5 Best Dividend Stocks to Buy According to Diamond Hill Capital

4. Bank of America Corporation (NYSE:BAC)

Diamond Hill Capital’s Stake Value: $509,009,000

Bank of America Corporation (NYSE:BAC) is a multinational investment bank and financial services company that provides services in credit cards, loans, and mortgages. Diamond Hill Capital owned over 16.3 million shares in the company on June 30, boosting its stake by 8% during Q2. The fund’s total stake in the company amounted to over $509 million, which represented 2.22% of its 13F portfolio.

On July 20, Bank of America Corporation (NYSE:BAC) hiked its quarterly dividend by 5% to $0.22 per share. This was the company’s ninth consecutive year of dividend growth. As of August 31, the stock’s dividend yield came in at 2.58%.

In July, RBC Capital maintained its ‘Outperform’ rating on Bank of America Corporation (NYSE:BAC), acknowledging the company’s diversified business model in the current economic landscape. The firm further appreciated the company’s strong revenue growth.

As of the close of Q2, 99 hedge funds tracked by Insider Monkey owned stakes in Bank of America Corporation (NYSE:BAC), the same as in the previous quarter. Those stakes were collectively valued at nearly $36 billion. Berkshire Hathaway was the company’s leading stakeholder in Q2, owning an ownership stake worth over $31 billion.

Miller Value Partners mentioned Bank of America Corporation (NYSE:BAC) in its Q1 2022 investor letter. Here is what the firm had to say:

“There are many times when volatility and beta give false signals. Banks outperformed in the post-tech bubble bear market of the early 2000s. At the market peak prior to the financial crisis (when risk was the highest in those names!), Bank of America (NYSE:BAC) had a 0.9x beta (based on the trailing 5 years) suggesting its “risk” was below the market’s. Wrong! It massively underperformed in the financial crisis. Realized beta over the 5 years from the pre-crisis’ 2006 peak measured 2.3x.

A much better indicator of actual risk, both before and after the financial crisis, was the quality of the balance sheet and risk-taking appetite. Beta is backwards looking and non-stationary. Relying on it underestimated risk going into the financial crisis and overestimated coming out of it (its beta has continued to fall over the past decade).

We care greatly about risk. We spend a significant amount of time thinking about the risks to our investments. We measure risk as permanent impairment of capital, which means the prices and values don’t bounce back. Business fundamentals determine risk.”