In this article, we will take a look at billionaire Cliff Asness’ top 10 dividend stocks.
Billionaire Cliff Asness is the founder of AQR Capital Management, one of the largest hedge funds in the world. In 1998, Asness, along with several of his Goldman Sachs colleagues, founded AQR Capital Management after they ran $7 billion for Goldman Sachs Asset Mangement’s quantitative research group that realized substantial success.
At AQR Capital Management, which stands for ‘Applied Quantitative Research Capital Management’, Asness and his colleagues did similar things where they took substantial market data, processed it, and applied it to the markets. Given AQR Capital Management’s track record since its founding, the fund now has a 13F portfolio worth over $41 billion as of the end of September.
Although the fund had a challenging 2018 to 2020, the fund had a strong 2021. In terms of 2022, some of AQR’s most famous funds are up this year as of April 2022.
2022 has been challenging given the high inflation and central bank tightening. Given the interest rate increases, U.S. Treasury yields have increased substantially and many dividend stocks are not as attractive to some investors as they were before as a result.
Nevertheless, October’s inflation data shows that inflation could be peaking. If inflation has peaked, interest rates might not rise that much further and high quality blue chip dividend stocks could potentially be attractive in the long term given the lower valuations.
Given the uncertainty, it could be a good idea for long term investors to own a diversified portfolio of stocks across many different sectors.
Cliff Asness of AQR Capital Management
Methodology
For our list of Billionaire Cliff Asness’ Top 10 Dividend Stocks, we took 10 stocks from Cliff Asness’ AQR Capital Management’s top holdings in its 13F portfolio at the end of Q3 2022 that paid dividends and we ranked them based on AQR Capital Management’s stake in the stocks.
Billionaire Cliff Asness’ Top 10 Dividend Stocks
10. Johnson & Johnson (NYSE:JNJ)
AQR Capital Management’s Stake Value as of 9/30: $326,259,000
Percentage of AQR Capital Management’s 13F Portfolio as of 9/30: 0.79%
Dividend Yield as of 11/17: 2.61%
Johnson & Johnson is a healthcare giant whose shares are up 1.4% year to date. Given that the company has been well run and it has substantial pricing power, Johnson & Johnson has raised its annual dividend for over 60 years. Despite the strong dollar and high inflation, the company’s recent results have been strong. For Q3, Johnson & Johnson reported adjusted earnings of $2.55 per share on sales of $23.8 billion versus estimates of $2.48 on revenue of $23.4 billion. AQR Capital Management has a stake of over $326 million in the giant as of the end of September.
Alongside Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM), Microsoft Corporation (NASDAQ:MSFT), and Apple Inc. (NASDAQ:AAPL), Johnson & Johnson is a dividend stock owned by billionaire Cliff Asness’ AQR Capital Management at the end of Q3 2022.
9. Cisco Systems, Inc. (NASDAQ:CSCO)
AQR Capital Management’s Stake Value as of 9/30: $335,677,000
Percentage of AQR Capital Management’s 13F Portfolio as of 9/30: 0.81%
Dividend Yield as of 11/17: 3.42%
Although shares are down 26.2% year to date, Cisco Systems, Inc. (NASDAQ:CSCO) shares are up 11.5% in the last month thanks to the broader market rally. Shares of the computer network product maker also have a dividend yield of 3.42% as of 11/17. With inflation potentially peaking, there’s hope that interest rates won’t go up as much as expected. If interest rates don’t go up as much, valuations for big tech companies like Cisco Systems, Inc. could benefit. AQR Capital Management has a stake of over $335 million in Cisco Systems, Inc. at the end of Q3.
8. Merck & Co., Inc. (NYSE:MRK)
AQR Capital Management’s Stake Value as of 9/30: $338,191,000
Percentage of AQR Capital Management’s 13F Portfolio as of 9/30: 0.82%
Dividend Yield as of 11/17: 2.76%
Merck & Co., Inc. has been one of the best performing large capitalization stocks in 2022 with shares up 33% year to date. Furthermore, Merck & Co., Inc. is also a dividend stock given its yield of 2.76% as of 11/17. With a stake of over $338 million at the end of September 30, AQR Capital Management’s 13F portfolio has likely benefited from Merck & Co., Inc.’s recent rise from $86.12 on 9/30 to $102.31 as of 11/17. One reason for the rally could be higher expected earnings. According to Barron’s, analysts expect Merck & Co., Inc. to earn on average $7.37 in EPS for 2022, $7.53 for 2023, and $8.69 for 2024.
7. Gilead Sciences, Inc. (NASDAQ:GILD)
AQR Capital Management’s Stake Value as of 9/30: $340,112,000
Percentage of AQR Capital Management’s 13F Portfolio as of 9/30: 0.82%
Dividend Yield as of 11/17: 3.52%
Like its peer Merck & Co., Inc., Gilead Sciences, Inc. (NASDAQ:GILD) shares have performed well in 2022 with shares up 15.2% year to date. With AQR Capital Management owning over $340 million worth of Gilead Sciences, Inc. at the end of September 30, the fund has likely benefited from the stock’s rise from $61.69 at the end of September to $83.62 as of November 17. In November, Jasper Hellweg of Argus raised his price target to $100 from $70 and kept a ‘Buy’ rating on Gilead Sciences, Inc. citing pipeline and regulatory progress. As of 11/17, Gilead Sciences, Inc. shares have a dividend yield of 3.52%.
6. CVS Health Corporation (NYSE:CVS)
AQR Capital Management’s Stake Value as of 9/30: $365,686,000
Percentage of AQR Capital Management’s 13F Portfolio as of 9/30: 0.89%
Dividend Yield as of 11/17: 2.29%
CVS Health Corporation (NYSE:CVS) is a dividend stock given its yield of 2.29% as of 11/17. As of 9/30, AQR Capital Management was a substantial holder of the stock with a stake value of over $365 million. For FY22, the company sees adjusted EPS guidance range of $8.55-$8.65 and full year 2022 cash flow from operations guidance range to $13.5 billion to $14.5 billion.
Vltava Fund commented on CVS Health Corporation in a Q3 2022 investor letter,
“CVS is a leader in the provision of healthcare services in the USA. It has three main businesses: an enormous network of pharmacies, a health insurance company, and “prescription benefit management”, which is a kind of intermediary between insurance companies and pharmacies. This is the result of large acquisitions over the past 15 years – most notably of Caremark (2007) and Aetna (2018). The markets had deemed its acquisition of health insurer Aetna too expensive (and we agree), so CVS stock then fell into disfavour for a few years.
We took advantage of this in the summer of 2020 and brought the stock into our portfolio at a time when its price was pressed down still further by the coronavirus pandemic. CVS is a giant. It has revenues of USD 300 billion, making it one of the largest companies in the world. It is a relatively stable and highly profitable company with strong free cash flow. Over the past few years, CVS has focused primarily on reducing debt.
This is already much lower than it had been after the Aetna acquisition, and most of the cash is now likely to go to shareholders through share buybacks or be used for smaller acquisitions to grow the company further. CVS trades at about 11 times annual earnings, which is a very appealing valuation given the expected future growth in profitability and overall modest cyclicality in its business.”
Like CVS Health Corporation, Taiwan Semiconductor Manufacturing Company Limited, Microsoft Corporation, and Apple Inc. are among billionaire Cliff Asness’ AQR Capital Management’s top dividend stocks at the end of Q3 2022.
5. Exxon Mobil Corporation (NYSE:XOM)
AQR Capital Management’s Stake Value as of 9/30: $379,998,000
Percentage of AQR Capital Management’s 13F Portfolio as of 9/30: 0.92%
Dividend Yield as of 11/17: 3.22%
AQR Capital Management owned almost $380 million worth of oil giant Exxon Mobil Corporation (NYSE:XOM) at the end of September, making it one of the fund’s largest positions. Although oil and gas prices can go up and down substantially based on supply and demand, Exxon Mobil Corporation has benefited from higher energy prices this year and shares of the company have outperformed the market with a 78% year to date rally. Exxon Mobil Corporation shares also have a dividend yield of 3.22% as of 11/17.
4. Pfizer Inc. (NYSE:PFE)
AQR Capital Management’s Stake Value as of 9/30: $467,588,000
Percentage of AQR Capital Management’s 13F Portfolio as of 9/30: 1.13%
Dividend Yield as of 11/17: 3.33%
Pharmaceutical and vaccine giant Pfizer Inc. (NYSE:PFE) is one of AQR Capital Management’s top positions given the fund’s stake of over $467 million at the end of Q3 in the stock. Although shares of Pfizer Inc. have fallen 14.7% year to date given that analysts expect the company’s earnings per share to decrease in 2023 and 2024, Pfizer Inc. expected earnings should more than cover its annual forward dividend of $1.6 per share. At its current price, Pfizer Inc. shares have a dividend yield of 3.33%.
3. Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM)
AQR Capital Management’s Stake Value as of 9/30: $492,567,000
Percentage of AQR Capital Management’s 13F Portfolio as of 9/30: 1.2%
Dividend Yield as of 11/17: 2.3%
With AQR Capital Management’s position of over $492 million at the end of September, Taiwan Semiconductor Manufacturing Company Limited ranks #3 on our list of Billionaire Cliff Asness’ Top 10Dividend Stocks. While it faces geopolitical risk if tensions between China and the United States rise, Taiwan Semiconductor Manufacturing Company Limited is the leader in making crucial semiconductors that power many of today’s most advanced devices. As a result, Warren Buffett’s Berkshire Hathaway recently disclosed a $4.1 billion position in Taiwan Semiconductor Manufacturing Company Limited at the end of Q3 too.
2. Microsoft Corporation (NASDAQ:MSFT)
AQR Capital Management’s Stake Value as of 9/30: $1,106,019,000
Percentage of AQR Capital Management’s 13F Portfolio as of 9/30: 2.69%
Dividend Yield as of 11/17: 1.13%
Although its dividend yield is only 1.13% as of 11/17, Microsoft Corporation is a dividend growth stock given the company has increased its annual dividend for 19 straight years. Given analysts expect Microsoft Corporation to earn $9.27 per share for 2022, $9.51 per share for 2023, $11.18 per share for 2024, and $13.28 per share for 2025, the company’s dividend will likely continue to grow in the medium term if Microsoft Corporation meets earnings estimates. As of 9/30, AQR Capital Management owned over $1.1 billion worth of Microsoft Corporation.
Diamond Hill commented on Microsoft Corporation in a Q3 2022 investor letter,
Also among our bottom contributors were media and technology giant Alphabet, software and IT services provider Microsoft Corporation and insurance company American International Group (AIG). Microsoft shares declined in Q3, along with other tech companies, as rising interest rates impacted the near-term outlook. We expect the business to continue to generate strong revenue growth and benefit from operating leverage. Microsoft’s cloud computing services business, Azure, is generating robust growth, confirming its competitive positioning.
1. Apple Inc. (NASDAQ:AAPL)
AQR Capital Management’s Stake Value as of 9/30: $1,377,056,000
Percentage of AQR Capital Management’s 13F Portfolio as of 9/30: 3.35%
Dividend Yield as of 11/17: 0.62%
With a holding of over $1.37 billion as of the end of Q3, Apple Inc. is AQR Capital Management’s largest position as the tech giant accounts for 3.35% of the fund’s 13F equity portfolio. Given Apple Inc.’s huge market capitalization of over $2.3 trillion, AQR Capital Management is actually underweight the stock versus the company’s weight in the S&P 500 index, for instance. As of 11/17, Apple Inc. has a dividend yield of 0.62%.
Wedgewood Partners commented on Apple Inc. in a Q3 2022 investor letter,
“Apple Inc. grew revenues +5% (foreign exchange adjusted and excluding Russia) driven by record iPhone revenues that were up about +3% on an exceptional year ago comparison of +50%. Apple’s installed base is over 1.8 billion devices which helps drive a software and services business that has generated almost $80 billion of revenue over the past 4 quarters. As we have highlighted in the past, Apple’s relentless focus on the development and integration between hardware (especially ICs) as well as software, continues to add significant value for customers of its products and services. We expect this favorable competitive dynamic to continue for the foreseeable future.”
You can also take a look at 15 Biggest IT Companies in the World and 15 Biggest Insurance Companies in the World.
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This article is originally published at Insider Monkey.
