12 Best Fortune 500 Dividend Stocks to Buy Now

Published on October 18, 2022 at 9:19 am by Usman Kabir in Hedge Funds, News

In this article, we discuss 12 best Fortune 500 dividend stocks to buy now. If you want to read about some more Fortune 500 dividend stocks, go directly to 5 Best Fortune 500 Dividend Stocks to Buy Now.

United States President Joe Biden has repeatedly stressed that the US economy will avoid a recession despite rising interest rates and soaring inflation, a lethal economic combo, and even predicted that it will resume growth in the coming months. Economic experts do not share his point of view. A recent report by news platform Bloomberg reveals that a recession is effectively certain in the next 12 months. The prediction, based on a new Bloomberg Economics model, forecasts a higher recession probability across all timeframes.

Per the model, the 12-month estimate of a downturn by October 2023 has hit 100%, up from 65% in the previous update. Analysts Anna Wong and Eliza Winger are leading authors of the new report. The model made by the analysts uses a total of 13 macroeconomic and financial indicators to predict the chance of a downturn at horizons of one month to two years. According to the model, the likelihood of a recession within 11 months has climbed to 73% from 30%, and the 10-month probability has risen to 25% from 0%, in the past few months.

Investors can take advantage of the selloff at the stock market due to these economic conditions, which has led to a broad decrease in the share prices of solid businesses like Chevron Corporation (NYSE:CVX), Gilead Sciences, Inc. (NASDAQ:GILD), and Philip Morris International Inc. (NYSE:PM), to reap the rewards later. These firms also have resilient dividend yields and a dependable history of payouts that provide an extra layer of protection against volatile market conditions.

Our Methodology

The companies that feature on the Fortune 500 list and have solid dividend profiles were selected for the list. In order to provide readers with some context for their investment choices, the business fundamentals and analyst ratings for the stocks are also discussed. Data from around 900 elite hedge funds tracked by Insider Monkey in the second quarter of 2022 was used to identify the number of hedge funds that hold stakes in each firm.

Image by Steve Buissinne from Pixabay

Best Fortune 500 Dividend Stocks to Buy Now

12. ONEOK, Inc. (NYSE:OKE)

Number of Hedge Fund Holders: 30

Dividend Yield as of October 18: 6.82%

ONEOK, Inc. (NYSE:OKE) engages in the processing, storage, and transportation of natural gas in the United States. It is one of the best large cap stocks to invest in. On August 8, the firm posted earnings for the second quarter of 2022, reporting earnings per share of $0.92, beating market estimates by $0.04. The revenue over the period rose 77% year-on-year to $6 billion, above analyst consensus estimates of $5.18 billion.

On July 20, Barclays analyst Theresa Chen maintained an Equal Weight rating on ONEOK, Inc. (NYSE:OKE) stock and lowered the price target to $62 from $71, highlighting that the company reported solid Q2 results.

Among the hedge funds being tracked by Insider Monkey, Washington-based firm Citadel Investment Group is a leading shareholder in ONEOK, Inc. (NYSE:OKE), with 695,100 shares worth more than $38.6 million.

Just like Chevron Corporation (NYSE:CVX), Gilead Sciences, Inc. (NASDAQ:GILD), and Philip Morris International Inc. (NYSE:PM), ONEOK, Inc. (NYSE:OKE) is one of the best Fortune 500 dividend stocks to buy according to hedge funds.

In its Q3 2021 investor letter, Miller Howard Investments, an asset management firm, highlighted a few stocks and ONEOK, Inc. (NYSE:OKE) was one of them. Here is what the fund said:

”In late August, we increased the portfolio’s cyclical exposure by trimming utilities after a period of relative outperformance and reallocating the capital to midstream energy, which had pulled back over the summer. We added ONEOK Inc. (OKE) with the expectation that it will benefit from increasing natural gas and natural gas liquids (NGL) recovery in the Bakken region.”

11. International Business Machines Corporation (NYSE:IBM)

Number of Hedge Fund Holders: 40

Dividend Yield as of October 18: 5.43%

International Business Machines Corporation (NYSE:IBM) provides integrated technology solutions and services worldwide. It is one of the top large cap stocks to invest in. On October 6, IBM said that it would invest $20 billion across the Hudson Valley region over the next 10 years. IBM plans to expand the development and manufacturing of semiconductors, mainframe technology, and artificial intelligence through this investment.

On October 6, Morgan Stanley analyst Erik Woodring maintained an Overweight rating on International Business Machines Corporation (NYSE:IBM) stock and lowered the price target to $152 from $155, noting that continued wage pressure in consulting and expectations for a sub-seasonal mainframe quarter were some of the headwinds for the shares.

At the end of the second quarter of 2022, 40 hedge funds in the database of Insider Monkey held stakes worth $948 million in International Business Machines Corporation (NYSE:IBM), compared to 43 in the previous quarter worth $1.2 billion.

In its Q1 2022 investor letter, St. James Investment Company, an asset management firm, highlighted a few stocks and International Business Machines Corporation (NYSE:IBM) was one of them. Here is what the fund said:

“IBM was not the first company to build computers. The distinction belongs to Sperry-Rand’s subsidiary UNIVAC, which introduced the first commercially successful computers in the early 1950s. In this era, IBM did possess the largest research and development department of the business machines industry and quickly caught up, introducing cost-competitive computers a few years after UNIVAC. By the late 1950s, IBM held the dominant market share in computers. IBM also touted a vastly superior sales organization, which used a sales tactic called “paper machines” (the equivalent of today’s “vaporware”). If a competitor’s product was selling well in a market segment that IBM had yet to penetrate, the company would announce a competing product and start taking orders for the “paper machine” long before it was available. (read more)

10. Walgreens Boots Alliance, Inc. (NASDAQ:WBA)

Number of Hedge Fund Holders: 40

Dividend Yield as of October 18: 5.82%

Walgreens Boots Alliance, Inc. (NASDAQ:WBA) operates as a pharmacy-led health and beauty retail company. It is one of the premier large cap stocks to invest in. On October 11, Walgreens Boots Alliance said that it would buy the remaining 45% stake it does not own in post-acute and home care services provider CareCentrix for about $392 million. On September 2, Walgreens and CVS Health Corporation announced that the redesigned COVID-19 booster shots developed by Pfizer and Moderna will now be available nationwide for eligible individuals aged 12 years and above.

On October 13, investment advisory Mizuho maintained a Neutral rating on Walgreens Boots Alliance, Inc. (NASDAQ:WBA) stock and lowered the price target to $36 from $49. Analyst Ann Hynes issued the ratings update.

At the end of the second quarter of 2022, 40 hedge funds in the database of Insider Monkey held stakes worth $599 million in Walgreens Boots Alliance, Inc. (NASDAQ:WBA), compared to 38 in the previous quarter worth $737 million.

In its Q1 2022 investor letter, Aristotle Capital Management, an asset management firm, highlighted a few stocks and Walgreens Boots Alliance, Inc. (NASDAQ:WBA) was one of them. Here is what the fund said:

“We first invested in Walgreens Boots Alliance in early 2013. Over our holding period, Walgreens merged with U.K.-based Boots Alliance, establishing itself as a global leading retail pharmacy chain. CEO Stefano Pessina set the company on a path of pursuing strategic partnerships (as opposed to vertical integration deals) to increase store traffic and to, over time, transform the business into a neighborhood health destination around a more modern pharmacy. Using its strong FREE cash flow generation, the company ramped up its investments in technology, aiming to accelerate the digitalization of health information. Mr. Pessina was not successful, however, at turning around the firm’s U.S. retail segment and had to deal with increasing prescription drug reimbursement pressures. He stepped down as CEO in 2020, and in 2021, Roz Brewer took the reins of the firm. We admire Ms. Brewer’s impressive track record at companies that include Starbucks (NASDAQ:SBUX) and Walmart (Sam’s Club). However, given management’s decision to divest core cash-generative businesses and redeploy capital to embryonic healthcare startups, we prefer to step aside while we follow the company’s progress.”

9. Kinder Morgan, Inc. (NYSE:KMI)

Number of Hedge Fund Holders: 41

Dividend Yield as of October 18: 6.34%

Kinder Morgan, Inc. (NYSE:KMI) operates as an energy infrastructure company in North America. It is one of the major large cap stocks to invest in. On August 11, Kinder Morgan said that it had acquired North American Natural Resources and its seven landfill gas to power facilities in Michigan and Kentucky for $135 million. On September 27, Kinder Morgan disclosed that it sold a 25.5% equity interest in Elba Liquefaction to an undisclosed financial buyer for approximately $565 million.

On September 7, Goldman Sachs analyst Michael Lapides upgraded Kinder Morgan, Inc. (NYSE:KMI) to Neutral from Sell with a $19 price target, noting that the company is benefiting from incremental natural gas pipeline growth.

Among the hedge funds being tracked by Insider Monkey, Bermuda-based investment firm Orbis Investment Management is a leading shareholder in Kinder Morgan, Inc. (NYSE:KMI), with 21.7 million shares worth more than $363 million.

8. Lumen Technologies, Inc. (NYSE:LUMN)

Number of Hedge Fund Holders: 42

Dividend Yield as of October 18: 14.53%

Lumen Technologies, Inc. (NYSE:LUMN) is a facilities-based technology and communications company that provides various integrated products and services under the Lumen, Quantum Fiber, and CenturyLink brands. It is one of the most prominent large cap stocks to invest in. On October 3, Lumen Technologies, Inc. (NYSE:LUMN) said that it has closed the sale of its Incumbent Local Exchange Carrier business in 20 states to Brightspeed. Lumen Technologies retains its ILEC assets in 16 states, where it plans to continue to invest in bringing Quantum Fiber broadband to more communities.

On October 13, Citi analyst Michael Rollins maintained a Neutral rating on Lumen Technologies, Inc. (NYSE:LUMN) stock and lowered the price target to $8 from $11, noting that the company is going through a tougher Q3 expense environment due to higher inflation and seasonal pressures.

In its Q1 2022 investor letter, Longleaf Partners Fund, an asset management firm, highlighted a few stocks and Lumen Technologies, Inc. (NYSE:LUMN) was one of them. Here is what the fund said:

“Lumen – Lumen reported weak organic revenue growth and guided more weakness for 2022. We expect revenue growth to kick back in towards the end of 2022, and the huge FCF coupon helped offset value decline from the weaker guidance. The other factor weighing on the stock price was largest shareholder Temasek’s partial sale of its 10% position in the quarter, creating uncertainty and a share price overhang. We have a 13D filed and continue to urge the company to take steps to address the significant price-to-value gap, including continued share buybacks.”

7. Altria Group, Inc. (NYSE:MO)

Number of Hedge Fund Holders: 48

Dividend Yield as of October 18: 8.43%

Altria Group, Inc. (NYSE:MO) manufactures and sells smokable and oral tobacco products in the United States. It is one of the elite large cap stocks to invest in. On September 30, Altria Group unveiled in an SEC filing that it was planning to end its noncompete agreement with JUUL Labs, a vaping company. Altria may develop its own vaping products and JUUL will be freed up to work a buyout deal with another company.

At the end of the second quarter of 2022, 48 hedge funds in the database of Insider Monkey held stakes worth $1.8 billion in Altria Group, Inc. (NYSE:MO), compared to 47 the preceding quarter worth $1.96 billion.

In its Q2 2021 investor letter, Broyhill Asset Management, an asset management firm, highlighted a few stocks and Altria Group, Inc. (NYSE:MO) was one of them. Here is what the fund said:

“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.”

6. Lowe’s Companies, Inc. (NYSE:LOW)

Number of Hedge Fund Holders: 53

Dividend Yield as of October 18: 2.16%

Lowe’s Companies, Inc. (NYSE:LOW) operates as a home improvement retailer in the United States and internationally. It is one of the best large cap stocks to invest in. On September 8, Lowe’s Companies, Inc. (NYSE:LOW) announced that it has partnered up with home improvement retailer Instacart to launch same day delivery. Same day delivery is now available from more than 1700 Lowe’s stores. Lowe’s Companies, Inc. (NYSE:LOW) will be one of the first retailers on Instacart App to roll out same day delivery for large items up to 3x3x5 feet and 60 pounds.

On October 3, Jefferies analyst Jonathan Matuszewski maintained a Buy rating on Lowe’s Companies, Inc. (NYSE:LOW) stock and raised the price target to $259 from $255, noting that the company’s home improvement outlays had slowed due to under-appreciated downside cushion.

Among the hedge funds being tracked by Insider Monkey, New York-based investment firm Pershing Square is a leading shareholder in Lowe’s Companies, Inc. (NYSE:LOW), with 10 million shares worth more than $1.8 billion.

Alongside Chevron Corporation (NYSE:CVX), Gilead Sciences, Inc. (NASDAQ:GILD), and Philip Morris International Inc. (NYSE:PM), Lowe’s Companies, Inc. (NYSE:LOW) is one of the best Fortune 500 dividend stocks to buy according to hedge funds.

Here is what Pershing Square Holdings specifically said about Lowe’s Companies, Inc. (NYSE:LOW) in its Q2 2022 investor letter:

“Lowe’s Companies, Inc. (NYSE:LOW)’s is a high-quality business with significant long-term earnings growth potential underpinned by a superb management team that is successfully executing a multi-faceted business transformation.

COVID-19 was a transformational event for the US housing market, causing homeowners to invest significantly in their homes as they shifted nearly all their daily activities to the home environment, including work, school, and leisure. The increased use of the home during COVID, in turn, increased the need for repair, maintenance and remodel activity, which significantly benefited Lowe’s same-store sales. As consumers return to spending more time and money on out-of-the home activities the near-term demand for certain Do-It-Yourself (“DIY”) categories has decreased. Moderation in DIY demand combined with increased mortgage rates and decreased housing affordability has caused many market participants to become concerned that the home improvement industry may give up a significant part of their COVID pandemic sales gains.

While we expect that there will be some near-term volatility and continued moderation of DIY demand, growth remains strong for projects requiring professional installation (the “Pro” business) due to a substantial backlog of projects undertaken during COVID, which should support industry growth in the near-term. In addition, we believe the medium[1]term growth outlook for the home improvement industry remains strong as demand is likely to normalize at a materially higher level as compared to the pre-COVID era. For the decade prior to COVID, home improvement industry sales were notably depressed relative to their long-term averages as a percentage of overall consumer spend and GDP and have only now returned to their longer-term historical levels. Moreover, we believe COVID has permanently renewed consumers’ focus, appreciation, and utilization of their homes, which combined with higher home equity values, strong consumer balance sheets, low levels of home inventory for sale and an aging housing stock that requires an increasing level of maintenance, will likely result in a structurally higher level of ongoing home industry spending in the future. In the most recent quarter demand strengthened throughout the quarter as DIY consumers returned from summer vacations and focused on less seasonal home improvement projects…” (Click here to read the full text)

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