In this article, we discuss the 5 best dividend stocks on Robinhood. If you want to read our detailed analysis of these stocks, go directly to the 10 Best Dividend Stocks on Robinhood.
Best Dividend Stocks on Robinhood
5. Starbucks Corporation (NASDAQ: SBUX)
Number of Hedge Fund Holders: 67
Dividend Yield: 1.64%
Global coffee roaster Starbucks Corporation (NASDAQ: SBUX) ranks 5th on the list of the best dividend stocks on Robinhood. The Seattle-based coffee giant currently pays its shareholders an annual dividend of $1.80 per share with a dividend yield of 1.62%. The company went public in 1992 and had 165 total stores. Starbucks currently has about 33,000 outlets worldwide, with a goal of 55,000 by 2030. Given the enormous size of Starbucks Corporation, the company continues to expand at a tremendous speed, which may explain why the stock is so famous among Robinhood investors.
The company has a market cap of $131 billion. Revenues for the second quarter came in at $6.7 billion. Starbucks posted a net income of $659.4 million, or $0.56 per share, in the fiscal second quarter, up from $328.4 million, or 28 cents per share, a year ago. On May 4, investment banking firm Jefferies Financial Group maintained its “Buy” rating and raised its price target for Starbucks Corporation from $118 to $135 per share. Shares of SBUX jumped 50% over the past twelve months.
At the end of the fourth quarter of 2020, 67 hedge funds in the database of Insider Monkey held stakes worth $4.99 billion in Starbucks Corporation (NASDAQ: SBUX) which is an increase from 66 hedge funds in the previous quarter holding stakes worth $3.26 billion.
Wedgewood Partners, in its Q1 2021 investor letter, mentioned Starbucks Corporation (NASDAQ: SBUX). Here is what Wedgewood Partners has to say about Starbucks Corporation in its 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. General Electric Company (NYSE: GE)
Number of Hedge Fund Holders: 69
Dividend Yield: 0.30%
Boston-based digital industrial firm General Electric Company (NYSE: GE) ranks 4th in our list of the 10 best dividend stocks on Robinhood. The quarterly dividend on GE stock is just $0.01 per share, yielding a modest 0.4%. On the other hand, General Electric Company may be an outstanding dividend growth stock for long-term investors. The company offers industrial products and services that range from medical imaging, aircraft engines, oil and gas production equipment, and power generation tools. In March, GE announced a $30 billion merger of its aircraft leasing unit with Dublin-based aircraft leasing company AerCap Holdings N.V. (NYSE: AER), with the proceeds going toward debt reduction.
General Electric Company (NYSE: GE) has a market cap of $116 billion. General Electric’s consolidated revenues in the first quarter were $17 billion, down 12.2% year over year from $19.5 billion in 2020. Shares of GE surged 141% over the past twelve months.
At the end of the fourth quarter of 2020, 69 hedge funds in the database of Insider Monkey held stakes worth $5.68 billion in General Electric Company (NYSE: GE) which is an increase from 45 hedge funds in the previous quarter holding stakes worth $2.75 billion.
In its Q1 2021 investor letter, Longleaf Partners Fund highlighted a few stocks and General Electric Co (NYSE:GE) is one of them. Here is what the fund said:
“General Electric (GE) (22%, 1.50%), the revitalized Aviation, Healthcare and Power conglomerate, was a top contributor following on its strong 4Q 2020 performance. Fourth-quarter Healthcare results were excellent, with revenues up 6% year-over-year (YoY), operating margins up 3% to 20% and strong FCF conversion. The Power and Renewables segment improved margins due to strength from gas plant services. With flight traffic increasing, Aviation appears likely to begin a multi-year recovery in the second half of this year. GE also swapped its aircraft leasing operations to AerCap for a 46% stake in the combined company, intelligently wrapping up its previously troubled GE Capital financing operations and further decreasing overall leverage. We continue to be impressed by the turnaround work of CEO Larry Culp, and the stock remains discounted against the quality of the three core business segments.”
3. Bank of America Corporation (NYSE: BAC)
Number of Hedge Fund Holders: 99
Dividend Yield: 1.75%
One of the best dividend stocks on Robinhood is Bank of America Corporation (NYSE: BAC). Since 2014, Bank of America has raised its dividend payout regularly, and its current dividend yield of 1.70% is higher than the average dividend yield of S&P 500 stocks, which is 1.38%. The bank earned $8.1 billion in the first quarter, or $0.86 per share, beating analysts’ expectations of 66 cents per share.
The company has a market cap of over $363 billion and revenue of $22.9 billion in the first quarter. Bank of America Corporation (NYSE: BAC) is one of the leading banks worldwide providing financial services to small, medium, and large enterprises as well as governments. Bank of America stock has gained 97% in the last twelve months.
At the end of the fourth quarter of 2020, 99 hedge funds in the database of Insider Monkey held stakes worth $35.3 billion in Bank of America Corporation (NYSE: BAC) which is an increase from 88 hedge funds in the previous quarter holding stakes worth $26.6 billion.
2. Apple Inc. (NASDAQ: AAPL)
Number of Hedge Fund Holders: 146
Dividend Yield: 0.70%
California-based tech giant Apple Inc. (NASDAQ: AAPL) ranks 2nd in our list of 10 best dividend stocks on Robinhood. Apple Inc. currently pays a $0.88 per share annual dividend, with a dividend yield of 0.70%. The tech behemoth pays a dividend of 26.83% of its earnings. The company announced record sales of $89.6 billion in the second quarter, up 54% year over year, and $1.40 in quarterly earnings per diluted share.
With over $2 trillion market cap, Apple Inc. (NASDAQ: AAPL) is still one of the best growth stocks to invest in. In the second quarter, Apple posted record results of $73 billion across Mac, iPhone, wearables, home, and accessories. The success of Apple’s latest M1 chip, which is now also used in the 5G-enabled iPad Pro, is driving a record sales period for the Mac. Shares of AAPL increased 66% over the past twelve months.
At the end of the fourth quarter of 2020, 146 hedge funds in the database of Insider Monkey held stakes worth $142 billion in Apple Inc. (NASDAQ: AAPL) which is an increase from 134 hedge funds in the previous quarter.
Based on our calculations, Apple Inc. (NASDAQ: AAPL) ranks 10th in our list of the 30 Most Popular Stocks Among Hedge Funds.
Distillate Capital, in its Q1 2021 investor letter, mentioned Apple Inc. (NASDAQ: AAPL). Here is what Distillate Capital has to say in its letter:
“Apple is an even more notable situation and one that highlights our free cash valuation methodology and bears further discussion given its Q3 ‘20 sale from our strategy. For an extended period, Apple was extraordinarily inexpensive on a free cash flow basis and was the largest position in our strategy, exceeding 5% of the portfolio.”
1. Microsoft Corporation (NASDAQ: MSFT)
Number of Hedge Fund Holders: 258
Dividend Yield: 0.94%
Topping the list of 10 best dividend stocks on Robinhood is American multinational tech firm Microsoft Corporation (NASDAQ: MSFT). Even though its 0.90% yield isn’t particularly attractive on print, with 7.53 billion shares outstanding and a $2.24 annual dividend, Microsoft pays out nearly $17 billion to its shareholders per year. Microsoft shareholders benefit from high-growth cloud services, consistent demand for tech solutions, consistent cash flow from legacy operations, and a balanced capital return strategy.
The company has a market cap of $1.9 trillion. The company’s revenue in the third quarter came in at $41.7 billion, up 19% from $35 billion year over year. Shares of MSFT increased 35% over the past twelve months. On May 13, Rosenblatt initiated a “Buy” coverage on Microsoft Corporation with a $301 price target.
At the end of the fourth quarter of 2020, 258 hedge funds in the database of Insider Monkey held stakes worth $52.9 billion in Microsoft Corporation (NASDAQ: MSFT) which is an increase from 234 hedge funds in the previous quarter holding stakes worth $42.1 billion.
Our calculations show that Microsoft Corporation (NASDAQ: MSFT) ranks 2nd in our list of the 30 Most Popular Stocks Among Hedge Funds.
Polen Global Growth Fund, in its Q1 2021 investor letter, mentioned Microsoft Corporation (NASDAQ: MSFT). Here is what Polen Global Growth Fund has to say about Microsoft Corporation in its letter:
“We have written extensively about Microsoft in recent commentaries. It was our leading contributor last year and one of our largest weightings within the Portfolio. It continues to experience business momentum through several dominant, essential, and competitively advantaged businesses, like Office 365 and Azure. The markets it competes for are enormous, which gives the company the ability to compound at scale. In the past quarter alone, the company generated over $40 billion in revenue, representing a 17% growth rate. The inherent operating leverage in Microsoft’s business model continues and led to 34% earnings growth this past quarter. Despite the broad rotation we saw in the first quarter and Microsoft’s robust performance in 2020, we think its business fundamentals continue to exhibit strength, and the stock continues to reflect the fundamentals.”
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