In this article, we discuss 10 best Dogs of the Dow stocks ranked by hedge fund sentiment.
‘Dogs of the Dow’ is an investment strategy popularized by Michael B. O’Higgins in his 1991 book titled ‘Beating the Dow’. The strategy focuses on the highest dividend-yielding stocks in the Dow Jones Industrial Average (DJIA). In addition to this, the strategy’s main aim is to generate higher returns than DJIA by investing in high-yielding stocks at the end of the calendar year. This year’s economic situation has turned investors’ attention toward these securities as they can help them to generate stable income.
Over the years, the Dogs of the Dow have generated positive returns for shareholders, becoming investors’ top choice in periods of slow economic growth. According to a report by Wall Street Journal, the Dogs returned 34.3% in 2013 through December 26, compared with a 28.9% return of the Dow during the same period. The report also mentioned that the strategy beat the market through much of the 1970s and 1980s. Another report by CNBC threw light on the positive returns of the Dogs. The report stated that the strategy has beaten the Dow in ten of the 15 years from 2000 to 2015 by an average of about 1.3%. In 2015, the DJIA delivered a 2% return to shareholders, while the Dogs returned 4%.
This year’s returns also showed the supremacy of the Dogs over the broader market. As of October 28, the Dogs fell by 0.3%, compared with a 17.10% decline in the S&P 500 and an 8.20% drop in the DJIA, as reported by Horan Associates. Overall, dividend stocks are performing well given the market situation. Some of the best stocks in this category include Caterpillar Inc. (NYSE:CAT), Exxon Mobil Corporation (NYSE:XOM), and AbbVie Inc. (NYSE:ABBV) as these companies have strong dividend policies and sound financials.
Our Methodology:
We picked the most notable, high-yield, blue-chip dividend stocks from Dow Jones Industrial Average and ranked them by using hedge fund sentiment. The hedge fund sentiment here means the number of hedge funds having stakes in these companies as of the end of the third quarter. We gauged this sentiment from Insider Monkey’s database of 920 hedge funds’ holdings.
Best Dogs of the Dow Stocks Ranked By Hedge Fund Sentiment
10. Walgreens Boots Alliance, Inc. (NASDAQ:WBA)
Number of Hedge Fund Holders: 39
Walgreens Boots Alliance, Inc. (NASDAQ:WBA) is an American pharmacy retail company that also deals in other consumer products. In December, Mizuho raised its price target on the stock to $41 with a neutral rating on the shares, presenting a positive stance on managed care and drug distributors’ earnings this year.
In fiscal Q4 2022, Walgreens Boots Alliance, Inc. reported revenue of $32.4 billion, which beat analysts’ estimates by $278.3 million. The company’s cash position remained stable as its operating cash flow came in at $85 million. It paid $1.6 billion to shareholders in dividends during the quarter, which places it as one of the best dividend stocks on our list.
Walgreens Boots Alliance, Inc. has a 47-year run of consistently raising its dividends. The company currently pays a quarterly dividend of $0.48 per share and has a dividend yield of 4.67%, as of December 14. Its dividend growth history makes it a reliable investment option alongside Caterpillar Inc., Exxon Mobil Corporation, and AbbVie Inc..
As of the end of the September quarter, 39 hedge funds tracked by Insider Monkey owned stakes in Walgreens Boots Alliance, Inc., compared with 40 in the previous quarter. These stakes are collectively worth over $712.6 million. Arrowstreet Capital owned roughly 6 million WBA shares, becoming the company’s largest stakeholder in Q3.
9. International Business Machines Corporation (NYSE:IBM)
Number of Hedge Fund Holders: 40
International Business Machines Corporation (NYSE:IBM) is a technology company that provides a wide range of the latest related services to its consumers. The company is headquartered in New York. The company is a Dividend Aristocrat as it has a 27-year track record of consistent dividend growth. Moreover, the company has been making regular dividend payments to shareholders since 1916, becoming one of the best dividend stocks on our list. It currently pays a quarterly dividend of $1.65 per share and has a dividend yield of 4.37%, as of December 14.
In October, Morgan Stanley maintained an Overweight rating on International Business Machines Corporation with a $152 price target, appreciating the company’s strong balance sheet and its improving revenue.
International Business Machines Corporation reported a strong cash position this year. In the first nine months of 2022, the company’s operating cash flow came in at $6.5 billion and it generated $4.1 billion in free cash flow. During the third quarter, it returned $1.5 billion to shareholders in dividends.
As of the close of Q3 2022, 40 hedge funds in Insider Monkey’s database owned stakes in International Business Machines Corporation, the same as in the previous quarter. The collective value of these stakes is over $868.7 million.
8. Dow Inc. (NYSE:DOW)
Number of Hedge Fund Holders: 43
Dow Inc. (NYSE:DOW) is an American multinational chemical company that provides innovative and sustainable solutions in packaging and consumer care. In the third quarter of 2022, the company posted revenue of $14.1 billion, which beat Street estimates by $1.09 billion. Its operating cash flow for the quarter came in at $1.9 billion and its free cash flow stood at $1.5 billion. Moreover, the company paid $493 million to shareholders in dividends, which shows that its cash flow generation is stable.
On October 13, Dow Inc. declared a quarterly dividend of $0.70 per share, which fell in line with its previous dividend. The company is one of the best dividend stocks on our list as it has been making uninterrupted dividend payments since 1912. As of December 14, the stock has a dividend yield of 5.40%.
In October, Fermium Research maintained a Buy rating on Dow Inc., following the company’s strong performance in the recent quarterly earnings. In addition to this, the firm also appreciated the stock’s dividend yield.
At the end of September, 43 hedge funds tracked by Insider Monkey had investments in Dow Inc., valued at nearly $710 million. With over 7.5 million shares, Pzena Investment Management was the company’s leading stakeholder in Q3.
7. 3M Company (NYSE:MMM)
Number of Hedge Fund Holders: 49
3M Company (NYSE:MMM) is a multinational conglomerate that manufactures products related to different industries. The company is one of the best dividend stocks on our list with a 64-year streak of consistent dividend growth. It currently pays a quarterly dividend of $1.49 per share and has a dividend yield of 4.67%, as of December 14.
In the third quarter of 2022, 3M Company reported revenue of $8.6 billion and its organic sales grew by 2% from the same period last year. The company’s operating cash flow for the quarter came in at $1.5 billion and it generated $1.4 billion in free cash flow. It remained committed to shareholder returns, paying over $1 billion in dividends and share repurchases during the quarter.
Citigroup presented a positive stance on industrials due to the improving supply chains and growing profitability of the group. In view of this, the firm maintained a Neutral rating on 3M Company in December.
At the end of Q3 2022, 49 hedge funds tracked by Insider Monkey reported owning stakes in 3M Company, down from 54 in the previous quarter. The collective value of these stakes is over $1.45 billion.
Mayar Capital mentioned 3M Company in its Q2 2022 investor letter. Here is what the firm has to say:
“We also bought back into 3M (NYSE:MMM) as the stock reached attractive levels. We’d sold our shares in 3M last year when the price exceeded our estimated fair value, and as better opportunities to invest in presented themselves at the time. Nonetheless, we’ve always liked this business with its diversified revenues, its R&D leadership and its stable margins.
6. Amgen Inc. (NASDAQ:AMGN)
Number of Hedge Fund Holders: 53
Amgen Inc. (NASDAQ:AMGN) is a California-based multinational biopharmaceutical company that manufactures medicines for patients with serious illnesses. In December, Piper Sandler raised its price target on the stock to $299 with an Overweight rating on the shares, after the company reached a deal to buy Horizon Therapeutics.
In Q3 2022, Amgen Inc. posted revenue of $6.6 billion, which fell by 0.9% from the same period last year. However, the company’s revenue beat analysts’ consensus by $90 million. Its cash flow generation also remained strong during the quarter, with $2.8 billion in free cash flow, compared with $2.2 billion during the prior-year quarter.
On December 13, Amgen Inc. declared a 10% hike in its quarterly dividend to $2.13 per share. The company is one of the best dividend stocks on our list as it has raised its payouts every year since 2011. As of December 14, the stock has a dividend yield of 3.15%. In addition to Caterpillar Inc., Exxon Mobil Corporation, and AbbVie Inc., investors are also paying attention to AMGN due to its dividend growth track record.
At the end of Q3 2022, 53 hedge funds in Insider Monkey’s database owned stakes in Amgen Inc., compared with 55 in the previous quarter. These stakes are worth over $1.55 billion collectively.
5. The Coca-Cola Company (NYSE:KO)
Number of Hedge Fund Holders: 59
An American leading beverage company, The Coca-Cola Company (NYSE:KO) is one of the strongest dividend payers in the market. The company has paid regular dividends to shareholders since 1920 and has raised its payouts consistently for the past 60 years. It currently pays a quarterly dividend of $0.44 per share and has a dividend yield of 2.73%, as of December 14.
In December, Deutsche Bank raised its price target on The Coca-Cola Company to $62 with a Hold rating on the shares, highlighting the company’s positive developments this year.
As of the end of Q3 2022, 59 hedge funds in Insider Monkey’s database owned stakes in The Coca-Cola Company, with a collective value of $25 billion. Berkshire Hathaway was the company’s largest stakeholder with 400 million shares.
Carillon Tower Advisers mentioned The Coca-Cola Company in its Q3 2022 investor letter. Here is what the firm has to say:
“Shares of The Coca-Cola Company (NYSE:KO) sold off with consumer staples even as the company reported strong pricing for the second quarter. On average, product prices rose with management hinting at further momentum.”
4. Verizon Communications Inc. (NYSE:VZ)
Number of Hedge Fund Holders: 62
Verizon Communications Inc. (NYSE:VZ) is a New York-based telecommunications company. In the third quarter of 2022, the company’s revenue of $34.2 billion saw a 4% growth from the same period last year. The company’s operating cash flow came in at $28.2 billion year-to-date and its free cash flow amounted to $12.4 billion.
Verizon Communications Inc. holds the longest dividend growth track record in the US telecom industry. The company has raised its dividends for the past 16 years in a row, which makes it one of the best dividend stocks on our list. It currently pays a quarterly dividend of $0.6525 per share and has a dividend yield of 6.91%, as of December 14.
Verizon Communications Inc. saw growth in hedge fund positions in Q3 2022, as 62 funds in Insider Monkey’s database owned stakes in the company, up from 58 in the previous quarter. The collective value of these stakes is over $1.42 billion.
Mawer Investment Management mentioned Verizon Communications Inc. in its Q3 2022 investor letter. Here is what the firm has to say:
“There are a few other segments of our portfolios that displayed weakness in the quarter. Cable and telecommunication companies have been an area that has lagged the broader market as their worlds are increasingly colliding. Companies such as Verizon (NYSE:VZ) has been impacted as wireless operator is spending heavily to attract internet subscribers with fixed wired access and the cable companies are trying to build wireless businesses.”
3. Chevron Corporation (NYSE:CVX)
Number of Hedge Fund Holders: 66
Chevron Corporation (NYSE:CVX) is an American multinational energy company. The company remained committed to its shareholder return in Q3 2022, distributing $2.7 billion in dividends. Its dividend payments showed a 6% growth from the same period last year.
Chevron Corporation currently pays a quarterly dividend of $1.42 per share for a dividend yield of 3.26%, as of December 14. The company is one of the best dividend stocks on our list as it maintains a 25-year streak of dividend growth.
The number of hedge funds tracked by Insider Monkey owning stakes in Chevron Corporation grew to 66 in Q3 2022, from 59 in the previous quarter. These stakes have a total value of over $27 billion. Berkshire Hathaway was the company’s leading stakeholder in Q3.
Diamond Hill Capital mentioned Chevron Corporation in its Q1 2022 investor letter. Here is what the firm had to say:
“Other top contributors in Q1 included multinational energy company Chevron Corp. (NYSE:CVX). The company benefited from increased energy demand as COVID-related economic restrictions eased in tandem with concerns regarding supply interruptions related to Russia’s invasion of Ukraine.”
2. Intel Corporation (NASDAQ:INTC)
Number of Hedge Fund Holders: 69
Intel Corporation (NASDAQ:INTC) is a California-based multinational semiconductor company. The company has been raising its dividends consistently for the past seven years and paid dividends for 28 years in a row. Its dividend growth and solid balance sheet make it one of the best dividend stocks on our list. The company currently pays a quarterly dividend of $0.365 per share and has a dividend yield of 5.06%, as of December 14.
Intel Corporation reported strong earnings in the third quarter of 2022. The company expects its revenue to be between $14 billion to $15 billion in the next quarter.
As of the end of the September quarter, 69 hedge funds owned stakes in Intel Corporation, up from 65 in the previous quarter. These stakes have a total value of roughly $2 billion. With over 15 million shares, Two Sigma Advisors was one of the company’s leading stakeholders in Q3.
ClearBridge Investments mentioned Intel Corporation in its Q3 2022 investor letter. Here is what the firm has to say:
“Also on the detractor side, Intel Corporation (NASDAQ:INTC) delivered a disappointing revenue miss and lowered full-year revenue and earnings guidance as COVID-19-driven demand for PCs abated (where Intel enjoys half its sales) and a delay in its flagship Sapphire Rapids CPU hurt its data center business. Despite these issues, we still believe Intel is an economically sensitive turnaround story with substantial upside.”
1. Merck & Co., Inc. (NYSE:MRK)
Number of Hedge Fund Holders: 82
Merck & Co., Inc. has been raising its dividends consistently for the past 12 years. It currently offers a quarterly dividend of $0.73 per share and has a dividend yield of 2.61%, as recorded on December 14.
At the end of Q3 2022, 82 hedge funds tracked by Insider Monkey presented a bullish stance on Merck & Co., Inc., up from 79 in the previous quarter. The stakes owned by these hedge funds have a total value of over $4.7 billion.
Chartwell Investment Partners mentioned Merck & Co., Inc. in its Q2 2022 investor letter. Here is what the firm has to say:
“In the Dividend Equity accounts, the three best performers in Q2 includes Merck (NYSE:MRK, 3.6%), up 12.0%. Merck, like other pharma companies, is in a defensive business, but the stock also did well as peak-sales estimates for their flagship drug, Keytruda, have gone up (JPMorgan estimates $32 billion in sales by 2026).”
You can also take a look at 16 Best Dividend Stocks of 2022 and 12 Defensive Healthcare Dividend Stocks To Buy
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This article is originally published at Insider Monkey.
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