Dividend Stock Portfolio: 10 Stock Picks by Hedge Funds

Published November 17, 2021 at 10:25 am EST Updated September 7, 2026 at 11:24 am EDT

In this article, we will discuss dividend stock portfolio: 10 stock picks by hedge funds.

Following the pandemic, many companies were compelled to decrease dividends. The recent quarters have seen a steady improvement in these payments to shareholders. According to BMO Capital Markets, dividends climbed by 4% in the second quarter of 2021 compared to the same period the previous year. This was 6.5% higher than the pandemic low established in the third quarter of 2020.

Howard Silverblatt, a senior index analyst at S&P Dow Jones, was quoted as saying, “dividends are back.” As per S&P Dow Jones Indices, almost 300 companies have increased their dividends this year, contributing towards the annual dividend payment of $522 billion YTD, reflecting a rise of 8.1% since the last year.

However, despite the dividends increasing, the dividend yields continue to remain low. Bob Pisani at CNBC reported:

“Because of the relentless rise in the S&P this year (up about 24% year-to-date), dividend yields, at 1.3%, are near historic lows.”

The lowest yields ever recorded were in September 2000 at 1.14%.

If you are looking at long-term investing, it is important to opt for corporations that offer a healthy dividend yield on the back of a strong bottom line and cash flows. According to AFH Wealth Management, with a number of stocks in the FTSE 100 index yielding above 4%, it is still possible for a dividend investor to build a portfolio that will provide a steady stream of income.

Photo by Vitaly Taranov on Unsplash

Our Methodology

With this context in mind, let’s discuss the 10 dividend-paying stock picks by hedge funds.

These are some of the most popular dividend stocks based on the data of 873 hedge funds tracked by Insider Monkey.

We have kept a dividend yield of more than 2% as an eligibility criterion for this list. We have also made use of analyst ratings and the hedge fund sentiment concerning each stock. Notable names on the list include the leading investment bank JPMorgan Chase & Co., the financial giant Citigroup Inc. (NYSE:C), and the pharmaceutical behemoth Johnson & Johnson.

Why pay attention to hedge fund sentiment while choosing stocks? Insider Monkey’s research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 86 percentage points since March 2017. Between March 2017 and July 2021, our monthly newsletter’s stock picks returned 186.1%, vs. 100.1% for the S&P 500 ETF (SPY). Our stock picks outperformed the market by more than 86 percentage points (see the details here). That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to. You can subscribe to our free newsletter on our homepage to receive our stories in your inbox.

Dividend Stock Portfolio: 10 Stock Picks by Hedge Funds

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

Number of Hedge Fund Holders: 68

Dividend Yield as of November 10: 2.37%

The Procter & Gamble Company is a name that belongs to the prestigious group of Dividend Aristocrats List. The Cincinnati, Ohio-based multinational consumer goods corporation has been increasing its annual dividend for the past 65 consecutive years.

Procter & Gamble Company was able to surpass analysts’ revenue and earnings estimates for Q1 FY22 due to the strong growth of nine out of ten business segments. The company posted an EPS of $1.61, beating the analysts’ estimate of $1.59. Despite the global supply chain concerns, the company reiterated its FY 2022 guidance of revenues growing by 2% to 4% and EPS increasing by 3% to 6%, undeterred by a $2.3 billion headwind due to higher commodity and freight cost putting pressure on margins. Furthermore, the company reiterated its plan of paying out $8 billion in dividends in FY 2022.

On October 5, Bryan Spillane at Bank of America reinitiated his coverage on Procter & Gamble Company with a Buy rating and a $160 target price. He believes that the company is reaping the benefit of product innovation and has the potential to navigate itself during these challenging times due to supply chain disruption.

JPMorgan Chase & Co., Citigroup Inc., and Johnson & Johnson are amongst the other popular stocks in the dividend stock portfolio.

9. Morgan Stanley (NYSE:MS)

Number of Hedge Fund Holders: 69

Dividend Yield as of November 10: 2.86%

Morgan Stanley (NYSE:MS) in July this year doubled its dividend payout and announced a handsome stock repurchase program to increase the value of the stock. The announcement of doubling the dividend was made to compensate for the dividend freeze during the COVID-19 pandemic in 2020.

Investment management firm ClearBridge Investments discussed its stance on Morgan Stanley in its Q2 2021 investor letter. Here’s what the fund said:

“The Strategy also benefited from strong showings from financials holdings such as recent addition Morgan Stanley, a leading bank holding company offering a variety of financial services worldwide, and one of the largest broker-dealers, investment banks and wealth managers in the U.S. Morgan Stanley has been a leader in helping direct capital to address global sustainability challenges. Its sustainability efforts include capital markets actions such as issuing green bonds and it was early in its support for sustainability in investing and its concern for the environment. Morgan Stanley reported a great quarter with record revenues and strength across the businesses as it works to integrate and find synergies with recent acquisition E*TRADE. Following stress tests for banks, Morgan Stanley increased its dividend and share repurchase plan more than expected.”

The investment banking division of the company has been riding the IPO and SPAC wave for the past two years, which has helped the company generate strong revenues. Furthermore, Morgan Stanley also made a smart plan through the acquisition of E-Trade financials and Eaton Vance in 2020. The electronic trading platform had $56 billion in deposits at the time of the takeover.

Keith Horowitz, a Citi analyst, maintained a Neutral rating on Morgan Stanley stock but raised the price target from $100 to $105 on October 18, citing the company’s ‘strong quarter’ results.

8. ViacomCBS Inc. (NASDAQ:VIAC)

Number of Hedge Fund Holders: 71

Dividend Yield as of November 10: 2.71%

ViacomCBS Inc. (NASDAQ:VIAC) is a legacy entertainment and mass media conglomerate company with access to over 4.3 billion subscribers across 180 countries. Notable network, studio, and streaming brands like Showtime, Paramount+, the CW, and CBS fall under the domain of the corporation. The company was created as a result of a merger between Viacom and CBS in August 2019.

ViacomCBS Inc. is one of the new players in the streaming industry that pays out a dividend. The company’s annual dividend payment comes in at around $600 million.

The company is shifting its focus towards developing strong streaming platforms. In this regard, ViacomCBS Inc. has partnered up with Comcast in launching a new subscription video on demand or SVOD service in Europe across 20 countries and reaching up to 90 million homes by March 2022. Following this development, Steven Cahall at Wells Fargo upgraded the stock from an Equal Weight rating to an Overweight rating and revised the price target from $45 to $60 in August this year. The analyst is impressed by the efforts made by ViacomCBS related to the strategic shift towards a streaming service and believes that the efforts made by the company are “bearing fruit.”

In addition to ViacomCBS Inc., JPMorgan Chase & Co., Citigroup Inc., and Johnson & Johnson are amongst the stocks with a dividend yield of over 2%.

7. Bristol-Myers Squibb Company (NYSE:BMY)

Number of Hedge Fund Holders: 73

Dividend Yield as of November 10: 3.30%

Bristol-Myers Squibb Company (NYSE:BMY) is one of the largest biopharmaceutical companies in the world, headquartered in New York. The company offers treatment in the field of cardiovascular, hematology, immunology therapeutic medicines, and oncology. Bristol-Myers Squibb Company is studying more than 40 diseases and has around 50 compounds in the pipeline. One of the leading compounds in Phase-III of research is Opdivo, which is targeted towards the treatment of solid tumors.

The company’s dividend is hovering around 3.3% around its five-year high with a payout ratio of 26%. This provides the company a lot of space in raising its dividend for the investors. In finding a cure for cancer, the company made an equity investment of $20 million in Compugen Ltd (NASDAQ:CGEN), a leading clinical-stage cancel immunotherapy corporation.

Wedgewood Partners mentioned Bristol-Myers Squibb Company in its Q4 2020 investor letter. Here’s what the fund said:

“Bristol-Myers Squibb recently reported accelerating sales as much of the medical services industry returned to work. The Company continues to expect double-digit earnings growth over the next few years, driven by existing drugs, in addition to a broad pipeline of new drugs and indications. While the market remains fixated on a couple of patent expirations that could occur over the next several years, we think this is well-known at this point, yet the market still undervalues a couple of key acquisitions the Company has made in the past few years, particularly Celgene, which was acquired for a song.”

Amongst the hedge funds, Warren Buffett’s Berkshire Hathaway Inc (NYSE:BRK-B) has a stake worth $1.75 billion in Bristol-Myers Squibb Company at an average price of $60 as of the end of the second quarter of 2021. The stock price is still hovering around the $60 level.

6. Intel Corporation (NASDAQ:INTC)

Number of Hedge Fund Holders: 78

Dividend Yield as of November 10: 2.74%

Intel Corporation (NASDAQ:INTC) is the world’s biggest semiconductor chip manufacturer in terms of revenue. The semiconductor industry is on fire as the global sales of semiconductors grew to an all-time high of $144.8 billion at the end of Q3 2021. The sales observed growth of 27.6% from the same quarter last year and 7.4% on a sequential basis.

However, the company is diversifying itself from the semiconductor business as the industry is commoditized with very little room for differentiation. Intel Corporation is heavily betting on the foundry business. The foundry business is focused on providing customers with a wide range of silicon design and manufacturing services to fulfill their own unique product needs. Intel Corporation is expected to have a capital outlay of over $20 billion towards its foundry business. However, this should not concern dividend investors as the company has $20 billion worth of cash on its book, which can easily sustain an annual dividend payment of roughly $6 billion.

On November 1, Gus Richard, at investment advisory Northland, upgraded Intel Corporation from an Underperform rating to a Market Perform rating with a $49 target, up from $42 previously. Richard believes that the success of the foundry business is slim, but the chance of ending Taiwan Semiconductor Manufacturing Company’s (TSMC) monopoly is still a bet to take on.

Third point LLC shared its stance on Intel Corporation in its Q4 2020 investor letter. Here’s what the investment management firm said:

“After building a significant stake in Intel in Q4, we sent a letter on December 29th to Intel’s Board Chairman, Omar Ishrak. We shared our views regarding Intel’s dramatic underperformance and suggested certain steps the company could take to remedy a rapidly deteriorating outlook. We highlighted an urgent need for Intel to address its “brain drain” of engineering talent, the chief cause of the manufacturing and design deficiencies that have led to its declining market share.

Shortly after our note and engagement with the company, Intel announced it was bringing back Pat Gelsinger as its new CEO. Gelsinger is a respected engineer and manager who previously spent 30 years of his career working closely with Intel’s legendary founders during the company’s best days. With a background in electrical engineering and prior roles such as head of Intel’s digital enterprise group, desktop products group, and Intel Labs, and as the company’s first CTO, Gelsinger has the deep technical expertise needed to address Intel’s current execution issues. He also has a history of success in reinvigorating major organizations. During his eight-year tenure as CEO of VMWare, he put the on-premise company on a path to the hybrid cloud and positioned it for several years of growth ahead.

Equally important, while Gelsinger is a respected engineer, he is also widely lauded as a manager of engineers. It is hard to think of a better person to motivate and inspire the best of Intel’s thousands of brilliant employees who will help build the company’s future.

Once Gelsinger has successfully regained Intel’s position as the premier microprocessor vendor in the world, we believe the opportunity for additional shareholder value creation is enormous. The semiconductor compute TAM is over $100 billion, including CPUs, GPUs, FPGAs, ASICs, and other architectures, and growth is increasingly driven by unstoppable trends like cloud computing and artificial intelligence. Intel’s human, financial, and intellectual property resources are unmatched in the semiconductor industry. The ability to leverage those resources in order to better capture the full unbounded growth of this market opportunity set makes us excited to be long-term shareholders.”

Apart from Intel Corporation, JPMorgan Chase & Co., and Citigroup Inc., Johnson & Johnson is one of the dividend-paying stocks on the hedge funds’ radar as of the second quarter of 2021.

5. Merck & Co., Inc. (NYSE:MRK)

Number of Hedge Fund Holders: 79

Dividend Yield as of November 10: 3.14%

Merck & Co., Inc. is a leading pharmaceutical company operating for the last 130 years. The company’s dividend has grown at an average rate of 5.5% in the past ten years and the payout ratio stands at 45%. The company has been at the forefront in coming up with treatments for deadly diseases like Ebola and HIV.

Now Merck is leading its effort against the COVID-19 pandemic. Although the company was unsuccessful in developing a vaccine against the COVID-19 virus but is the first to come up with an antiviral known as molnupiravir to treat COVID-19.

On November 9, Merck & Co. Inc. announced that the US government will buy 1.4 million more doses of molnupiravir for nearly $1 billion, taking the total doses ordered to 3.1 million doses. However, the order will only be exercised if the drug receives Emergency Use Authorization (EUA) or receives complete approval from the FDA. Merck’s drug against COVID reduces the chances of hospitalization or death by 50% for patients suffering from mild to moderate COVID-19.

Artisan Partners shared its insights on Merck & Co. Inc. in its Q2 2021 investor letter. Here’s what the fund had to say:

“In Q1, we initiated a position in Merck, a provider of health care solutions including prescription medicines, vaccines, biologic therapies, animal health and consumer care products. We purchased Merck when the stock came under pressure in part on concerns that the newly minted Biden administration could implement regulatory changes and lower drug costs in the pharmaceutical industry. Recent, but anticipated changes to Merck’s management team have also weighed on shares, as have concerns over the company’s heavy reliance on immunotherapy treatment Keytruda. Notably, Merck is not getting much credit from investors for the 60+ programs it has in clinical development, despite having several solid and large new product opportunities. Additionally, the company’s strong balance sheet and robust free cash flow provide it multiple options for future partnerships and acquisitions. While Merck is undergoing a period of transition, we think the company’s fundamentals are strong and believe changes to management should be a catalyst for improvement.”

Merck & Co. Inc. has also reached an agreement with the Japanese government to supply 1.6 million doses of molnupiravir for $1.2 billion. However, the deal is also dependent on approval from Japan’s Pharmaceuticals and Medical Devices Agency. It would be interesting to note that the UK’s Medicine and Healthcare Regulatory Agency has given the approval to molnupiravir to be used as the first antiviral for the treatment of COVID-19.

4. AbbVie Inc. (NYSE:ABBV)

Number of Hedge Fund Holders: 82

Dividend Yield as of November 10: 4.88%

AbbVie Inc. (NYSE:ABBV) is a research-based global pharmaceutical company that was split from Abbot Laboratories (NYSE:ABT) in January 2013 and now has become bigger than its parent. Since the spin-off, AbbVie has continued the trend of increasing its annual dividend like Abbott Laboratories has done and is also a part of the Dividend Aristocrat List for increasing its annual dividend for the past 49 consecutive years.

AbbVie Inc. offers a dividend yield that is more than three times higher than the average of the S&P 500 stocks. In the last three years, dividends have increased by 13% and the payout ratio stands at 41%. The company is behind popular drugs like Humira, Skyrizi, and Rinyoq.

In a research note issued on November 1, David Risinger, an analyst at Morgan Stanley increased the price target on AbbVie Inc. from $116 to $124 and maintained an Overweight rating on the stock following a “solid quarter,” on the back of strong performance of the aesthetics division.

Of the 873 hedge funds tracked by Insider Monkey, 82 held a stake in AbbVie Inc. at the end of Q2 2021 in comparison to 72 hedge funds in the previous quarter. This reflects the peaking interest of hedge funds in the healthcare company.

3. Citigroup Inc. (NYSE:C)

Number of Hedge Fund Holders: 87

Dividend Yield as of November 10: 3%

Citigroup Inc. is one of the leading names in the financial sector offering investment banking and financial services. The company is increasing its focus on the six metropolitan cities in the US, despite pursuing a digital-first mindset. The bank believes that customers still value the branch for high-value transactions like mortgages or loans for a small business. On the other hand, the company wound up its consumer banking arm in South Korea and booked a $1.5 billion charge on its financial statements. The bank trades at a relative discount against its industry peers due to its weaker retail consumer division but the management is now focused on exiting non-profitable markets and refocusing the investment towards businesses that earn higher returns.

Citigroup Inc. has been increasing its dividend since Q3 2019. The company’s dividend payout ratio is 21%. Analysts see a possibility of an increase in dividend along with a special one-time dividend that can be paid out by the company in the coming quarters.

In mid-October, James Fotheringham at BMO Capital increased the price target on Citigroup Inc. by $2 to $86. This reflects a potential upside of more than 25% from the current stock price. Fotheringham termed Citi as “the top pick by far” amongst the banks due to its valuation. The analyst anticipates the company to report a higher Return on Average Tangible Common Shareholder’s Equity (RoTCE) in March.

2. Johnson & Johnson (NYSE:JNJ)

Number of Hedge Fund Holders: 88

Dividend Yield as of November 10: 2.61%

Johnson & Johnson is one of the world’s largest healthcare companies that has been operating for 130 years with 130,000 employees currently working across the globe. For dividend investors, it would be interesting to know that the New Jersey-based company is part of the 2021 Dividend Aristocrats list. This is a list of 65 companies that have been increasing their dividend payout annually for at least the past 25 consecutive years. Johnson & Johnson has been increasing its dividend for the past 59 consecutive years.

The company is at the forefront in response to the COVID-19 pandemic. On November 10, the company entered into an agreement with the US government and the Vaccine Alliance, Gavi to provide its single-shot vaccine to the most vulnerable people worldwide through the COVAX Humanitarian Buffer. In addition to this, the company received approval for its booster shots by the US Food and Drug Authority (FDA) on October 20.

Johnson & Johnson was mentioned in the Q2 2021 investor letter of Distillate Capital. Here’s what the investment management firm 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.”

Johnson & Johnson can be considered as a defensive stock with a global footprint and growing dividends. The company’s gross profit margin has been above 70% for the past four years and the operating earnings have grown for the past 35 consecutive years. Furthermore, the company has invested $50 billion since 2017 to acquire other companies for top-line and bottom-line growth.

1. JPMorgan Chase & Co. (NYSE:JPM)

Number of Hedge Fund Holders: 108

Dividend Yield as of November 10: 2.38%

JPMorgan Chase & Co. is an investment bank and financial services firm that provides its services to leading organizations, institutions, and governments globally. The company divides its business into four notable segments. The Consumer and Community Banking segment is for the daily banking needs of the masses. The Corporate and Investment Bank segment caters to the needs of corporations. The Commercial bank segment is into providing payment services. Meanwhile, the Asset and Wealth Management segment invests in various asset classes on behalf of its clients.

Having numerous proven businesses under the same umbrella has resulted in strong cash flows and shareholder returns in the form of dividends. The company’s dividend yield of 2.38% is significantly higher than the S&P 500’s current dividend yield of 1.3%. The interest rates have been depressed since the start of the COVID-19 pandemic to encourage economic activity and companies like JP Morgan Chase are an alternative for lost income that could have been generated by investing in high-yield bonds.

Vltava Fund discussed its stance on JP Morgan Chase & Co. in its Q3 2021 investor letter. Here’s what the fund said:

“While all the previous names could be categorised as founder, continuing, or key shareholders, these last two names fall into the category of hired professional managers. This is actually the most numerous category among the bosses of large companies, but even among them there exist a number of individuals with exceptional long-term track records. In our view, these include also Jamie Dimon and Herman Gref.

We consider JP Morgan to be the strongest, largest, and most profitable bank in the world. It has not always been so, and the fact that it is what it is today can be attributed especially to its CEO Jamie Dimon. Dimon has spent his entire career in banking. He came to JP Morgan in a roundabout way in 2004 after the bank bought Bank One, of which he was CEO at the time. Since early 2006, Dimon has been CEO of the entire JP Morgan.

The quality and strength of JP Morgan under his leadership became fully apparent for the first time in 2008. Not only did JP Morgan help to stabilise the market by taking over the failing Bear Stearns in the spring of that year, but it was the only major US bank that did not require government assistance throughout the Great Financial Crisis and that was highly profitable even in the difficult year of 2008. Today, JP Morgan is even bigger, even more profitable, and even stronger than ever before. Many investors view banks with disdain, but a good bank with good management can be a very good long-term investment. From the time of its merger with Bank One in 2004 through the end of 2020, JP Morgan’s stock has outperformed even the S&P 500 index. The bank has earned a total net profit of USD 330 billion during this period, of which USD 232 billion has been paid out to shareholders in dividends and in share buybacks. I can recommend two books about Jamie Dimon: The House of Dimon and Last Man Standing.”

JP Morgan Chase & Co. reported its Q3 2021 earnings on October 13 and continued its trend of outperforming consensus estimates for the past five consecutive quarters. On October 25, Mike Mayo at Wells Fargo increased the price target on JP Morgan Chase & Co. from $200 to $210 and maintained an Overweight rating on the stock. The analyst highlighted his confidence in the earnings capacity of the company.

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