In this article, we discuss 10 dividend stocks Redditors buy for early retirement.
With the outcome of the Russia-Ukraine war looking uncertain at the moment, the stock market is quite turbulent. In addition to high inflation, the Fed is expected to increase rates in March. To build a defensive portfolio amid the market uncertainty, investors turn towards dividend payers, owing to strong performance over the years, steady cash flow, and the fact that most of the dividend payers are mature companies that have weathered many market storms.
Passive income is essential for early retirement. In this market, investors gravitate towards sectors that are benefiting from inflation and war, such as the hot housing market, booming energy stocks, commodities, and renewables. Instead of buying property and flipping houses, investors passively gain income from buying REIT stocks, which are known for monthly payments and high yields. An early retirement portfolio includes dividend growth stocks and safe dividend payers, so that investors can benefit from high yielding companies and preserve their wealth by adding stable stocks to their income portfolio.
In 2021, dividend payouts amounted to $1.47 trillion, a strong recovery from the pandemic dividend cuts that were imposed in 2020. A handful of sectors were responsible for the solid dividend recovery last year, including mining and banks, which delivered three-fifths of the increase to payouts. The rebound came as a relief for retirees, who were almost entirely dependent on income portfolios.
Some of the most notable dividend paying companies in 2022 are Microsoft Corporation (NASDAQ:MSFT), Visa Inc. (NYSE:V), and JPMorgan Chase & Co. (NYSE:JPM), among others discussed in detail below.
Photo by Esther Tuttle on Unsplash
Our Methodology
We scoured Reddit threads to gain extensive insights into the income portfolio composition of early retirees. While most Redditors recommend a healthy mix of dividend ETFs and individual stocks, we selected securities that were discussed repeatedly by the users.
We have also mentioned the hedge fund sentiment around each stock. Data from 924 elite hedge funds tracked by Insider Monkey in Q4 2021 was used to identify the number of hedge funds that hold stakes in each firm.
Dividend Stocks Redditors Buy for Early Retirement
10. Western Asset Mortgage Capital Corporation (NYSE:WMC)
Number of Hedge Fund Holders: 9
Dividend Yield as of March 11: 13.79%
Western Asset Mortgage Capital Corporation (NYSE:WMC) is a California-based real estate investment trust that manages a portfolio of agency and non-agency residential mortgage-backed securities, commercial mortgage-backed securities, asset-backed securities, residential whole-loans, residential bridge loans, securitized commercial loans, and other financial investment vehicles.
Western Asset Mortgage Capital Corporation (NYSE:WMC) made the cut to several early retirement portfolios owned by Redditors, owing to the high dividend yield of 13.79%. Western Asset Mortgage Capital Corporation (NYSE:WMC) declared on December 21 a $0.06 per share quarterly dividend, in line with previous. The dividend was paid on January 26, to shareholders of record on December 31.
Among the 924 hedge funds monitored by Insider Monkey in the fourth quarter of 2021, 9 funds held long positions in Western Asset Mortgage Capital Corporation (NYSE:WMC), with combined stakes amounting to $6.6 million. Beach Point Capital Management is a prominent shareholder of the company, owning 1.13 million shares worth $2.3 million.
In addition to Microsoft Corporation (NASDAQ:MSFT), Visa Inc. (NYSE:V), and JPMorgan Chase & Co. (NYSE:JPM), Western Asset Mortgage Capital Corporation (NYSE:WMC) is a notable pick of Redditors for a diversified income portfolio.
9. Sabra Health Care REIT, Inc. (NASDAQ:SBRA)
Number of Hedge Fund Holders: 18
Dividend Yield as of March 11: 8.61%
Sabra Health Care REIT, Inc. (NASDAQ:SBRA) is a California-based real estate investment trust that invests primarily in healthcare properties across the United States and Canada. Sabra Health Care REIT, Inc. (NASDAQ:SBRA)’s dividend yield on March 11 came in at 8.61%.
On February 1, Sabra Health Care REIT, Inc. (NASDAQ:SBRA) declared a quarterly per share dividend of $0.30, in line with previous. The dividend was paid on February 28, for shareholders of record on February 11.
BofA analyst Joshua Dennerlein upgraded Sabra Health Care REIT, Inc. (NASDAQ:SBRA) on March 11 to Neutral from Underperform with a $15 price target. While still cautious on the outlook for skilled nursing facilities, he believes Sabra Health Care REIT, Inc. (NASDAQ:SBRA) will have fewer tenant issues over the next 12 months relative to peers, the analyst told investors in a research note.
Among the hedge funds tracked by Insider Monkey, 18 funds were bullish on Sabra Health Care REIT, Inc. (NASDAQ:SBRA) as of December 2021, up from 11 funds in the quarter earlier. AQR Capital Management held 1.41 million shares of Sabra Health Care REIT, Inc. (NASDAQ:SBRA) in Q4, worth $19.20 million.
8. Medical Properties Trust, Inc. (NYSE:MPW)
Number of Hedge Fund Holders: 20
Dividend Yield as of March 11: 5.76%
Medical Properties Trust, Inc. (NYSE:MPW) is a real estate investment trust that facilitates acquisitions and recapitalizations, and allows operators of medical establishments to fund facility improvements, technology upgrades, and other operational investments.
On February 17, Medical Properties Trust, Inc. (NYSE:MPW) declared a $0.29 per share quarterly dividend, a 3.6% increase from its prior dividend of $0.28. The dividend is payable on April 14, for shareholders of record on March 17.
Medical Properties Trust, Inc. (NYSE:MPW) announced above consensus Q4 results on February 3, as the REIT’s hospital tenants reported strong operating and financial performance. The fourth quarter revenue of $409.3 million exceeded the $403.7 million consensus, and revenue rose from $333.8 million in the prior-year quarter.
According to the Q4 database of Insider Monkey, 20 hedge funds were bullish on Medical Properties Trust, Inc. (NYSE:MPW), up from 18 funds in the prior quarter. Cardinal Capital held the leading stake in the company, with 5.3 million shares worth $127.50 million.
7. STAG Industrial, Inc. (NYSE:STAG)
Number of Hedge Fund Holders: 22
Dividend Yield as of March 11: 3.69%
STAG Industrial, Inc. (NYSE:STAG) is a real estate investment trust that is based in Boston, Massachusetts. The REIT acquires and manages single-tenant, industrial properties throughout the United States.
On February 16, STAG Industrial, Inc. (NYSE:STAG) announced its fourth quarter results, reporting a Q4 core FFO per share of $0.51 that matched the consensus estimate, falling from $0.53 in Q3 but increasing from $0.49 in Q4 2020. Total revenue of $147.6 million was above the $147.3 million consensus, and increased from $142.1 million in Q3 and $129.8 million in the preceding-year quarter.
STAG Industrial (NYSE:STAG) declared on January 10 a $0.1217 per share monthly dividend, a 0.7% increase from prior its dividend of $0.1208. The dividend was paid on February 15, and is set to be distributed on March 15 and April 15, to shareholders of record on February 28 and March 31, respectively.
STAG Industrial (NYSE:STAG) was a popular choice of Redditors for an early retirement income portfolio. Elite hedge funds are also bullish on the stock. In Q4 2021, 22 hedge funds reported owning stakes worth $525.3 million in STAG Industrial (NYSE:STAG). Zimmer Partners is the leading shareholder of the company, with 2.85 million shares worth $136.6 million.
6. Realty Income Corporation (NYSE:O)
Number of Hedge Fund Holders: 30
Dividend Yield as of March 11: 4.53%
Realty Income Corporation (NYSE:O) is a dependable monthly income stock that was one of the top picks of Redditors for an early retirement portfolio. The California-based real estate investment trust manages a portfolio of single-tenant commercial properties in the United States, Spain, and the United Kingdom.
Mizuho analyst Vikram Malhotra on January 20 lowered the price target on Realty Income Corporation (NYSE:O) to $76 from $82 but kept a Buy rating on the shares after assuming coverage of the name. The analyst reported that “lofty” valuations and “resilient, but modestly decelerating” fundamentals imply multiple contraction risk. He emphasized on stock selectivity, favoring pricing power and duration.
On February 15, Realty Income Corporation (NYSE:O) announced a $0.2465 per share monthly dividend, in line with previous. The dividend is payable on March 15, for shareholders of record March 1. The stock yields 4.53% as of March 11.
A total of 30 hedge funds were bullish on Realty Income Corporation (NYSE:O) in the fourth quarter of 2021, up from 22 funds in the quarter prior. Glendon Capital Management is the biggest shareholder of the company, with 1.85 million shares worth roughly $139 million.
On February 22, Realty Income Corporation (NYSE:O)’s Q4 earnings topped the average analyst estimates and the REIT invested a record $2.6 billion in real estate during Q4, bringing 2021 property-level acquisitions to $6.4 billion and setting an annual record for the company.
Hedge funds are pouring into Realty Income Corporation (NYSE:O), just like Microsoft Corporation (NASDAQ:MSFT), Visa Inc. (NYSE:V), and JPMorgan Chase & Co. (NYSE:JPM).
5. Altria Group, Inc. (NYSE:MO)
Number of Hedge Fund Holders: 39
Dividend Yield as of March 11: 7.13%
Headquartered in Richmond, Virginia, Altria Group, Inc. (NYSE:MO) manufactures and markets smokeable and oral tobacco products in the United States. Although green investors shy away from Altria Group, Inc. (NYSE:MO) due to its harmful products, Redditors were strongly inclined towards the tobacco manufacturer, owing to its high yield and solid dividend history.
Altria Group, Inc. (NYSE:MO) on February 25 declared a $0.90 per share quarterly dividend, in line with previous. The dividend will be paid on April 29, to shareholders of record on March 25. Altria Group, Inc. (NYSE:MO)’s dividend yield on March 11 was 7.13%.
Among the hedge funds tracked by Insider Monkey, 39 funds were bullish on Altria Group, Inc. (NYSE:MO) at the end of December 2021, as compared to 45 funds in the previous quarter. GQG Partners held the biggest stake in the company, owning over 9 million shares worth approximately $435 million.
Here is what Broyhill Asset Management has to say about Altria Group, Inc. (NYSE:MO) in its Q2 2021 investor letter:
“Altria (MO) shook off the prospects of a ban on menthol and a potential cap on nicotine and gained 20%. We shared our thoughts on these regulations during the quarter, which are available here.
MO Valuation. MO is up ~ 18% YTD (even accounting for the recent sell-off). We expect MO to generate close to $5 in annual FCF per share over the next few years, putting the stock at ~ 10x, which is less than half the market’s multiple today. Over the last decade, shares have traded at an average multiple of 15x and within a range of ~ 10x – 20x (+/-1 standard deviation). The stock yields 7.2% at the current price, close to a 6% premium to treasuries. Historically, shares have traded closer to a 3% premium to the 10Y, which would imply a ~ $75 share price.”
4. PepsiCo, Inc. (NASDAQ:PEP)
Number of Hedge Fund Holders: 60
Dividend Yield as of March 11: 2.80%
PepsiCo, Inc. (NASDAQ:PEP) is a New York-based multinational beverage corporation that markets its products worldwide. PepsiCo, Inc. (NASDAQ:PEP) is a favorite stock of several Redditors for early retirement, since they have gained consistently from PepsiCo, Inc. (NASDAQ:PEP)’s steady dividend growth over the years.
On February 10, PepsiCo, Inc. (NASDAQ:PEP) announced a 7% increase in its annualized dividend to $4.60 per share from $4.30 per share, effective with the dividend expected to be paid in June 2022. This represents the company’s 50th consecutive annual dividend per share increase.
Elite hedge funds hold large stakes in PepsiCo, Inc. (NASDAQ:PEP). In the December quarter, 60 funds were bullish on PepsiCo, Inc. (NASDAQ:PEP), compared to 61 funds in the prior quarter. Total stakes held in Q4 2021 amounted to $4.64 billion. Fundsmith LLP is the largest shareholder of the company, with 10.4 million shares worth $1.80 billion.
Here is what Saturna Capital Amana Funds has to say about PepsiCo, Inc. (NASDAQ:PEP) in its Q4 2021 investor letter:
“Given the likelihood of rising inflation and interest rates ahead, we anticipate adjustments to the portfolio to reduce exposure to highly valued stocks dependent on low interest rates to support terminal year valuations, while seeking investments in companies more correlated with a return to economic normalcy. We sold our positions in Pepsi. We believe Pepsi to be a well-run firm, but its products are not in keeping with an ESG mandate. Additionally, it has entered a joint venture to produce and distribute alcoholic beverages, making it ineligible for the portfolio.”
3. Walmart Inc. (NYSE:WMT)
Number of Hedge Fund Holders: 63
Dividend Yield as of March 11: 1.58%
Walmart Inc. (NYSE:WMT) is an American retail chain that operates supercenters, supermarkets, hypermarkets, warehouse clubs, cash and carry stores, and discount stores.
Morgan Stanley analyst Simeon Gutman on February 22 lowered the price target on Walmart Inc. (NYSE:WMT) to $165 from $170 and kept an Overweight rating on the shares.
Walmart Inc. (NYSE:WMT) is a steady dividend stock, and it raised its annual dividend on February 17 to $2.24 per share, marking the 49th consecutive year of dividend increases. This is an increase of approximately 2% from the $2.20 per share paid for the last fiscal year. A quarterly payment of $0.56 per share will be made on April 4, to shareholders of record on March 18.
According to the fourth quarter database of Insider Monkey, 63 elite funds were long Walmart Inc. (NYSE:WMT), as compared to 71 funds in the earlier quarter. Bill & Melinda Gates Foundation Trust endorses the stock, holding close to 7 million Walmart Inc. (NYSE:WMT) shares worth more than $1 billion.
2. Merck & Co., Inc. (NYSE:MRK)
Number of Hedge Fund Holders: 80
Dividend Yield as of March 11: 3.53%
Merck & Co., Inc. (NYSE:MRK) is a healthcare company that develops animal and human health products. The main therapeutic focus areas at Merck & Co., Inc. (NYSE:MRK) include oncology, immunology, neuroscience, virology, cardiovascular, and diabetes.
On January 25, Merck & Co., Inc. (NYSE:MRK) declared a quarterly dividend of $0.69 per share, distributable on April 7, to shareholders of record at the close of business on March 15.
JPMorgan analyst Chris Schott lowered the price target on Merck & Co., Inc. (NYSE:MRK) to $95 from $100 and kept an Overweight rating on the shares on January 28. The analyst does not expect any major surprises with the 2022 guidance based on the positive momentum he’s seeing in Merck & Co., Inc. (NYSE:MRK)’s core business and with near-term upside from Molnupiravir sales.
The fourth quarter database of Insider Monkey suggests that 80 hedge funds were bullish on Merck & Co., Inc. (NYSE:MRK), up from 77 funds in the prior quarter. Fisher Asset Management is the biggest shareholder of the company, owning 11.40 million shares worth $874.4 million.
1. Microsoft Corporation (NASDAQ:MSFT)
Number of Hedge Fund Holders: 262
Dividend Yield as of March 11: 0.89%
Microsoft Corporation (NASDAQ:MSFT) is a reliable blue chip dividend stock that was reported by several Redditors as part of their early retirement income portfolios, which is a testament to the company’s solid dividend history, consistency of performance, and fortress balance sheet.
Morgan Stanley analyst Keith Weiss on February 8 extended his Microsoft Corporation (NASDAQ:MSFT) forecast to five years to highlight what he sees as a “durable EPS growth story”, arguing that Microsoft Corporation (NASDAQ:MSFT) positions well against multiple secular growth trends, which leads him to forecast the company sustaining a 15% revenue compound annual growth rate through calendar year 2026. He maintained an Overweight rating and a $372 price target on Microsoft Corporation (NASDAQ:MSFT), which he said “remains a strong buy at current levels”.
On December 7, Microsoft Corporation (NASDAQ:MSFT) declared a quarterly dividend of $0.62 per share. The dividend was paid on March 10, to shareholders of record on February 17.
Microsoft Corporation (NASDAQ:MSFT) is a favorite tech stock in the hedge fund universe. A total of 262 funds were bullish on Microsoft Corporation (NASDAQ:MSFT) in Q4 2021, up from 250 funds in the prior quarter. Arrowstreet Capital is a prominent Microsoft Corporation (NASDAQ:MSFT) shareholder, with more than 17 million shares worth $5.7 billion.
Here is what Saturna Capital Amana Funds has to say about Microsoft Corporation (NASDAQ:MSFT) in its Q4 2021 investor letter:
“Only two companies remain from 2010’s top 10 list: Apple and Microsoft. Going back to 2000, only Microsoft remains. We expect that Microsoft will maintain its position as the dominant global provider of personal and business software, while growing its cloud business and potentially being a key provider of augmented and mixed hardware and software.
US Technology companies have been the equity market’s biggest winners in recent years. Because of the Amana Income Fund’s objective of current income, many of these zero- or low-dividend companies do not suit the Fund’s mandate. One that does — Microsoft, which returned 46.03% for 2021 — was the Fund’s second biggest contributor to returns during the year. While Technology no doubt underpins much of the current economy and its future potential, Tech stocks have also benefited from low inflation, globalization, and valuations that are near historic highs. With globalization backsliding and inflation worries escalating, we believe companies in other industries with strong financial positions, competitive advantages, strong management, attractive dividend yields, and reasonable valuations can offer investors diversification in the context of equity markets increasingly concentrated in a handful of very large Technology firms.”
You can also take a look at 10 Dividend Stocks with Over 10% Yield and 10 Companies That Topped Profit Expectations.
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Disclosure: None. 10 Dividend Stocks Redditors Buy for Early Retirement is originally published on Insider Monkey.
