Five Dividend Aristocrats Hedge Funds Are Bullish On

Amid the latest market volatility, dividend investing is one of the safest bets on the equity markets. Large investors select dividend stocks not just for the continuous distributions that they provide while the stock keeps growing over the years, but also because companies that maintain a stable dividend-paying policy show management’s commitment to rewarding shareholders, as well as serving as a signal of a company’s financial stability. Among the many stocks that pay out dividends there is an elite group known as dividend aristocrats, which are companies that have been raising their dividends for the last 20 years. Given that Insider Monkey tracks almost 800 hedge funds and other large institutional investors, we decided to see how these smart money investors feel about dividend aristocrats. With this in mind, we selected five dividend aristocrats that hedge funds were fond of at the end of last year.

However, even though investing in dividend aristocrats is safer, these stocks might appreciate in value slower than others, which is why they don’t always represent the best risk-payoff combination for smaller investors. The main reason why we track the activity of almost 800 funds is our small-cap strategy, which showed that imitating the 15 most popular small-cap stocks among them can help a retail investor beat the market by around one percentage point per month over the long-run (see more details here).

McDonald’s Corporation (NYSE:MCD) ranks as the favorite dividend aristocrat among the funds in our database and is one of only two stocks in this list that registered an increase in popularity during the final three months of 2015. The number of funds holding shares of McDonald’s Corporation (NYSE:MCD) went up to 84 from 75 during the quarter, while the aggregate value of their holdings went up to $6.74 billion from $6.11 billion and represented roughly 6.20% of the company’s ownership at the end of December. McDonald’s shares appreciated by around 17% over the last 52 weeks, giving the $0.89 dividend that the stock sports a yield of 3.04%. Last year, McDonald’s launched its all-day breakfast program, which boosted its sales and helped the company deliver better-than-expected results last quarter. The company’s fourth-quarter revenue slipped by 3.5% on the year to $6.35 billion, but the decline was mainly attributed to a stronger dollar, while its EPS went up to $1.31, from $1.13 a year earlier. Both EPS and revenue beat analysts’ estimates of $1.23 and $6.22 billion, respectively. McDonald’s Corporation (NYSE:MCD) also showed that its same store sales went up by 5.7% in the fourth-quarter, beating the estimates of 2.7%. The main risk the company faces is the transition of consumers to healthier options, but investors are optimistic that the brand will remain popular and the company will adapt to new trends. Among the funds we track, Jonathon Jacobson’s Highfields Capital Management reported holding 11.90 million shares in its latest 13F filing.

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