Billionaires Like These Five Dividend Stocks

At Insider Monkey, we track around 730 hedge funds and other institutional investors as part of our small-cap strategy (see more details here). Among these funds, around 40 are managed or were led by investors who became billionaires. This group is particularly interesting, because billionaire investors stand above the rest of the crowd of smart money investors due to their unique stock-picking skills and views on the market that helped them generate outstanding returns. For example, Warren Buffett‘s last investor letter showed that Berkshire managed to generate a total return of 1,826,163% since 1965. If you could have imitated Buffett’s moves, your returns would probably have been lower, but still considerably above the market. With the current environment, many investors are uncertain which stocks to invest in, but most billionaires stuck to their strategies and remain bullish on companies that sport strong fundamentals. A good way to determine a solid investment is to follow dividend stocks and here is where imitating billionaires comes in handy. With this in mind, we have selected five stocks that sport a strong dividend yield and that billionaires in our database are collectively bullish on.

Kraft Heinz Co (NASDAQ:KHC) ranked on the fifth spot in our list of billionaires’ favorite dividend stocks, with 14 investors holding shares as of the end of December, having amassed over $25 billion worth of its stock. Since the merger between Kraft and Heinz was backed by Warren Buffett’s Berkshire and Brazilian-based 3G Capital, Berkshire Hathaway is the largest shareholder of Kraft Heinz Co (NASDAQ:KHC), holding a $23.63 billion position that contains 325.63 million shares. Other funds managed or founded by billionaires that are bullish on the company include David E. Shaw’s D. E. Shaw, Israel Englander’s Millennium Management, and Andreas Halvorsen’s Viking Global.

Kraft Heinz Co started trading in July last year and its stock has inched up by slightly more than 2% since going public. Following the merger, the company announced a dividend of $0.55 per share, which later was raised to $0.57 and the stock currently sports a dividend yield of 2.95%. Kraft Heinz Co (NASDAQ:KHC) is yet to achieve the synergies from the merger and management anticipated earlier to realize $1.5 billion in cost savings and for the merger to be EPS accretive by 2017. Nevertheless, at the current levels and with support from investors like Warren Buffett, Kraft Heinz Co represents a good long-term bet with a solid dividend as well.

Let’s move on to healthcare, particularly Teva Pharmaceutical Industries Ltd (ADR) (NYSE:TEVA), whose stock sports a dividend yield of 2.36%, and which saw its popularity among the billionaires we track increase considerably during the fourth quarter. A total of 15 billionaires’ funds held shares of Teva heading into 2016, which compares to 10 funds a quarter earlier. The move comes amid a 19% growth registered by the stock between October and December and the funds in question amassed $4.75 billion worth of shares, considerably above the $2.42 billion figure held a quarter earlier. Two largest shareholders of Teva Pharmaceutical Industries Ltd (ADR) (NYSE:TEVA) in our database are billionaires Andreas Halvorsen’s Viking Global and John Paulson’s Paulson & Co., which own 25.04 million shares and 20.41 million shares, respectively.

Teva Pharmaceutical Industries Ltd (ADR) (NYSE:TEVA) pays a dividend of $0.34 per share and at 9.3 times forward earnings, the stock looks attractive. More importantly, Teva is in the process of acquiring the generic business from Allergan in a $40.5 billion deal that would create one of the largest generic drugs companies worldwide. This would allow Teva to be more competitive and if the management commits to returning more capital to shareholders, it is likely that the company will further raise the dividend like it has been doing for the last several years.

Apple Inc. (NASDAQ:AAPL) is the only company in this list that registered a slight decline in popularity among the billionaires we follow. At the end of December, 17 funds held shares of the tech giant, versus 18 funds a quarter earlier. As we stated in a previous article, the total number of funds from our database with long positions in Apple stayed unchanged at 133 during the fourth quarter, but the stock fell several spots in our ranking of the most popular stocks (read more details here).  Apple’s stock has lost nearly 26% in the last 52 weeks and with the company paying a dividend of $0.52 per share, the stock currently sports a dividend yield of 2.15%.

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Trading at a forward P/E of 9.5, Apple Inc. (NASDAQ:AAPL)’s stock seems very cheap, although one of the reasons for its undervaluation is the company’s dependency on a single product – the iPhone, which might soon find itself in a more competitive and oversaturated market. Nevertheless, at the moment Apple has a strong balance sheet and a considerable amount of cash that it can use for stock buybacks and dividends, which is why Apple Inc. (NASDAQ:AAPL) is considered a good short to medium-term investment. Meanwhile, billionaire Carl Icahn‘s Icahn Capital trimmed its position in Apple by 14% during the fourth quarter and owns 45.76 million shares as of the end of 2015. Other billionaires bullish on the stock are Ken Fisher, Chase Coleman and David Einhorn.

On the second spot on our list is Pfizer Inc. (NYSE:PFE), in which 19 billionaires’ funds reported long positions as of December 31, higher than 15 funds a quarter earlier. Pfizer’s stock has slid by more than 12% over the last year and it currently sports a dividend yield of 3.73%, which is one of the highest among major drug manufacturers. For the last several years, Pfizer Inc. (NYSE:PFE) has been consistently increasing its quarterly dividend by $0.02 per share and last reported a dividend of $0.30 per share.

Pfizer has been in the spotlight lately as it is currently in the process of acquiring Allergan plc (NYSE:AGN) and, following the transaction, it plans to relocate its headquarters to Dublin, which would allow it to reduce its tax bill. The inversion move sparked some discussions in the investment community as well as in Washington and following the upcoming elections, the lawmakers are expected to address the issue of companies relocating abroad to cut their tax expenses. Nevertheless, as a standalone company Pfizer has a well established business and even though it has been struggling lately and reported earnings and revenue lower in year-on-year terms, its mainly due to a stronger dollar. The acquisition of Allergan will allow Pfizer Inc. (NYSE:PFE) to benefit from a larger portfolio of fast-growing products and the merger would allow Allergan to use some of Pfizer’s cash flow to reduce its debt. Meanwhile, among the billionaire-founded funds bullish on Pfizer are Ken Fisher’s Fisher Asset Management, D. E. Shaw and Jim Simons’ Renaissance Technologies.

Finally, the most popular dividend stock among the billionaires we track is Microsoft Corporation (NASDAQ:MSFT), in which 20 funds reported stakes in the latest round of 13F filings, compared to 18 funds a quarter earlier. The largest shareholder of Microsoft among the investors we follow is billionaire Jeff Ubben‘s ValueAct Capital, which reported 56.62 million shares as of the end of December. Microsoft pays a dividend of $0.36 per share, which gives its stock a yield of 2.81%.

Microsoft Corporation (NASDAQ:MSFT)’s stock has jumped by over 16% over the last year as the company is adjusting well to the current environment marked by a decline in the PC market and registers strong growth in the cloud space. In addition, the company’s Surface Book laptop released last year was well received by customers and the Windows 10 operating system was also a hit with more than 200 million downloads. Overall, Microsoft Corporation (NASDAQ:MSFT) represents a good dividend stock to invest in and its spot as the second most popular tech stock among billionaires in our database (trailing only Facebook) is well-deserved.

Disclosure: none