This article presents an overview of 5 Best Retail Dividend Stocks to Buy. For a detailed overview of such stocks read our article, 11 Best Retail Dividend Stocks to Buy.
5. TJX Companies Inc (NYSE:TJX)
Number of Hedge Fund Investors: 62
Off-price retailer TJX Companies Inc (NYSE:TJX) ranks fifth in our list of the best retail dividend stocks to invest in according to hedge funds. Earlier this month TJX Companies Inc (NYSE:TJX) increased its dividend by 13%. This was the 27th year of dividend growth for TJX Companies Inc (NYSE:TJX).
Insider Monkey’s database of 933 hedge funds shows that 62 hedge funds had stakes in TJX Companies Inc (NYSE:TJX) as of the end of 2023.
Madison Investments U.S. Equity Strategy stated the following regarding The TJX Companies, Inc. (NYSE:TJX) in its fourth quarter 2023 investor letter:
“Whether it’s performance by market capitalization, sectors, or any other factor, stock markets are intrinsically cyclical. Some cycles are long-term, taking decades to unfold, and some are short-term, lasting months, weeks, or even days. Many are medium in length, lasting two, three, or several years. Most cycles occur because a trend often creates the seeds of its own reversal. We at Madison Investments are certain that market cycles will occur, but it doesn’t mean we can predict their timing or magnitude. We don’t think we can. This is perhaps a major difference between us and many other investors. Most investors believe it’s their job to time market cycles despite overwhelming evidence that it’s nearly impossible to do so with enough accuracy to make such an effort profitable over long periods. We avoid making calls about market cycles and spend zero minutes thinking about them, not because we don’t think they can be important, but because we think they’re inherently unpredictable in duration.
This mentality of our team is generally true for other kinds of cycles, such as macroeconomic, industry, or company-specific, but is a bit more nuanced for those. We make no explicit prediction about cycles on which we base a buy or sell decision. Still, we are acutely aware of the various cyclical forces at work, and depending on whether we think we have the ability to assess the length or intensity of such, we may incorporate them to various degrees.
Let’s use a few examples to illustrate our point. We’ve been invested in off-price retailer The TJX Companies, Inc. (NYSE:TJX) for just under ten years, having invested in 2014 in our Large Cap strategy. TJX is one of the most recession-resistant companies we own due to its perennial value proposition to customers; customers always like to save money, especially when economic times get tough. As a result, the company has had an exceedingly steady revenue and earning profile over the past several decades…” (Click here to read the full text)
4. CVS Health Corporation (NYSE:CVS)
Number of Hedge Fund Investors: 67
CVS Health Corporation (NYSE:CVS) is one of the top dividend growth stocks liked by hedge funds. Earlier this year CVS Health Corporation (NYSE:CVS) announced yet another dividend increase. Over the past 10 years CVS Health Corporation’s (NYSE:CVS) dividend has seen a compound annual growth rate (CAGR) of approximately 10% per year.
CVS Health Corporation (NYSE:CVS) is also highly popular among hedge funds. Insider Monkey’s database shows that 67 hedge funds had stakes in CVS Health Corporation (NYSE:CVS)as of the end of 2023. The biggest stake in CVS Health Corporation (NYSE:CVS) is owned by Bernard Horn’s Polaris Capital Management which owns a $37 million stake in CVS Health Corporation (NYSE:CVS).
In its fourth quarter 2023 investor letter, Vltava Fund stated the following regarding CVS Health Corporation (NYSE:CVS):
“Not every transaction creates value. Some transactions destroy company value. An example of such transaction is CVS Health Corporation (NYSE:CVS)’s acquisition of Oak Street Health in early 2023. This acquisition cost CVS $10.6 billion, and, based on metrics cited by the company itself, it seems to us that it was a waste of money for the most part. Unfortunately, CVS has its own history of overpriced acquisitions. The last one prior to that was in 2018, when CVS bought health insurer Aetna for $69 billion. We had assumed that CVS management, which has since changed, would recognise that mistake and learn from it. We were wrong. The acquisition of Oak Street Health is both disappointing and a warning to us. We now have a company in our portfolio whose capital allocation we consider to be poor and that should not be there. Unfortunately, the situation is complicated by the fact that the CVS stock is now very cheap and therefore we are reluctant to dispose of it just yet. We probably will do so, however, when the opportunity arises.”
3. Lowe’s Companies Inc (NYSE:LOW)
Number of Hedge Fund Investors: 68
With about 60 years of consistent dividend increases, Lowe’s Companies Inc (NYSE:LOW) is a dividend king in the retail sector.
Insider Monkey’s database of hedge funds shows that smart money investors like this dividend stock, as 68 hedge funds reported having stakes in Lowe’s Companies Inc (NYSE:LOW) as of the end of 2023. The biggest stakeholder of Lowe’s Companies Inc (NYSE:LOW) during this period was Eric W. Mandelblatt’s Soroban Capital Partners which owns a $451 million stake in Lowe’s Companies Inc (NYSE:LOW).
Aristotle Capital’s Value Equity Strategy stated the following regarding Lowe’s Companies, Inc. (NYSE:LOW) in its first quarter 2024 investor letter:
“During the quarter, we sold our positions in Phillips 66 and Sysco and invested in two new positions: Lowe’s Companies, Inc. (NYSE:LOW) and TotalEnergies.
Based in North Carolina, and with a history dating back to 1921, Lowe’s Companies is the world’s second-largest home improvement retailer (after Home Depot). The company operates more than 1,700 stores in the United States that offer a wide variety of products to enhance a home, from plants for the garden and house décor to hardware and appliances. Often located in suburban areas, Lowe’s stores primarily serve retail “do-it-yourself” customers (~75% of revenue) and sell products that are used for home maintenance and repair (over 60% of revenue). This contrasts with Home Depot, whose stores have a higher presence in metropolitan areas and cater more to professional customers.
We had previously been investors in Home Depot. Over much of the past decade Home Depot had, in our opinion, executed better than Lowe’s—expanding its presence with large professional customers and increasing its store productivity. However, with Lowe’s hiring of former Home Depot executive Marvin Ellison in 2018, we believe Lowe’s has started the process of closing the gap to better compete with its nearest rival…” (Click here to read the full text)
2. Home Depot Inc (NYSE:HD)
Number of Hedge Fund Investors: 70
Home improvement retailer Home Depot Inc (NYSE:HD) earlier this year announced a 7.7% increase to its quarterly dividend. It is one of the best dividend stocks to buy according to hedge funds as 70 hedge funds tracked by Insider Monkey had stakes in Home Depot Inc (NYSE:HD) as of the end of 2023.
ClearBridge Sustainability Leaders Strategy made the following comment about The Home Depot, Inc. (NYSE:HD) in its Q3 2023 investor letter:
“The Home Depot, Inc. (NYSE:HD) has long been a leader in advancing sustainable forestry, and its wood products can have a significant impact, as timber rates at the top of high-risk commodities responsible for most agriculture-related deforestation (Exhibit 3). The home improvement retailer adopted its first wood purchasing policy in 1999, pledging to give preference to sustainably sourced wood and to eliminate wood purchases from endangered regions around the world.
Biodiversity-boosting efforts at Home Depot have included tracing the origin of all the wood products it sells. This forms part of the process of verifying sustainable production, which it does using the certification standards of the Forest Stewardship Council (FSC). Since 2000 Home Depot has developed programs to purchase FSC wood products, such as doors, boards and patio furniture, from over 60 global suppliers. It has also moved more than 90% of its cedar purchases to second-and third-growth forests, with the rest coming from areas with local community stakeholder review.”
1. Walmart Inc (NYSE:WMT)
Number of Hedge Fund Investors: 85
Walmart Inc (NYSE:WMT) earlier this year announced a 9% hike in its annual dividend. This was the 51st consecutive annual dividend increase, cementing Walmart Inc’s (NYSE:WMT) status as one of the best and reliable dividend stocks to invest in.
Of the 933 hedge funds in Insider Monkey’s database, 85 hedge funds had stakes in Walmart Inc (NYSE:WMT).
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