Five Dividend Stocks Billionaires Like

Dividends are a shareholder’s best friend. Not only do dividend stocks have wider moats than the average stock, but studies have also shown that the best dividend stocks beat the market in the long run.

At Insider Monkey, we follow over 740 smart money investors, including more than 60 funds that are currently managed or were run by billionaires. Assuming that this particular group has much better stock-picking skills, let’s take a look at some of these billionaires’ funds favorite dividend stocks, which include Pfizer Inc. (NYSE:PFE), Intel Corporation (NASDAQ:INTC), The Coca-Cola Co (NYSE:KO), Macy’s Inc (NYSE:M), and Marathon Petroleum Corp (NYSE:MPC).

Through extensive research, we determined that imitating some of the picks of hedge funds and other institutional investors can help generate market-beating returns over the long run. The key is to focus on the small-cap picks of these investors, since they are usually less followed by the broader market and are less price-efficient. Our backtests that covered the period between 1999 and 2012, showed that following the 15 most popular small-caps among hedge funds can help a retail investor beat the market by an average of 95 basis points per month (see the details here).

#5 Marathon Petroleum Corp (NYSE:MPC)

— Nr. of Billionaires Holding Shares (as of June 30): 10

— Total Value of Holdings (as of June 30): $1.08 billion

According to our records, 10 billionaires owned shares of Marathon Petroleum Corp (NYSE:MPC) at the end of June, up from six billionaires at the end of March. Although refining margins narrowed sharply in the first half, Marathon Petroleum Corp’s $1.44 per share annual dividend, which represents a 3.35% dividend yield at current prices, is safe. Not only are refiners cutting back on processing in the second half (and thus likely widening the refining margin again), but also Marathon’s payout ratio is just 35.2%. In previous quarters, Marathon’s management has used the other cash flow to buy back stock. The company is also confident in its future and on July 27, the company’s board of directors raised the quarterly dividend by 12.5% to $0.36 per share. 

#4 Macy’s Inc (NYSE:M)

— Nr. of Billionaires Holding Shares (as of June 30): 10

— Total Value of Holdings (as of June 30): $280.79 million

Although billionaire and Presidential candidate Donald Trump may not be as big of a fan of the department store as he used to, other billionaires certainly still like the stock. According to our records, the number of billionaires long Macy’s Inc (NYSE:M) rose by two quarter-over-quarter to 10 on June 30. Given that department stores are relatively insulated from competition from the likes of Amazon.com, Inc. (NASDAQ:AMZN), Macy’s dividend of $1.51 annually (4.18% yield at current prices, payout ratio of 58.6%) is safe. With a forward P/E of 10.42, the stock could also be considered a value play.

#3 The Coca-Cola Co (NYSE:KO)

— Nr. of Billionaires Holding Shares (as of June 30): 10

— Total Value of Holdings (as of June 30): $19.29 billion

A total of 55 investors from our database, including 10 billionaires owned shares of The Coca-Cola Co (NYSE:KO) at the end of the second quarter, with Warren Buffett‘s Berkshire Hathaway among them. Many billionaires own Coca-Cola because its products don’t cost very much and demand doesn’t fall as hard during recessions. Due to those characteristics, Coca Cola’s cash flows are very stable and its dividend is very secure. Coca-Cola has raised its dividend payout every year for 53 straight years, giving it a current annual dividend of $1.40, which translates into a 3.2% yield at current prices.

#2 Intel Corporation (NASDAQ:INTC)

— Nr. of Billionaires Holding Shares (as of June 30): 11

— Total Value of Holdings (as of June 30): $1.62 billion

With 11 billionaires out of 57 funds tracked by us that were bullish on the stock at the end of June, Intel Corporation (NASDAQ:INTC) is the second favorite dividend stock on our list. Although its dividend history isn’t as great as Coca-Cola’s, Intel has nevertheless maintained or raised its dividend every year since 1993. With a payout ratio of 0.46 and an expected next 5-year annual growth rate of 10%, billionaires expect Intel to maintain its tradition of raising its dividend for the foreseeable future too. Helping to secure the company’s $1.04 per share annual dividend is management’s focus on cost cuts and Intel’s progress in emerging growth markets such as the Internet of Things.

#1 Pfizer Inc. (NYSE:PFE)

— Nr. of Billionaires Holding Shares (as of June 30): 12

— Total Value of Holdings (as of June 30): $2.54 billion

At the end of June 12 billionaires from our database held shares of Pfizer Inc. (NYSE:PFE) in their portfolios and, overall, 94 investors tracked by us reported long positions in the stock. One reason for Pfizer’s popularity among the smart money crowd is good execution. Pfizer soundly beat expectations for its second quarter, with EPS of $0.64 on revenue of $13.15 billion, which topped the consensus estimates by $0.02 and $140 million, respectively. Guidance is similarly upbeat, with the company reaffirming adjusted EPS guidance of $2.38 to $2.48 for the full year. The other reason is Pfizer’s quarterly dividend of $0.30 per share, giving it a safe dividend yield of 3.45%, or over twice as high as the current 10-year Treasury yield.

Disclosure: none