In this article we discuss the 10 best dividend stocks to buy now according to billionaire Kerr Neilson.
Popularly dubbed as “Australia’s Warren Buffett,” Kerr Neilson is a South African-born Australian billionaire investment manager. Neilson co-founded Platinum Asset Management in 1994 and is renowned for always picking out stocks with exceptional high-performance rates.
Platinum Asset Management was founded with the financial backing of none other than George Soros, the man known for breaking the bank of England with his short sale of the sterling pound on what became known as Black Wednesday in 1992. Operating as a specialist company in international equities, Platinum was responsible for managing a total of $22 billion in funds last year. The fund has consistently done well, with only a slight financial slump in 2012 when there was a 16% fall in Platinum’s net profit. However, for the most part, the hedge fund has managed to always bounce back from financial crunches, allowing it to become a fund operating globally today, with a multibillion-dollar portfolio valued at $9.15 billion as of May 2021.
Perhaps the fund has managed to be as successful today because it relies on Neilson’s unorthodox investment strategy. Focusing more on the stocks he believes will yield long-term benefits than those overhyped in the news and merely promise gains in the short-term, Neilson is known for his contrarian investing philosophy. Through his financial foresight and this unconventional approach, Neilson has been able to look beyond the market turbulence in favor of solid returns in the long run.
Owing to this philosophy, Platinum owns many shares in various companies it has deemed to be successful in the long run. Some of the companies the fund holds the highest number of shares in include Micron Technology, Inc (NASDAQ: MU), Microchip Technology Incorporated (NASDAQ: MCHP), and Ally Financial Inc. (NYSE: ALLY).
But if you’re reading this article, you’re probably here because you want to hear more about dividend stocks and how to pick the right ones. If that’s the case, then you’re in the right place. Before we launch into our list of the 10 best dividend stocks to buy now according to billionaire Kerr Nielson, though, it’s essential to lay down that dividend investing is not as simple as it seems. As with any form of investment, dividend investing is riddled with risks, and chances of making or breaking your fortune really depend on how smart you are in approaching companies that pay out dividends to their shareholders. For a better idea about just how risky and unpredictable dividend investing can be, let’s look at what happened to General Motors Company (NYSE: GM) in the 2000s.
General Motors Company (NYSE: GM) was the largest automaker in the United States in its prime and was renowned for having paid reliable and consistent dividends for decades. However, come the mid-2000s, the company hit a significant financial slump when its dividend yield had crossed 10%, and its share price began to drop alarmingly. With a dividend yield like that, you can rest assured that General Motors Company (NYSE: GM) remained an attractive investment for shareholders who were under the impression that a company as reliable as General Motors Company (NYSE: GM) would never tank. However, they were unfortunately sorely mistaken as the company’s shares continued to plummet from over $60 in 2003 to under $20 in 2006. Resultantly, General Motors Company (NYSE: GM) cut its dividend in half to make it 25 cents a share as a countermeasure to potential bankruptcy. However, by 2009 it had to entirely suspend its dividend alongside selling around $4 to $7 billion in assets while also cutting salary costs to avoid going bankrupt. All this turned out to be in vain. In 2009, General Motors Company (NYSE: GM) still declared bankruptcy and was in deep waters until a bailout from the US government saved it from complete obscurity.
As the example above shows, the General Motors Company (NYSE: GM) business was most definitely far from ideal for the shareholders involved. This example also highlights the reality that regardless of how reliable and consistent a company has proven to be in the past, as far as its dividend yield and payout is concerned, investors can never be 100% certain that the investment they’re making based on a company’s dividend yield will pay off. Despite this, hardcore shareholders are not shaken off, and so, dividend investing continues to be a hot practice on the stock market even today.
If you’re interested in investing in dividend stocks, the best way to assure a degree of safety for your investments is to do your research. We assume that’s why you’re here anyway: to research. If that’s the case, then let’s get right into it.
Dividends and Share Price Gains Combined
A good bet for any investor as far as dividend stocks are concerned has always been your typical mega-company. Even though these companies have low yields, they have thriving business models, promising share price gains as well.
These include giants like Microsoft Corporation (NASDAQ: MSFT), Apple Inc. (NASDAQ: AAPL), Intel Corporation (NASDAQ: INTC), PepsiCo, Inc. (NASDAQ: PEP), and Target Corporation (NYSE: TGT), among a plethora of others. Microsoft Corporation (NASDAQ: MSFT), being one of the best and largest technology stocks paying a dividend, is sure to be on any investor’s list as a dividend stock they must invest in. It has annually increased its dividend and is a highly reliable stock to invest in, despite its low dividend yield.
The same is true for Apple Inc. (NASDAQ: AAPL) and Intel Corporation (NASDAQ: INTC). Like Microsoft Corporation (NASDAQ: MSFT), these stocks are renowned for being reliable dividend stocks with low yields. Apple Inc. (NASDAQ: AAPL) has been paying constant dividends over the past few years, and its shareholders benefit from a gradual and steady rise in the stock’s price as well. As far as Intel Corporation (NASDAQ: INTC) is concerned, it is quite a solid dividend-paying company with an increase of 7.7% per year for the past decade in its dividend yield.
Like Microsoft Corporation (NASDAQ: MSFT), Apple Inc. (NASDAQ: AAPL) and Intel Corporation (NASDAQ: INTC), PepsiCo, Inc. (NASDAQ: PEP), and Target Corporation (NYSE: TGT) are also considered some of the major giants that are safe bets for shareholders vying after dividend payouts. Both these stocks are considered to be among the top few dividend stocks to invest in this year. While Target Corporation’s (NYSE: TGT) last recorded dividend yield of 1.3% is not extremely high, it can be concluded that Target Corporation (NYSE: TGT) has a lot of room to grow and a world of potential as far as increasing its dividend yield is concerned, judging by its payout ratio of 31%. As for PepsiCo, Inc. (NASDAQ: PEP), it should be noted that the company’s EPS rose by 29% last year and that PepsiCo, Inc. (NASDAQ: PEP) pays a dividend of 2.9% to its shareholders currently. As such, its value as a dividend stock cannot be ignored either.
Kerr Neilson of Platinum Asset Management
All of the above notwithstanding, you’re probably here to hear more about which stocks Kerr Neilson has his eye on instead. If that’s the case, then we won’t keep you waiting any longer, and thus present our list of the 10 best dividend stocks to buy now according to billionaire Kerr Nielson. This list has been compiled from Platinum Asset Management’s 13F holdings data, and the stocks mentioned have been ranked based on the dividend yield offered.
Nielson is an exception in an industry that is reeling from losses. 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 discuss the 10 best dividend stocks to buy now according to billionaire Kerr Neilson.
Best Dividend Stocks to Buy Now According to Billionaire Kerr Neilson
10. FedEx Corporation (NYSE: FDX)
Neilson’s Stake Value: $111,087,000
Percentage of Kerr Neilson’s 13F Portfolio: 2.47%
Dividend Yield: 0.86%
No. of Hedge Fund Holders: 63
Ranking 10th on the list of the best dividend stocks to buy now according to billionaire Kerr Nielson is FedEx Corporation (NYSE: FDX). The company is a US-based multinational delivery services company with headquarters in Memphis, Tennessee.
FedEx Corporation (NYSE: FDX) has recently come to be considered a force to be reckoned with in the transportation sector, as some significant mutual funds have decided to invest in the company. One such fund is Dodge & Cox Stock Fund. FedEx Corporation (NYSE: FDX) has managed to rake in around $445 million from some mutual funds, alongside its rival company United Parcel Service, Inc. (NYSE: UPS).
Artisan Partners, in its Q1 2021 investor letter, mentioned FedEx Corporation (NYSE: FDX). Here is what Artisan Partners has to say about FedEx Corporation in its letter:
“Whatever products did make it off the line met a constrained logistics infrastructure, with commercial air capacity cut and ship cargo space at a premium. Then, in the event your dishwasher part actually made it to US waters, our ports were congested due to manpower shortages and COVID-19 protocols. When the goods were finally unloaded, it turns out trucking shortages caused a spike in ground rates! All this might be bad for your dinner parties, home décor or exercise goals, but it can be great for the middlemen. Middlemen like logistics expert FedEx.
FedEx provides global logistics services. It gets your dishwasher part on a truck, or that semiconductor chip on a plane. Surging demand for at-home deliveries during the pandemic boosted volumes and allowed management to push through price increases, keeping competitive with industry peers. The industry’s renewed pricing discipline was a welcome change, reflecting a broader commitment to earn better returns on invested capital. Despite a significant re-rating of the business over the last 12 months, FedEx remains attractive based on our margin of safety criteria.”
9. Louisiana-Pacific Corporation (NYSE: LPX)
Neilson’s Stake Value: $237,886,000
Percentage of Kerr Neilson’s 13F Portfolio: 5.3%
Dividend Yield: 1.03%
No. of Hedge Fund Holders: 30
An American building materials manufacturer founded in 1973, Louisiana-Pacific Corporation (NYSE: LPX) ranked 9th on our list of the best dividend stocks to buy now according to billionaire Kerr Nielson. Louisiana-Pacific Corporation (NYSE: LPX) is based in Nashville, Tennessee, and is credited with being the pioneer of the US production of oriented strand board panels.
Louisiana-Pacific Corporation (NYSE: LPX) benefits from the existence of a reliable US residential market which will constantly require its services. Lastly, in the first quarter of this year, Louisiana-Pacific Corporation’s (NYSE: LPX) net sales have grown over 50% year-over-year, showcasing its overwhelming potential and ability to bounce back from losses.
Like Microsoft Corporation (NASDAQ: MSFT), Apple Inc. (NASDAQ: AAPL), Intel Corporation (NASDAQ: INTC), PepsiCo, Inc. (NASDAQ: PEP) and Target Corporation (NYSE: TGT), LPX is one of the best dividend stocks to invest in.
L1 Capital International Fund, in its Q1 2021 investor letter, mentioned Louisiana-Pacific Corporation (NYSE: LPX). Here is what L1 Capital International Fund has to say about Louisiana-Pacific Corporation in its letter:
“Contributors to the gains were broad based, with the decision to selectively increase exposure to more cyclical sectors such as U.S. housing delivering strong returns. Recently, we further increased our exposure to U.S. housing through a new top 10 investment in Louisiana-Pacific Corporation. Louisiana-Pacific is a business in transition – rapidly evolving from a commodity-oriented forest products company to a specialty building solutions company. We expect a significant improvement in the quality of earnings over the coming years and near term we believe the market is significantly under-appreciating profitability during highly favourable operating conditions.”
8. Microchip Technology Incorporated (NASDAQ: MCHP)
Neilson’s Stake Value: $299,845,000
Percentage of Kerr Neilson’s 13F Portfolio: 6.68%
Dividend Yield: 1.08%
No. of Hedge Fund Holders: 42
A publicly-listed American corporation specializing in the manufacture of microcontrollers, mixed-signal, analog, and Flash-IP integrated circuits, Microchip Technology Incorporated (NASDAQ: MCHP) ranks 8th on our list of the 10 best dividend stocks to buy now according to billionaire Kerr Nielson.
Microchip Technology Incorporated (NASDAQ: MCHP) recently announced that its M6 MRH25N12U3 silicon transistor can withstand extreme space environments. The company’s new transistor has proven capable of being used for commercial aerospace and defense space operations, making it a groundbreaking achievement for Microchip Technology Incorporated (NASDAQ: MCHP).
Like Microsoft Corporation (NASDAQ: MSFT), Apple Inc. (NASDAQ: AAPL), Intel Corporation (NASDAQ: INTC), PepsiCo, Inc. (NASDAQ: PEP) and Target Corporation (NYSE: TGT), MCHP is one of the best dividend stocks to invest in.
Amana Mutual Fund highlighted a few stocks in their investor letter and Microchip Technology Inc (NASDAQ:MCHP) is one of them. Here is what Amana Mutual Fund said:
“We see all of the Industrials as being negatively affected, rather than perceiving any major differences in vulnerability to the virus. Nor does being in the Technology sector help if you are making hardware, like semiconductor chips, as opposed to software. Microchip and Taiwan Semiconductor were not immune.”
7. Skyworks Solutions, Inc. (NASDAQ: SWKS)
Neilson’s Stake Value: $83,324,000
Percentage of Kerr Neilson’s 13F Portfolio: 1.85%
Dividend Yield: 1.18%
No. of Hedge Fund Holders: 33
This American semiconductor manufacturing company ranks 7th on our list of the best dividend stocks to buy now according to billionaire Kerr Nielson. Skyworks Solutions, Inc. (NASDAQ: SWKS) is headquartered in Irvine, California, and manufactures semiconductors to use in radio frequency and mobile communication systems.
In April, Raymond James raised its price target for Skyworks Solutions (NASDAQ:SWKS) to $220 from $205, citing the pullback after the company’s earnings. The firm recommended investors to buy Skyworks Solutions, Inc. (NASDAQ: SWKS) as it believes the company will experience a strong momentum in the second half of the year. The firm has an Outperform rating for the stock.
Like Microsoft Corporation (NASDAQ: MSFT), Apple Inc. (NASDAQ: AAPL), Intel Corporation (NASDAQ: INTC), PepsiCo, Inc. (NASDAQ: PEP) and Target Corporation (NYSE: TGT), SWKS is one of the best dividend stocks to invest in.
Semper Augustus Investments Group, in their Q4 2020 investor letter, said that they’ve liquidated their position in Skyworks Solutions, Inc. (NASDAQ: SWKS) to look for better opportunities. Here is what Semper Augustus Investments Group has to say about Skyworks Solutions, Inc. in its Q4 2020 investor letter:
“Analog semiconductor manufacturer Skyworks was also completely liquidated. The stock had reached our appraisal of fair value early in the year and then fell by half, back to our cost basis in March. Worried about the duration of loss of demand in consumer electronics and having better opportunities, we sold the Skyworks position, wanting the cash for deployment elsewhere. Skyworks was sold at approximately our original cost basis, all of the prior gain evaporated. The Skyworks sale was boneheaded, as the shares not only doubled back to their highs but continued higher from there. That the proceeds were invested well doesn’t remedy that the sale was of too good of a company at way too low a price. Opportunity cost in this case was opportunity lost.”
6. Intercontinental Exchange, Inc. (NYSE: ICE)
Neilson’s Stake Value: $20,078,000
Percentage of Kerr Neilson’s 13F Portfolio: 0.44%
Dividend Yield: 1.20%
No. of Hedge Fund Holders: 58
Ranked 6th on the list of the 10 best dividend stocks to buy now according to billionaire Kerr Neilson is an American Fortune 500 company. Intercontinental Exchange, Inc. (NYSE: ICE) was formed in 2000 and works with global exchanges and clearing houses. The company also provides mortgage technology, data, and listing services and owns exchanges for financial and commodity markets. Intercontinental Exchange, Inc. (NYSE: ICE) operates 12 exchanges and marketplaces.
The company recently announced that it plans on increasing its dividend by the 30th of June. Intercontinental Exchange, Inc. (NYSE: ICE) is also relatively safe to invest in since its earnings can cover the dividend even after the increase with ease.
Like Microsoft Corporation (NASDAQ: MSFT), Apple Inc. (NASDAQ: AAPL), Intel Corporation (NASDAQ: INTC), PepsiCo, Inc. (NASDAQ: PEP) and Target Corporation (NYSE: TGT), ICE is one of the best dividend stocks to invest in.
Spree Capital Advisers, in their Q1 2021 investor letter, mentioned Intercontinental Exchange, Inc. (NYSE: ICE). Here is what Spree Capital Advisers has to say about Intercontinental Exchange, Inc. in its letter:
“Intercontinental Exchange was founded in the year 2000 after Western Power Group executive Jeff Sprecher bought Continental Power Exchange from MidAmerican Energy for $1. Sprecher made the acquisition because he recognized that the deregulation of the electric power industry in the United States had opened a market for surplus energy to be traded between power plants. Using eBay as a model, Sprecher aimed to develop a transparent marketplace for over-the-counter energy trading. Acquisitions of International Petroleum Exchange, New York Board of Trade, Creditex, Climate Exchange, NYSE Euronext, Interactive Data Corporation, and Ellie Mae followed, with the commonalities of successful acquisition consisting of small companies early in their growth trajectory that could be scaled on ICE’s platform, and large mature companies where ICE’s technological and operating expertise could reinvigorate and scale their growth trajectory.
Today, Intercontinental Exchange is a transactional marketplace and subscription database business with global scale. Entrenched network effects in a wide range of asset class marketplaces provide a platform from which ICE usesits technology and operating expertise to layer on growth opportunities. After applying digital technology to increase the efficiency of marketplaces, ICE rolls out new innovations on top of its scalable infrastructure. Core competencies in collecting and cleansing unstructured data to build databases enforce ICE’s ability to capture the data exhaust from its marketplaces to provide recurring subscription-based revenue streams.
Despite ICE’s repeatable business model and proven ability to continuously innovate driving a 14-year EPS CAGR of 17%, investors are currently skeptical of ICE due to a February 2020 news leak that ICE was talking to eBay about a transaction, and due to the sticker price of ICE’s October 2020 acquisition of Ellie Mae being higher than its valuation the prior year. In Intercontinental Exchange, we see five paths to value creation.
First, ICE’s Q3 2020 acquisition of Ellie Mae creates an end-to-end ecosystem for the mortgage industry to use ICE’s digital rails to digitize the mortgage process across lead generation, processing, underwriting, closing, and servicing. The mortgage transaction process is like……………(read the complete letter here)
5. Ally Financial Inc. (NYSE: ALLY)
Neilson’s Stake Value: $258,416,000
Percentage of Kerr Neilson’s 13F Portfolio: 5.76%
Dividend Yield: 1.37%
No. of Hedge Fund Holders: 51
Ally Financial Inc. (NYSE: ALLY) is the largest digital bank in the US. It is a bank holding company with headquarters in Detroit, Michigan. Ally Financial Inc. (NYSE: ALLY) provides financial services ranging from car finance to mortgage loans, and they have an electronic trading platform where assets can be traded.
Recently, to the delight of its customers, Ally Financial Inc. (NYSE: ALLY) decided to eliminate overdraft fees.
The bank had an estimated 55% gain year to date. Ally Financial Inc. (NYSE: ALLY) stands 5th on the list of the best dividend stocks to buy now according to billionaire Kerr Neilson.
4. Barrick Gold Corporation (NYSE: GOLD)
Neilson’s Stake Value: $151,933,000
Percentage of Kerr Neilson’s 13F Portfolio: 3.38%
Dividend Yield: 1.54%
No. of Hedge Fund Holders: 49
Barrick Gold Corporation (NYSE: GOLD) is a mining company specializing in the production of gold and copper. The company operates 16 sites in 13 countries and is based in Toronto, Ontario, Canada. It is ranked 4th on our list of the best dividend stocks to buy now according to billionaire Kerr Neilson.
Recently, Barrick Gold Corporation (NYSE: GOLD) has announced its plans to restart operating the Porgera Gold Mine this year after entering into an agreement on the matter with the government of Papua New Guinea.
GoodHaven Capital Management, in their Q4 2020 investor letter, mentioned Barrick Gold Corporation (NYSE: GOLD). Here is what the fund has to say about Barrick Gold Corporation in its Q4 2020 letter:
“Barrick’s recent results have been consistent with our expectations. Barrick has begun inching up the dividend as planned, which should continue increasing absent them finding a large acquisition (they want more copper assets) or a materially lower price of gold. We’d also expect periodic special dividends during stronger gold price environments. At current gold prices we estimate normalized free cash flow at Barrick of over $1.60/share. The company is now about net-debt free. We see plenty of upside and absent a collapse in gold not too much downside. Missing from much of the public discussions about gold, but potentially interesting, is the supply/demand backdrop. As the Wall Street Journal (8/16/20) recently said “gold is amongst the rarest metals in the earth’s crust and much of the easier to get to ore has already been mined. What is left is harder to find and more expensive to extract…” According to the World Platinum Council, it was forecasted that there will be a supply and demand imbalance of 1.2 million ounces globally. The potential macro tailwinds that could add value to an alternate currency like gold including currency concerns, excessive debt and continuing negative real interest rates are still out there. While the shares performed well for the year they were weak in the second half and now stand more attractively priced.”
3. American Eagle Outfitters, Inc. (NYSE: AEO)
Neilson’s Stake Value: $89,651,000
Percentage of Kerr Neilson’s 13F Portfolio: 2%
Dividend Yield: 2.14%
No. of Hedge Fund Holders: 43
This American clothing company ranks 3rd on our list of the best dividend stocks to buy now according to billionaire Kerr Neilson. American Eagle Outfitters, Inc. (NYSE: AEO) is a lifestyle clothing and accessories retailer with headquarters at SouthSide Works in Pittsburgh, Pennsylvania.
American Eagle Outfitters, Inc. (NYSE: AEO) is one of the major companies that raised their dividends last week, cheering its shareholders with the 31% hike. The brand’s consistency and reliability in the past, coupled with its renewed dividend yield approach, makes it a tempting stock to invest in.
2. LyondellBasell Industries N.V. (NYSE: LYB)
Neilson’s Stake Value: $72,665,000
Percentage of Kerr Neilson’s 13F Portfolio: 1.62%
Dividend Yield: 4.01%
No. of Hedge Fund Holders: 47
A Dutch-domiciled multinational chemical company with roots in Britain and America, LyondellBasell Industries N.V. (NYSE: LYB) ranks 2nd on this list of best dividend stocks to buy according to billionaire Kerr Neilson. This company is the largest licensor of polyethylene and polypropylene technologies.
LyondellBasell Industries N.V. (NYSE: LYB) recently released its 2020 sustainability report, which revealed that the company is attempting to end plastic waste and its negative impact on the environment. This showcases LyondellBasell Industries N.V.’s (NYSE: LYB) dedication to the climate action front.
The company has shown a $9.08 billion revenue report in the first quarter of 2021, and its EPS came in at $3.18 a share, the highest value in the past two years. LyondellBasell Industries N.V. (NYSE: LYB) has proven to have robust financials and reduced debt this year, also bumping up its common share dividend by 7.6%.
1. Gilead Sciences, Inc. (NASDAQ: GILD)
Neilson’s Stake Value: $107,890,000
Percentage of Kerr Neilson’s 13F Portfolio: 2.4%
Dividend Yield: 4.21%
No. of Hedge Fund Holders: 65
Coming in 1st on our list is Gilead Sciences, Inc. (NASDAQ: GILD). This biopharmaceutical company is headquartered in Foster City, California. It focuses on research and the development of antiviral drugs. Gilead Sciences, Inc. (NASDAQ: GILD) has been working on these drugs to treat HIV, hepatitis B, hepatitis C, and influenza.
The company’s Trodelvy new subgroup data has shown benefits for relapsed or refractory metastatic triple-negative breast cancer (TNBC) treatment. Gilead Sciences, Inc.’s (NASDAQ: GILD) announcement of the new data from the company’s Phase 3 ASCENT study made the declaration.
Nelson Roberts Investment Advisors’ in their Q3 2020 investor letter talked about GILD. Here is what the fund said:
“In the healthcare sector, we sold our position in Gilead (NASDAQ: GILD) as there are no near or medium-term growth drivers for the company. Its popular HIV drug, Truvada, is going off patent this year. Additionally, UnitedHealth Group said it would not cover Gilead’s other HIV drug, Descovy. Lastly, the multiple acquisitions that Gilead has made recently are not ready for prime time, and it will likely be two years or more before any of Gilead’s new drugs have a meaningful impact on revenue.”
You can also take a peek at 10 Best American Dividend Stocks to Invest In and 15 Best American Stocks to Buy Now.
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Disclosure: None. 10 Best Dividend Stocks to Buy Now According to Billionaire Kerr Neilson is originally published on Insider Monkey.
