In this article, we will be looking at the 10 best dividend kings to buy now according to hedge funds.
The economic and financial volatility that came as a result of the events of 2020, in particular the outbreak of the coronavirus pandemic, has introduced an interesting conundrum for investors across the globe. As far as dividend investors are concerned, it should be noted that your typical high yield stock with fundamentals that seem lacking will not cut it anymore. Instead, a focus on stable dividend-yielders with a track record of financial stability and consistent dividend growth is what will save a dividend investor’s portfolio. Dividend kings like The Procter & Gamble Company (NYSE: PG), Johnson & Johnson (NYSE: JNJ), and The Coca-Cola Company (NYSE: KO), or even a dividend aristocrat like PepsiCo, Inc. (NASDAQ: PEP) have always gained the market’s attention during times of crisis because of their stability and flawless track record.
What is a Dividend King?
The term ‘dividend king’ is used to refer to a dividend-yielding stock that has increased its dividend yield for at least the past 50 years, without a break. Not many stocks qualify as dividend kings, as increasing their yield for 50 years or more is no small feat.
Merely focusing on high-yielding stocks is ill-advised, as a research report published by S&P Global has also mentioned that about 29 companies from the S&P 500 High Dividend Index, which made up about 36.1% of the entire index, ended up cutting their full-year dividends. Such cuts then become indicators of financial weakness and result in a decrease in the income potential of the high-yield investing strategy as well. In comparison, your typical dividend grower with a track record of consistent dividend increases can act as a useful buffer against increasing financial volatility.
In their research report, S&P Global considered the performance of its S&P High Yield Dividend Aristocrats compared to the S&P Composite 1500 and S&P 500 High Dividend Index from 1999 to 2021, for instance, which showed that dividend growers outperformed the latter two indices by about 143 bps and 59 bps per month. Hence, it becomes clear that not only is it important to pick your dividend stocks wisely, one must also consider the pros and cons of investing in high yield dividend stocks over dividend growers, and vice versa.
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Investing is becoming difficult by the day, even for the smart money. 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.
Without further ado, let’s look at the 10 best dividend kings to buy now according to hedge funds. These stocks, in addition to being dividend kings, are also popular among the 866 hedge funds tracked by Insider Monkey as of Q1. For each stock we have mentioned the number of hedge funds having stakes in it as of Q1.
We also ensured each stock had increased its dividend for at least 50 years in a row for it to qualify as a dividend king and to indicate that the stock has a stable and safe dividend.
Best Dividend Kings to Buy Now According to Hedge Funds
10. Altria Group, Inc. (NYSE: MO)
Number of Hedge Fund Holders: 38
Number of Years of Consistent Dividend Growth: 51
Dividend Yield: 7.34%
Altria Group, Inc. (NYSE: MO) is a manufacturer and seller of cigarettes and oral tobacco products across the US, with some of its primary brands being Marlboro and Black & Mild. The company ranks 10th on our list of the best dividend kings to buy now according to hedge funds.
In the first quarter of 2021, Altria Group, Inc. (NYSE: MO) had an EPS of $1.07, beating estimates by $0.02. The company’s revenue was $4.88 billion but missed estimated by $108.51 million. Altria Group, Inc. (NYSE: MO) has gained 13.94% in the past 6 months and 14.69% year to date as well.
This June, Redburn initiated coverage of Altria Group, Inc. (NYSE: MO) shares with a Neutral rating, while in July Stifel analyst Christopher Growe reiterated his Buy rating on the shares with a $65 price target. Altria Group, Inc. (NYSE: MO) has announced that it would be selling its Ste. Michelle Wine Estates business for about $1.2 billion, which Growe cited as being a positive development while commenting on the stock.
By the end of the first quarter of 2021, 38 hedge funds out of the 866 tracked by Insider Monkey held stakes in Altria Group, Inc. (NYSE: MO) worth roughly $1.10 billion. This is compared to 37 hedge funds in the previous quarter with a total stake value of about $1.08 billion.
Like The Procter & Gamble Company (NYSE: PG), Johnson & Johnson (NYSE: JNJ), The Coca-Cola Company (NYSE: KO), and PepsiCo, Inc. (NASDAQ: PEP), Altria Group, Inc. (NYSE: MO) is a good dividend stock to invest in.
9. 3M Company (NYSE: MMM)
Number of Hedge Fund Holders: 41
Number of Years of Consistent Dividend Growth: 63
Dividend Yield: 2.97%
3M Company (NYSE: MMM) has four business segments, through which the company operates in a range of areas and manufactures various products. The segments are: Safety and Industrial, Transportation and Electronics, Health Care, and Consumer. The company ranks 9th on our list of the best dividend kings to buy now according to hedge funds.
This April, Deutsche Bank raised its price target on 3M Company (NYSE: MMM) from $192 to $199, keeping a Hold rating on the shares. As of this July, Credit Suisse has a price target of $212 on the shares, up from $210. Analyst John Walsh commented that he still sees a potential upside in the company’s shares and that 3M Company’s (NYSE: MMM) EPS may reach $11 by 2022.
In the first quarter of 2021, 3M Company (NYSE: MMM) had an EPS of $2.77, beating estimates by $0.48. The company’s revenue was $8.85 billion, up 9.61% year over year and beating estimates by $412.11 million. 3M Company (NYSE: MMM) has gained 19.94% in the past 6 months and 16.13% year to date.
By the end of the first quarter of 2021, 41 hedge funds out of the 866 tracked by Insider Monkey held stakes in 3M Company (NYSE: MMM) worth roughly $1.51 billion. This is compared to 44 hedge funds in the previous quarter with a total stake value of about $1.36 billion.
Like The Procter & Gamble Company (NYSE: PG), Johnson & Johnson (NYSE: JNJ), The Coca-Cola Company (NYSE: KO), and PepsiCo, Inc. (NASDAQ: PEP), 3M Company (NYSE: MMM) is a good dividend stock to invest in.
8. Sysco Corporation (NYSE: SYY)
Number of Hedge Fund Holders: 42
Number of Years of Consistent Dividend Growth: 51
Dividend Yield: 2.56%
Sysco Corporation (NYSE: SYY) is a distributer of food and related products to the foodservice industry in the US, Canada, the UK, France, and internationally. It ranks 8th on our list of the best dividend kings to buy now according to hedge funds.
This May, Barclays raised its price target on Sysco Corporation (NYSE: SYY) from $80 to $83, keeping an Equal Weight rating on the shares. Additionally, the company’s CEO Kevin Hourican also commented that the recovering restaurant business would lead to only an upside for Sysco Corporation (NYSE: SYY) which will be able to increase its share of wallet as it has the “broadest and strongest” supply chain operating in the foodservice sector.
In the fiscal third quarter of 2021, Sysco Corporation (NYSE: SYY) had an EPS of $0.22, beating estimates by $0.02. The company’s revenue was $11.82 billion, surpassing the previous quarter’s $11.56 billion revenue. Sysco Corporation (NYSE: SYY) has gained 38.43% in the past year as well.
By the end of the first quarter of 2021, 42 hedge funds out of the 866 tracked by Insider Monkey held stakes in Sysco Corporation (NYSE: SYY) worth roughly $2.71 billion. This is compared to 40 hedge funds in the previous quarter with a total stake value of about $2.51 billion.
Like The Procter & Gamble Company (NYSE: PG), Johnson & Johnson (NYSE: JNJ), The Coca-Cola Company (NYSE: KO), and PepsiCo, Inc. (NASDAQ: PEP), Sysco Corporation (NYSE: SYY) is a good dividend stock to invest in.
7. Parker-Hannifin Corporation (NYSE: PH)
Number of Hedge Fund Holders: 43
Number of Years of Consistent Dividend Growth: 65
Dividend Yield: 1.33%
Parker-Hannifin Corporation (NYSE: PH) is a manufacturer of motion and control technologies and systems for the mobile, industrial, and aerospace markets across the globe. The company ranks 7th on our list of the best dividend kings to buy now according to hedge funds.
This June, KeyBanc upgraded Parker-Hannifin Corporation (NYSE: PH) shares to Overweight with a $350 price target. Analyst Jeffrey Hammond commented that the company has the potential to push its margins into the top quartile of its peer group, seeming overall optimistic about Parker-Hannifin Corporation (NYSE: PH) shares.
In the fiscal third quarter of 2021, Parker-Hannifin Corporation (NYSE: PH) had an EPS of $4.11, beating estimates by $0.38. The company’s revenue was $3.75 billion, up 1.19% year over year and beating estimates by $26.09 million. Parker-Hannifin Corporation (NYSE: PH) has gained 6.42% in the past 6 months and 16.46% year to date as well.
By the end of the first quarter of 2021, 43 hedge funds out of the 866 tracked by Insider Monkey held stakes in Parker-Hannifin Corporation (NYSE: PH) worth roughly $1.25 billion. This is compared to 56 hedge funds in the previous quarter with a total stake value of about $1.60 billion.
Like The Procter & Gamble Company (NYSE: PG), Johnson & Johnson (NYSE: JNJ), The Coca-Cola Company (NYSE: KO), and PepsiCo, Inc. (NASDAQ: PEP), Parker-Hannifin Corporation (NYSE: PH) is a good dividend stock to invest in.
Oakmark Funds, an investment management firm, mentioned Parker-Hannifin Corporation (NYSE: PH) in its first-quarter 2021 investor letter. Here‘s what they said:
“Parker Hannifin approached our estimates of intrinsic value and were, therefore, eliminated during the period. The company was a longstanding investment of the Fund and produced successful outcomes. We believe Parker Hannifin, one of our longest tenured positions, is a high-quality, well-managed industrial with strong competitive positions in good end markets. However, after the market price reflected these positives, we elected to sell to pursue more attractive alternatives that were priced at steeper discounts to our estimates of intrinsic value.”
6. Emerson Electric Co. (NYSE: EMR)
Number of Hedge Fund Holders: 45
Number of Years of Consistent Dividend Growth: 64
Dividend Yield: 2.07%
Emerson Electric Co. (NYSE: EMR) manufactures technology and engineering products for industrial, commercial, and consumer markets across the globe. The company ranks 6th on our list of the best dividend kings to buy now according to hedge funds.
This June, JP Morgan analyst Stephen Tusa reiterated an Overweight rating on Emerson Electric Co. (NYSE: EMR) shares, alongside a $100 price target. Tusa’s comments on the stock have been positive in light of his interactions with the company’s new management and his belief that business trends in the company were ahead of schedule.
In the fiscal second quarter of 2021, Emerson Electric Co. (NYSE: EMR) had an EPS of $0.97, beating estimates by $0.07. The company’s revenue was $4.43 billion, up 6.46% year over year and beating estimates by $74.53 million. Emerson Electric Co. (NYSE: EMR) has also gained 17.35% in the past 6 months and 25.37% year to date.
By the end of the first quarter of 2021, 45 hedge funds out of the 866 tracked by Insider Monkey held stakes in Emerson Electric Co. (NYSE: EMR) worth roughly $796 million. This is compared to 46 hedge funds in the previous quarter with a total stake value of about $1.04 billion.
Like The Procter & Gamble Company (NYSE: PG), Johnson & Johnson (NYSE: JNJ), The Coca-Cola Company (NYSE: KO), and PepsiCo, Inc. (NASDAQ: PEP), Emerson Electric Co. (NYSE: EMR) is a good dividend stock to invest in.
5. Colgate-Palmolive Company (NYSE: CL)
Number of Hedge Fund Holders: 48
Number of Years of Consistent Dividend Growth: 58
Dividend Yield: 2.18%
Colgate-Palmolive Company (NYSE: CL) deals with consumer products and their sale across the globe. Some of its major brands include the Colgate, Palmolive, and Protex brands, and it ranks 5th on our list of the best dividend kings to buy now according to hedge funds.
This June, UBS initiated coverage of Colgate-Palmolive Company (NYSE: CL) shares with a Buy rating and a $95 price target. Credit Suisse upgraded the company’s shares to Outperform in the same month, with a $95 price target as well. Analyst Kaumil Gajrawala commented that Colgate-Palmolive Company (NYSE: CL) is performing better than its peers because its sales are closer to category growth, and the company seems capable of handling the incoming inflation.
In the first quarter of 2021, Colgate-Palmolive Company (NYSE: CL) had an EPS of $0.80, beating estimates by $0.01. The company’s revenue was $4.34 billion, up 6.03% year over year and it beat estimates by $80.51 million as well. Colgate-Palmolive Company (NYSE: CL) has gained 0.85% in the past 6 months.
By the end of the first quarter of 2021, 48 hedge funds out of the 866 tracked by Insider Monkey held stakes in Colgate-Palmolive Company (NYSE: CL) worth roughly $2.30 billion. This is compared to 46 hedge funds in the previous quarter with a total stake value of about $1.51 billion.
First Eagle Investment Management, an investment management firm, mentioned Colgate-Palmolive Company (NYSE: CL) in its first-quarter 2021 investor letter. Here‘s what they said:
“The leading detractors in the quarter (included) Colgate-Palmolive Company. After a strong 2020 fueled in part by lockdown-driven demand, consumer staples stocks generally cooled during the first quarter as investors shifted attention to the more economically sensitive areas of the market likely to benefit from re-openings and improved discretionary spending. The effects of this rotation could be seen in the share price underperformance of names like Colgate-Palmolive.”
4. Lowe’s Companies, Inc. (NYSE: LOW)
Number of Hedge Fund Holders: 61
Number of Years of Consistent Dividend Growth: 59
Dividend Yield: 1.65%
Lowe’s Companies, Inc. (NYSE: LOW) is a home improvement retailer in the US and internationally. The company provides customers with construction, maintenance, repair, remodeling, and decorating products, and ranks 4th on our list of the best dividend kings to buy now according to hedge funds.
This May, Truist, Morgan Stanley, and Credit Suisse raised their price targets on Lowe’s Companies, Inc. (NYSE: LOW). Truist raised it to $217 with a Buy rating, while Morgan Stanley and Credit Suisse raised their targets to $230 with an Overweight rating and $205 with an Outperform rating respectively.
In the fiscal first quarter of 2022, Lowe’s Companies, Inc. (NYSE: LOW) had an EPS of $3.21, beating estimates by $0.62. The company’s revenue was $24.42 billion, up 24.13% year over year and beating estimates by $667.62 million. Lowe’s Companies, Inc. (NYSE: LOW) has gained 14.02% in the past 6 months and 21.14% year to date.
By the end of the first quarter of 2021, 61 hedge funds out of the 866 tracked by Insider Monkey held stakes in Lowe’s Companies, Inc. (NYSE: LOW) worth roughly $5.17 billion. This is compared to 71 hedge funds in the previous quarter with a total stake value of about $5.19 billion.
Pershing Square Holdings Ltd, an investment management firm, mentioned Lowe’s Companies, Inc. (NYSE: LOW) in its fourth-quarter 2020 investor letter. Here‘s what they said:
“Lowe’s is a high-quality business with significant long-term earnings growth potential. We initiated our investment in the company in April 2018 largely because we believed that the hiring of a new high-caliber management team could dramatically improve the business and close the performance gap to its closest competitor, Home Depot. Marvin Ellison became CEO in July 2018, and immediately began working on a multi-year transformation plan to bolster Lowe’s retail fundamentals, reduce structural costs, expand distribution capabilities, and modernize systems and the company’s online capabilities.
In 2020, Lowe’s experienced unprecedented demand driven by consumers nesting at home, higher home asset utilization and a reallocation of discretionary spend. Lowe’s earlier decision to modernize the company’s online offering allowed it to meet consumers’ surging demand. Further, its commitment to improve the company’s retail fundamentals allowed Lowe’s to showcase its enhanced merchandising, greater in-stock-levels, and excellent customer service. In the fourth quarter, the company completed 95% of its store layout resets which include a more intuitive shopping experience complete with a more Pro-centric layout (by “Pro” we refer to the professional tradesmen that perform repair and maintenance, remodeling and construction services). The company is also rolling out a new Pro CRM tool, which should improve Lowe’s Pro market share…” (Click here to see the full text)
3. The Coca-Cola Company (NYSE: KO)
Number of Hedge Fund Holders: 61
Number of Years of Consistent Dividend Growth: 59
Dividend Yield: 3.05%
The Coca-Cola Company (NYSE: KO) is a beverage company operating globally. The company’s major brands include the Coca-Cola and Fanta brands, among others, and it ranks 3rd on our list of the best dividend kings to buy now according to hedge funds.
This July, Deutsche Bank raised its price target on The Coca-Cola Company (NYSE: KO) shares from the previous $57 to $58. Morgan Stanley also raised its price target on the company’s shares to $64 in June, keeping an Overweight rating on the stock. Analyst Dara Mohsenian commented that the company can be expected to undergo recovery in sales throughout 2022, surpassing consensus forecasts.
In the first quarter of 2021, The Coca-Cola Company (NYSE: KO) had an EPS of $0.55, beating estimates by $0.05. The company’s revenue for the quarter was $9.02 billion, up 5.2% year over year and beating estimates by $388.98 million. The Coca-Cola Company (NYSE: KO) has gained 11.76% in the past 6 months and 4.28% year to date.
By the end of the first quarter of 2021, 61 hedge funds out of the 866 tracked by Insider Monkey held stakes in The Coca-Cola Company (NYSE: KO) worth roughly $24.9 billion. This is compared to 62 hedge funds in the previous quarter with a total stake value of about $24.6 billion.
2. The Procter & Gamble Company (NYSE: PG)
Number of Hedge Fund Holders: 70
Number of Years of Consistent Dividend Growth: 65
Dividend Yield: 2.54%
The Procter & Gamble Company (NYSE: PG) is a consumer goods company providing products in North and Latin America, Europe, the Asia Pacific, Greater China, India, the Middle East, and Africa. The company’s brands include Gillette, Venus, Old Spice, and Olay, among others, and it ranks 2nd on our list of the best dividend kings to buy now according to hedge funds.
This June, UBS began covering The Procter & Gamble Company (NYSE: PG) with a Neutral rating and a $138 price target. In April, the company also stated that it has maintained its fiscal 2021 outlook and it expects its revenue to grow by 5-6% for the year.
In the fiscal third quarter of 2021, The Procter & Gamble Company (NYSE: PG) had an EPS of $1.26, beating estimates by $0.07. The company’s revenue was $18.11 billion, up 5.2% year over year and beating estimates by $147.79 million. The Procter & Gamble Company (NYSE: PG) has gained 0.86% in the past 6 months as well.
By the end of the first quarter of 2021, 70 hedge funds out of the 866 tracked by Insider Monkey held stakes in The Procter & Gamble Company (NYSE: PG) worth roughly $8.53 billion. This is compared to 83 hedge funds in the previous quarter with a total stake value of about $10.42 billion.
1. Johnson & Johnson (NYSE: JNJ)
Number of Hedge Fund Holders: 81
Number of Years of Consistent Dividend Growth: 58
Dividend Yield: 2.5%
Johnson & Johnson (NYSE: JNJ) is a healthcare company selling products such as baby care essentials, skin health or beauty care products, and allergy products among a range of relates items in the healthcare sector. The company ranks 1st on our list of the best dividend kings to buy now according to hedge funds.
This July, Johnson & Johnson (NYSE: JNJ) commended the US government’s move to distribute about 12 million doses of the company’s vaccine against the coronavirus. Cantor Fitzgerald analyst Louise Chen has also reiterated the firm’s Overweight rating on Johnson & Johnson (NYSE: JNJ) shares alongside a $200 price target. Chen has cited the company’s reports that its vaccine seems to be effective against the Delta variant as positive news.
In the first quarter of 2021, Johnson & Johnson (NYSE: JNJ) had an EPS of $2.59, beating estimates by $0.24. The company’s revenue was $22.32 billion, up 7.88% year over year and beating estimates by $308.14 million. Johnson & Johnson (NYSE: JNJ) has also gained 5.37% in the past 6 months and 8.16% year to date.
By the end of the first quarter of 2021, 81 hedge funds out of the 866 tracked by Insider Monkey held stakes in Johnson & Johnson (NYSE: JNJ) worth roughly $6.91 billion. This is compared to 81 hedge funds in the previous quarter with a total stake value of about $5.82 billion.
You can also take a peek at 10 Extreme Dividend Stocks with Huge Upside and 30 Dividend Kings of 2021 (Part I).
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Disclosure: None. 10 Best Dividend Kings to Buy Now According to Hedge Funds is originally published on Insider Monkey.
