10 Dividend Aristocrats Hedge Funds Love

In this article, we discuss the 10 dividend aristocrats that hedge funds love. If you want to skip our detailed analysis of dividend stocks, go directly to 5 Dividend Aristocrats Hedge Funds Love.

Dividend paying stocks have a history of outperforming stocks that don’t offer dividend payments to shareholders. J.P. Morgan Asset Management found in a 2013 report that companies which initiated and increased their dividend payments between 1972 and 2012 generated annualized gains of 9.5% over this period. In comparison, companies that didn’t offer any dividends posted returns of 1.6% over these four decades.

After the Covid pandemic disturbed dividend payments in 2020, the global dividend payments in 2021 recorded a 14.7% jump in underlying growth to reach a record amount of $1.47 trillion, as told by the Janus Henderson Global Dividend Index report. According to this report, global dividend payments are expected to reach $1.52 trillion in FY22, with underlying growth of 5.7%.

In order to pick stocks that offer good dividend yields, and offer them sustainably, we take a look at the S&P 500’s list of Dividend Aristocrats. These stocks have been increasing their dividend yields for the last 25 years in a row, and trade with a minimum market cap of $3 billion. Some of the best dividend-paying stocks include Walmart Inc. (NYSE:WMT), The Coca-Cola Company (NYSE:KO) and Johnson & Johnson (NYSE:JNJ), along with others mentioned below.

Photo by Dan Dennis on Unsplash

Our Methodology

To compile the following list, we picked 10 stocks from the S&P 500 Dividend Aristocrat Index with the highest number of hedge funds holding stakes in them. Hedge fund sentiment around each stock was derived from Insider Monkey’s database of 924 elite hedge funds.

10 Dividend Aristocrats Hedge Funds Love

10. PepsiCo, Inc. (NYSE:PEP)

Number of Hedge Fund Holders: 60

PepsiCo, Inc. (NYSE:PEP) is first up on our list of the dividend aristocrats hedge funds love. The firm has been increasing its dividend payout to shareholders for 49 consecutive years, offering a 2.70% yield as of March 16. PepsiCo, Inc. (NYSE:PEP) has seen its share price gain 19.52% in the last 12 months, and 3.61% in the last 6 months.

Based in New York, PepsiCo, Inc. (NYSE:PEP) manufactures and sells beverages and convenience foods around the world. On February 14,  analyst Lauren Lieberman of research firm Barclays maintained an ‘Overweight’ rating on PepsiCo, Inc. (NYSE:PEP) shares, and revised the price target to $180 from $186, noting that the company’s growth estimates are towards the higher end of its long-term sales growth algorithm for 2022.

In the fourth quarter of 2021, 60 out of 924 elite hedge funds tracked by Insider Monkey were bullish on PepsiCo, Inc. (NYSE:PEP) shares, with aggregate positions worth $4.64 billion. In comparison, 61 hedge funds held combined positions worth $4.43 billion in the firm in Q3 2021. Fundsmith LLP was the top shareholder in PepsiCo, Inc. (NYSE:PEP) at the end of the fourth quarter, with 10.41 million shares valued at $1.80 billion, which was a 4% increase in its holding from the previous quarter.

In addition to Walmart Inc. (NYSE:WMT), The Coca-Cola Company (NYSE:KO) and Johnson & Johnson (NYSE:JNJ); PepsiCo, Inc. (NYSE:PEP) is a dividend aristocrat hedge funds are buying in 2022.

9. Walmart Inc. (NYSE:WMT)

Number of Hedge Fund Holders: 63

Walmart Inc. (NYSE:WMT) is a wholesale and retail supermarket giant in the United States. Jefferies analyst Stephanie Wissink kept a ‘Buy’ rating on the company shares on February 18, noting that it was positioned strongly to gain further market share in the current inflationary macro environment. On March 16, Morgan Stanley analyst Simeon Gutman gave Walmart an ‘Overweight’ rating, and sees its fintech startup ONE as a $1.6 billion revenue opportunity, which could drive greater customer engagement and brand affinity to the firm’s core business.

Walmart Inc. (NYSE:WMT) has upped its dividend payment to shareholders for 48 consecutive years, and on February 17 posted a $0.56 per share quarterly dividend, which was a 1.8% increase from its previous dividend of $0.55. As of March 16, Walmart Inc. (NYSE:WMT) offers a 1.54% yield to shareholders. The firm’s EPS for Q4 2021 stood at $1.53, which exceeded analysts’ expectations by $0.03. The revenue for the fourth quarter was recorded at $151.53 billion, which was also above consensus estimates by $1.49 billion.

GQG Partners was the largest shareholder of Walmart Inc. (NYSE:WMT) in the fourth quarter, holding 10.42 million shares worth $1.5 billion. Out of all the hedge funds tracked by Insider Monkey, 63 hedge funds were long Walmart Inc. (NYSE:WMT) at the end of the fourth quarter, with combined positions worth $7.13 billion. This is in comparison to 71 hedge funds in the preceding quarter.

8. Abbott Laboratories (NYSE:ABT)

Number of Hedge Fund Holders: 64

Abbott Laboratories (NYSE:ABT) deals in the provision of healthcare products around the globe. On February 18,
the firm declared a $0.47 per share quarterly dividend, which was in-line with previous. As of March 16, Abbott Laboratories (NYSE:ABT) pays a dividend yield of 1.60% to shareholders.

On March 1, BofA analyst Travis Steed reinstated coverage of Abbott Laboratories (NYSE:ABT) with a ‘Buy’ rating and price target of $140. The analyst noted that the firm was offering a sustainable top-quartile organic growth profile, best-in-class pipeline, a balance sheet bolstered with profits from Covid testing, and a diversified business that can outperform in many different environments.

Fisher Asset Management of billionaire Ken Fisher was the largest shareholder of Abbott Laboratories (NYSE:ABT) in Q4 2021, with 8.76 million shares worth $1.23 billion, showing an increase of 5% in holding from the previous quarter. 64 hedge funds in total were bullish on Abbott Laboratories (NYSE:ABT) shares in the fourth quarter, up from 63 in the preceding quarter.

Reporting its fourth quarter earnings on January 26, Abbott Laboratories (NYSE:ABT) posted earnings per share of $1.32, which beat analysts’ estimates by $0.11. The firm’s revenue for the quarter stood at $11.47 billion, which outperformed analysts’ forecasts by $760.41 million. 

7. The Procter & Gamble Company (NYSE:PG)

Number of Hedge Fund Holders: 67

The Procter & Gamble Company (NYSE:PG) makes and sells branded consumer products, which include healthcare, beauty, grooming, baby care and feminine products. In January, The Procter & Gamble Company (NYSE:PG) declared a $0.8698 per share quarterly dividend, which was in-line with previous. As of March 16, the firm pays a dividend yield of 2.32%, and has grown its dividend payout for 65 consecutive years, making it a popular dividend aristocrat among hedge funds.

The Procter & Gamble Company (NYSE:PG) reported earnings per share of $1.66 for Q4 2021, beating estimates by $0.01. Quarterly revenue was up 6.12% compared to the year-ago quarter, standing at $20.95 billion and exceeding analysts’ forecasts by $617.36 million.

On January 20, Morgan Stanley analyst Dara Mohsenian reiterated an ‘Overweight’ rating on The Procter & Gamble Company (NYSE:PG) stock, and upped the price target to $177 from $161. The Procter & Gamble Company (NYSE:PG) is the analyst’s favorite name in the Household Products segment, who sees sustained revenue growth after the firm’s recent reinvestment and strategy changes over the last few years.

67 hedge funds held stakes in The Procter & Gamble Company (NYSE:PG) at the close of the fourth quarter, with a combined value of $6.61 billion. This is in comparison to 69 hedge funds with combined holdings worth $6.41 billion in the firm in Q3 2021. GQG Partners was the top shareholder of The Procter & Gamble Company (NYSE:PG) in the fourth quarter, with a stake comprising of 7.53 million shares worth $1.23 billion.

6. The Coca-Cola Company (NYSE:KO)

Number of Hedge Fund Holders: 70

Along with Walmart Inc. (NYSE:WMT) and Johnson & Johnson (NYSE:JNJ), The Coca-Cola Company (NYSE:KO) is a top dividend stock for income investors.

5. Exxon Mobil Corporation (NYSE:XOM)

Number of Hedge Fund Holders: 71

Exxon Mobil Corporation (NYSE:XOM) is the second-largest oil company in the world, and is based in Texas, United States. As of March 16, its dividend yield stands at an impressive 4.56%, with the firm having grown its dividend payout for 38 consecutive years making it an attractive dividend aristocrat for hedge funds to buy.

Hedge funds were seen buying up on Exxon Mobil Corporation (NYSE:XOM) shares, as 71 hedge funds out of 924 tracked by Insider Monkey were long on the company shares by the end of December, with combined stakes worth $5.38 billion. This is up from 64 hedge funds in the preceding quarter. GQG Partners held 32.4 million shares in Exxon Mobil Corporation (NYSE:XOM) over the fourth quarter, worth $1.98 billion and representing a 22% increase in holding from the previous quarter.

On March 7, MKM Partners analyst John Gerdes raised the firm’s price target on Exxon Mobil Corporation (NYSE:XOM) to $84 from $81 and maintained a ‘Buy’ rating on the shares, noting that the energy company could generate around $40.2 billion of free cash flows in 2022, assuming approximately $21.6 billion in net capital expenditures for the year. He also cited the company’s strong production outlook and modestly higher international natural gas prices that are partly offset by higher operating expenses. As of March 16, shares of Exxon Mobil Corporation (NYSE:XOM) have surged 29.58% in the last 12 months, and 39.47% in the last 6 months.

In Q4 2021, Exxon Mobil Corporation (NYSE:XOM) reported an EPS of $2.05, which was above consensus estimates by $0.11. Quarterly revenue stood at $84.97 billion, outperforming estimates by $6.24 billion and representing an increase of 82.56% year-on-year.

Investment firm Goehring & Rozencwajg Associates mentioned Exxon Mobil Corporation (NYSE:XOM) in its Q3 2021 investor letter. Here’s what the hedge fund said:

“After successfully replacing 25% of Exxon’s board of directors despite owning just 0.02% of the outstanding equity, Engine No. 1, the climate-focused activist hedge fund, met with Chevron’s management late last summer. In discussions that were later described as “cordial,” Chevron executives shared their plan to reduce carbon emissions. Subsequently, Chevron announced new plans to further reduce carbon output, along with their intention to appoint a new director with “environmental expertise.” Although it remains unclear exactly what Engine No. 1 is planning, rumors suggest the fund has contacted other investors, strongly suggesting they intend to launch a second campaign in the not-too-distant future.

What should Chevron expect?

It was recently reported by The Wall Street Journal that Exxon was considering abandoning two massive natural gas projects: the 75 trillion cubic foot (tcf ) Rovuma LNG project (capital cost $30 bn) and the 5 tcf Ca Voi Xanh offshore-Vietnam gas project (capital cost $10 bn). Exxon board members (most likely including the three supported by Engine No. 1) have publically expressed concerns about both projects.

According to internal reports, these projects are among the highest CO2 producers in Exxon’s pipeline; it is no surprise these projects have been called into question. However, we find the plight of both fields to be perplexing since production would almost certainly be used to displace coal in electricity generation, cutting CO2 emissions by nearly 50%. This fact seems to be lost on the new Exxon board members.”

4. Lowe’s Companies, Inc. (NYSE:LOW)

Number of Hedge Fund Holders: 72

Lowe’s Companies, Inc. (NYSE:LOW) is a home improvement retailer in the United States, and operates roughly 2,000 home improvement and hardware stores across the country. Hedge funds were eager on Lowe’s Companies, Inc. (NYSE:LOW) in the fourth quarter, where 72 hedge funds recorded bullish bets on the firm’s shares, as compared to 60 hedge funds in Q3 2021. Bill Ackman’s Pershing Square was the largest shareholder of Lowe’s Companies, Inc. (NYSE:LOW) in the fourth quarter, holding a position comprising of 10.23 million shares worth $2.64 billion.

On February 23, Baird analyst Peter Benedict noted that Lowe’s Companies, Inc. (NYSE:LOW) ‘capped off an impressive year’ with strong Q4 results, and kept his ‘Outperform’ rating on the shares with a price target of $285. He holds that demand for home improvement products will prove more durable than some in the market fear. As of March 16, Lowe’s Companies, Inc. (NYSE:LOW) has grown 32.61% in the last 12 months, and 10.67% in the last 6 months.

Lowe’s Companies, Inc. (NYSE:LOW) posted an EPS of $1.78 for the fourth quarter, beating estimates by $0.09. Quarterly revenue stood at $21.34 billion, outperforming analysts’ forecasts by $431.25 million.

Pershing Square Capital Management, an investment management firm, mentioned Lowe’s Companies, Inc. (NYSE:LOW) in its Q4 2021 investor letter. Here’s what the fund said:

“Lowe’s is a high-quality business with significant long-term earnings growth potential

Supportive macroeconomic backdrop

 -Aging housing stock, lack of new inventory, robust home equity values, and unprecedented pro project backlog
-COVID-19 causing millennials to enter the housing market

Positioned to grow EPS largely independent of market conditions

-Idiosyncratic revenue opportunities driving share gains
-Self-help initiatives catalyzing operating margin expansion
-Buybacks representing ~8% of current market capitalization planned for 2022

Multi-year business transformation with substantial earnings upside

-Margin target of 13% has substantial upside; Home Depot at ~15.3% and increasing
-Potential to generate high-teens EPS growth over the next several years.

Lowe’s continues to trade at a significantly discounted P/E multiple relative to Home Depot despite materially higher prospective EPS growth. LOW’s share price including dividends increased 63% in 2021 and has decreased 10% year-to-date in 2022.”

3. S&P Global Inc. (NYSE:SPGI)

Number of Hedge Fund Holders: 79

Next up is S&P Global Inc. (NYSE:SPGI), a global provider of research, news, analytics and credit ratings. On March 8, Goldman Sachs analyst George Tong reinstated coverage of S&P Global Inc. (NYSE:SPGI) with a ‘Buy’ rating and price target of $485, noting that the firm’s merger with research firm IHS Markit creates ‘amplified opportunity for shareholder value creation’. The firm declared a $0.77 per share quarterly dividend on January 26, which was in-line with previous.

79 hedge funds were bullish on S&P Global Inc. (NYSE:SPGI) in the fourth quarter of 2021, with combined positions worth $7.82 billion. This is up from 78 hedge funds in the previous quarter with $7.03 billion worth of stakes in the firm. With 3.74 million shares worth $1.76 billion, TCI Fund Management was the top shareholder of S&P Global Inc. (NYSE:SPGI) in Q4 2021.

S&P Global Inc. (NYSE:SPGI) reported an EPS of $3.15 in Q4 2021, which exceeded analysts’ expectations by $0.03. Quarterly revenue over the fourth quarter was recorded at $2.09 billion, outperforming consensus estimates by $42.53 million, and up 11.84% year-over-year.

Baron FinTech Fund talked about S&P Global Inc. (NYSE:SPGI) in its Q4 2021 investor letter. Here’s what the fund said:

“Shares of rating agency and data provider S&P Global Inc. increased after the company reported quarterly results that beat Street forecasts and raised full-year guidance. Revenue grew 13% and EPS grew 24% due to elevated issuance activity across bank loans and structured finance combined with strong growth in the Indices segment. Shares also benefited from the receipt of regulatory approvals for the pending merger with IHS Markit. We continue to own the stock due to the company’s long runway for growth and significant competitive advantages.”

2. AbbVie Inc. (NYSE:ABBV)

Number of Hedge Fund Holders: 82

AbbVie Inc. (NYSE:ABBV) is a US-based biopharmaceutical firm, offering a 3.62% yield as of March 16. It declared a $1.41 per share quarterly dividend on February 17, which was in-line with previous.

On March 16, AbbVie Inc. (NYSE:ABBV) received FDA approval for its Rinvoq drug to treat ulcerative colitis in adults. In early March, Citi analyst Andrew Baum reiterated a Buy rating on AbbVie Inc. (NYSE:ABBV) shares, and raised the price target to $170 from $155, on the back of optimism for its Rinvoq drug.

As of March 16, AbbVie Inc. (NYSE:ABBV) saw its share price gain 48.56% in the last 12 months, and 44.85% in the last 6 months. The firm’s EPS for the fourth quarter came in at $3.31, outperforming estimates by $0.03.

As of the fourth quarter, 82 hedge funds held positions in AbbVie Inc. (NYSE:ABBV), with a collective value of $3.74 billion. This is up from 81 hedge funds in Q3 2021. Berkshire Hathaway of Warren Buffett held 3.03 million shares worth $410.74 million in AbbVie Inc. (NYSE:ABBV) at the close of the fourth quarter, making it the top shareholder of the biopharmaceutical firm.

Investment firm Miller Howard Investments talked about many stocks in its Q3 2021 investor letter, and AbbVie Inc. (NYSE:ABBV) was one of them. Here’s what the fund said:

“While optimistic about a recovery, we continue to balance our cyclical holdings with dividend-payers in stable, less economically-sensitive industries. We hold three pharmaceutical companies, (which includes) AbbVie (ABBV). All three have strong cash flows and balance sheets, making their high dividends reasonably safe. The investment controversy surrounding these pharma companies is whether they can develop or acquire new products to replace their current blockbuster drugs. The low valuations on these stocks reflects what we believe to be undue pessimism by investors on the prospects for new drugs.”

1. Johnson & Johnson (NYSE:JNJ)

Number of Hedge Fund Holders: 83

Johnson & Johnson (NYSE:JNJ) has increased its dividend payout for the last 59 years in a row, and ranks first on our list of dividend aristocrats that hedge funds love. 83 were bullish on Johnson & Johnson (NYSE:JNJ) shares in the fourth quarter, with aggregate stakes worth $7.38 billion. Fundsmith LLP was the largest shareholder of the firm in the fourth quarter, with a stake comprising of 7.21 million shares worth $1.23 billion.

The New Jersey-based firm offers healthcare and pharmaceutical products. On January 4, Johnson & Johnson (NYSE:JNJ) declared a $1.06 per share quarterly dividend, which was in-line with previous. As of March 16, it provides a dividend yield of 2.41%.

In early March,  BofA analyst Geoff Meacham reinstated coverage of Johnson & Johnson (NYSE:JNJ) with a ‘Neutral’ rating and price target of $185, noting a positive outlook on the firm’s near-term growth prospects, given its ‘safe haven’ status within the current macro and geopolitical environment. Johnson & Johnson (NYSE:JNJ) reported an EPS of $2.13 in the fourth quarter, beating analysts’ forecasts by $0.01. Quarterly revenue stood at $24.80 billion, which was an increase of 10.36% as compared to the year-ago quarter, but fell below consensus estimates by $485.39 million.

Investment firm Distillate Capital talked about Johnson & Johnson (NYSE:JNJ) in its Q2 2021 investor letter. The fund said:

“The largest additions in the rebalance, Johnson & Johnson was around 50 and 40 basis points incrementally. J&J underperformed in the quarter while its normalized free cash flows held steady and so its position size was topped off to match the stable cash flows.”

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Disclosure. None. 10 Dividend Aristocrats Hedge Funds Love is originally published on Insider Monkey.