market cap of $37.6 billion. The company’s revenue in the first quarter of 2021 came in at $6.1 billion, a 22% increase compared to the same period in 2020. On May 17, BofA Securities upgraded Cummins Inc. to Buy and announced a $325 price target.
Like JPMorgan Chase & Co (NYSE:JPM) and Citigroup Inc (NYSE:C), Cummins Inc. (NYSE:CMI) is one the best dividend stocks to buy according to Stanley Druckenmiller.
7. Linde plc (NYSE:LIN)
Number of Hedge Fund Holders: 43
Ireland-based Linde plc (NYSE:LIN) ranks 7th in our list of the 10 best dividend stocks to buy according to Stanley Druckenmiller. Linde plc operates one of the largest industrial gas companies in the world. The company operates together with its notable subsidiaries, Praxair and Yara Praxair Holding AS, among others. On April 26, Linde plc (NYSE:LIN) Board of Directors announced a quarterly dividend of $1.06 per share, the dividend will be paid on June 17, 2021, to owners who had their shares registered by June 3, 2021. In 2020, gas company Gasum acquired Linde’s liquefied natural gas (LNG) and biogas business in Sweden and Norway. The acquisition helped Gasum boost cleaner transportation solutions in the Nordic region.
Linde plc (NYSE:LIN) has a market cap of $156 billion and currently offers a dividend yield of 1.41%. The company’s revenue in the first quarter of 2021 came in at $979 million, a 74% increase compared to the same period of 2020.
VGI Partners mentioned Linde plc (NYSE:LIN) in its FY 2019 investor letter:
“Linde plc (NYSE: LIN) contributed +1.3% to performance for the twelve months to 30 June 2019, with the share price increasing 27.0% over the course of the year.
Linde plc is the result of a merger between two of the big four industrial gas providers, Praxair Inc. and Linde AG. The merger closed in March 2019 and the combined business, Linde plc, is now the largest industrial gas player in the world, further consolidating an already highly concentrated industrial gas industry.
We believe a number of factors make the industrial gas industry an attractive investment. The product is a fraction of their customers’ total cost base but an essential input, providing substantial pricing power. Industrial gas facilities require substantial initial capital requirements and often it will take three years to see any return on this investment. The industry has very long-term contracts with ‘Take or Pay’ provisions, improving earnings visibility. In addition, the industry has a highly consolidated market structure, with the top three players holding ~80% of the global market. Finally, the industry tends to form regional monopolies, as production must occur within 200km of the end customer.
We have been Praxair shareholders for many years as, in addition to the above factors, Praxair has a very high-quality, long term focused management team who are aligned with shareholders as a result of their substantial shareholding.
This Praxair management team is, as of March, in control of the merged business and we believe their best-in-class execution combined with Linde AG’s assets will result in significant pricing opportunities and margin improvement over the coming years.”
6. Caterpillar Inc (NYSE:CAT)
Number of Hedge Fund Holders: 53
Illinois-based construction equipment manufacturer Caterpillar Inc (NYSE:CAT) ranks 6th in our list of 10 best dividend stocks to buy according to Stanley Druckenmiller. The company was founded in 1925 and has consistently been paying an annual dividends since its inception. In 1933, the company started paying a quarterly dividend. On April 14, Caterpillar Inc.’s (NYSE:CAT) Board of Directors announced that they will continue the quarterly cash dividend of $1.03 per share of common stock, which will be paid on May 20, 2021, to shareholders of record on April 26, 2021.
In 2020, the company acquired robot autonomy technology solutions company Marble Robot, Inc. The acquisition allowed the company to deliver scalable solutions to the construction, quarry, industrial, and waste industries to accommodate growing demand.
Caterpillar Inc (NYSE:CAT) has a market cap of $132 billion and currently offers a dividend yield of 1.71%. The company’s first-quarter 2021 revenue came in at $11.9 billion, up 12% compared to the first quarter of 2020. Shares of CAT increased 100% over the past twelve months.
5. Starbucks Corporation (NASDAQ:SBUX)
Number of Hedge Fund Holders: 61
Ranking 5th in our list of 10 best dividend stocks to buy according to Stanley Druckenmiller is Starbucks Corporation (NASDAQ:SBUX). Starbucks is a global coffeehouse and roastery firm that has over 32,000 locations globally. The corporation has around 8,900 outlets and 6,300 licensed outlets in the United States alone. The firm has consecutively increased its dividend for the past ten years, with an average annual increase of 16.96%. On May 11, the company’s Board of Directors announced that the company will issue a cash dividend of $0.45 per share on May 28. SBUX shareholders who bought the stock before the ex-dividend date on May 12 are entitled to the cash dividend.
Starbucks Corporation (NASDAQ:SBUX) has a market cap of $134 billion and currently offers a dividend yield of 1.58%. Starbucks Corporation’s net revenue in the first quarter of 2021 came in at $4.7 billion, a 6% decrease from the same period in 2020. Shares of SBUX rose 46% over the past twelve months. On April 28, Jefferies maintained a Buy rating on Starbucks Corporation and raised the price target to $135.
Wedgewood Partners mentioned Starbucks Corporation (NASDAQ:SBUX) in its Q1 2021 investor letter:
“As we have observed Starbucks through the unpredictable events of the past year, we believe all the things we liked about the Company’s competitive position before the pandemic have been turbocharged by the pandemic. We always have maintained the Company had no serious competition, anyway, and that in both large growth markets (U.S. and China), there was enormous fragmentation of share that would allow the Company to continue to expand through market expansion (especially in China) and through share gain versus small competitors. In fact, when we last discussed Starbucks, there was a lot of noise about competition in China from a newly established domestic competitor, Luckin Coffee, and that situation quickly dissolved into farce. In any case, had Luckin been a legitimate business, we had maintained that China was a massive market – and one in which coffee consumption was massively underpenetrated in comparison to other markets. We believed too that there was plenty of room for multiple large competitors to exploit.
The pandemic disaster over the past year truly highlights the Company’s financial strength in comparison to its small competitors, most of which struggled to survive, and many of which didn’t make it. While there is no perfect data, we have seen estimates from industry groups and restaurant distributors that as many as 15-20% of small, independent restaurants across the broad food and beverage industry may have closed permanently as a result of the pandemic, sadly. Starbucks not only survived due to its superior financial position; they also used its financial resources to invest in a variety of expanded or new capabilities, including the addition of drive-through capacity, new “walk-through” pick-up locations in urban areas, increased investment in technology to drive speed within the stores and drive-through lanes, and expansion of its loyalty program. These could have been viewed, prior to the pandemic, as a fairly big advantage in terms of convenience alone versus the Company’s small primary competitors. In the age of the pandemic, though, one might consider something like a drive-through an absolute necessity, as customers choose not to expose themselves to the interior of restaurants or to other people.
Another sign of the Company’s superior financial strength has been the continued expansion of the store base, even in the face of the pandemic. As of the end of the Company’s last fiscal year, September 2020, Starbucks had opened +4% more stores, including +13% growth in China. Additionally, Starbucks not only opened stores as competing stores folded; the Company is seeing more attractive lease terms on new stores (and on existing stores, for that matter), meaning that a store opening program that already had generated attractive financial returns will now generate even more attractive returns.
Short-term results, of course, have been quite poor all over the world, with some portion of the Company’s locations closed or operating on reduced hours for the last several quarters. Customers are simply reticent to show up even when stores have been open. We expect shorter-term results to remain unpredictable, as they will be tied to the ebb and flow of various COVID-related lockdowns around the world. However, Starbucks said it expected sales at established locations in both the U.S. and China to rebound to pre-pandemic levels in the March quarter that just ended. In addition, despite reduced operating hours still, and despite customers’ work and school routines being completely disrupted, a surprisingly early development in comparison to what we, at least, expected only a few quarters ago, is proof of the Company’s entrenched position in its customers’ lives. In contrast, the National Restaurant Association in the U.S. recently predicted that 2021 industry sales would recover significantly versus 2020, but would still come in nearly (-15%) below 2019 levels.
On the Company’s most recent Analyst Day in December 2020, management took its longerterm expectations a bit higher, primarily driven by a modest expected improvement in sales versus its prior expectations. Considering smaller competitors went belly-up and the Company’s investments in enhanced capabilities further improved its competitive position, we believe this improvement in longer-term sales trends is a layup. We also believe the technological investments and the improved terms from landlords create obvious benefits for to an already attractive margin and return profile. Our bullishness on the Company has not wavered and, in fact, we feel better than we did about the Company’s business model over the next several years than we did when we bought the stock originally.”
4. Fidelity National Information Services, Inc. (NYSE:FIS)
Number of Hedge Fund Holders: 75
Ranking 4th in the 10 best dividend stocks to buy according to Stanley Druckenmiller is Fidelity National Information Services, Inc. (NYSE:FIS). Fidelity National Information Services, Inc. operates as one of the largest banks that offer outstanding experiences, by using cutting-edge financial technology. The company’s user base includes institutions and merchants for credit and debit card processing, electronic banking, check risk management, check to cash, and merchant card processing. On May 10, the company’s Board of Directors declared a $0.39 per share dividend which will be paid to shareholders of record as of June 11.
Fidelity National Information Services, Inc. (NYSE:FIS) has a market cap of $92 billion and currently offers a dividend yield of 1.05%. The company posted its revenue of $3.2 billion in the first quarter of 2021, up 5% from the same quarter of 2020. Shares of FIS jumped 7% over the last twelve months. On May 14, Morgan Stanley maintained Equal-Weight on Fidelity National Information Services, Inc. (NYSE:FIS) and raised the price target to $154.
3. Taiwan Semiconductor Mfg. Co. Ltd. (NYSE:TSM)
Number of Hedge Fund Holders: 76
Ranking 3rd in our list of 10 best dividend stocks to buy according to Stanley Druckenmiller is Taiwan Semiconductor Mfg. Co. Ltd. (NYSE:TSM). The Taiwanese multinational semiconductor manufacturing and design company was founded in 1987.
Taiwan Semiconductor Mfg. Co. Ltd. (NYSE:TSM) has a market cap of $552.5 billion and currently offers a dividend yield of 1.52%. The company’s sales rose 16.7% from a year earlier in the first quarter of 2021 to $12.76 billion. Shares of TSM rose 133% over the past twelve months.
There were 76 hedge funds that reported owning stakes in Taiwan Semiconductor Mfg. Co. Ltd. (NYSE:TSM) at the end of the first quarter, up from 72 funds a quarter earlier. The total value of these stakes at the end of Q4 is $10.8 billion.
Bonsai Partners mentioned Taiwan Semiconductor Mfg. Co. Ltd. (NYSE:TSM) in its Q4 2020 investor letter:
“Taiwan Semiconductor is the world’s largest outsourced foundry of logic semiconductor chips. TSMC’s shares appreciated 34.5% during the quarter. Taiwan Semiconductor continues to see unprecedented demand, albeit at a slightly less rapid growth rate than earlier in 2020. At the time of writing, TSMC announced strong fourth-quarter results and staggering growth in their expected capital expenditures for 2021 – growing from $17B in 2020 to $25B to $28B in 2021. Forward-looking capital expenditures are the key leading indicator of their medium-term growth rate expectations, and I expect TSMC management will continue to earn excellent returns on these colossal investments.
TSMC’s capital expenditure growth is likely due to investment in their new U.S. manufacturing footprint, rapid investment in their cutting edge process technology, as well as generally high levels of customer demand. Lately, we’ve seen semiconductor shortages in some of their less advanced process technologies, emphasizing the current state of the semiconductor supply-demand imbalance.”
2. Citigroup Inc. (NYSE:C)
Number of Hedge Fund Holders: 90
Ranking 2nd in our list of 10 best dividend stocks to buy according to Stanley Druckenmiller is Citigroup Inc. (NYSE:C). The New York-based multinational investment bank was founded in 1998. The company has over 200 million customer accounts in more than 160 countries. On April 1, Citigroup Inc.’s Board of Directors announced a quarterly dividend of $0.51 per share on the common stock, payable on May 28, 2021, to shareholders of record on May 3, 2021.
Citigroup Inc. (NYSE:C) revenue in the first quarter of 2021 came in at $19.3 billion, down from $20.7 billion in the same period in 2020. Shares of C jumped 64% over the past three months.
Artisan Partners Limited Partnership mentioned Citigroup Inc. (NYSE:C) in its Q4 2020 investor letter:
“We fully exited position in Citigroup. Global financial services company Citigroup made a $900 million clerical error and received a public reprimand from federal regulators. This, after a decade focused on process control, information technology and risk systems, makes the error substantially more costly than just the $900 million mistake. Regulators believe the company’s risk management improvements have fallen short of expectations. To rectify the situation, a process and technology spending surge could negatively affect 2021-2022 profits by 10% to 20%. Trust and confidence are important in large financial institutions, and this incident combined with the CEO’s sudden retirement shook ours.”
1. JPMorgan Chase & Co. (NYSE:JPM)
Number of Hedge Fund Holders: 111
Topping the 10 best dividend stocks to buy according to Stanley Druckenmiller is JPMorgan Chase & Co. (NYSE:JPM). The New York-based investment bank and financial services holding company has over 30,000 middle-market customers, 1,700 corporate banking customers, and 1,100 commercial real estate banking customers users. Earlier this year, cryptocurrency infrastructure software development startup ConsenSys secured $65 million in a fundraising round sponsored by JPMorgan Chase. On May 27, JPMorgan Chase & Co. (NYSE: JPM) Board of Directors announced a quarterly dividend of $0.90 per share, payable to shareholders by the end of July.
JPMorgan Chase & Co.’s (NYSE:JPM) net income came in at $8.1 billion in the first quarter of 2021, up from $4.0 billion in the first quarter of 2020. Shares of JPM surged 68% over the last three months. On April 30, Wells Fargo maintained an Overweight rating on JPMorgan Chase & Co. (NYSE:JPM) and raised the price target to $195.
Bretton Fund mentioned JPMorgan Chase & Co. (NYSE:JPM) in its Q4 2020 investor letter:
“After a strong performance in 2019, we wrote this about our bank stocks in last year’s report: “There will be another recession sooner than later, and our banks will see larger loans losses, but we think this is more than priced into the stock, and our banks are well reserved for that eventuality.” Little did we know “sooner” really meant “a few weeks from now.” Despite the economic shock, the banks still have huge capital cushions that can absorb large loan losses. Our remaining bank investments, JPMorgan and Bank of America, increased their reserves significantly at the beginning of the Covid-19 crisis in anticipation of imminent loan defaults, but with the government stimulus and perhaps a more resilient economy than many would have guessed, actual loan losses are up only slightly. They might happen later in 2021, but with an additional stimulus package and the vaccine rolling out, the large-scale losses may not be as bad as most people predicted. The bigger drag on the banks’ earnings power is lower rates, which in our opinion will persist for a long time. Despite this drag, we estimate both JPMorgan and Bank of America will continue to grow revenue and earnings over the next few years, while we believe their stocks remain bargains in a somewhat expensive market. JPMorgan’s earnings per share declined 17% last year, and its stock returned -5.5%. Bank of America’s earnings, which are more sensitive to interest rates, were down 32%, and its stock returned -11.6%.”
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Disclosure: None. 10 Best Dividend Stocks to Buy According to Stanley Druckenmiller is originally published on Insider Monkey.
