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Five Dividend Stocks Hedge Funds Love

Oil baron and America’s first billionaire John D. Rockefeller once said, ‘do you know the only thing that gives me pleasure? It’s to see my dividends coming in’. With tens of millions of more Americans invested in the stock market than in the early 1900’s, it is safe to say that dividends are giving more people pleasure than in the 1900’s. Given the importance of dividends to a security’s total return, we use recently filed 13F filings to take a closer look at some of the hedge fund world’s favorite dividend stocks, including Pfizer Inc. (NYSE:PFE), Wells Fargo & Co (NYSE:WFC), Merck & Co., Inc. (NYSE:MRK), General Motors Company (NYSE:GM), and AbbVie Inc (NYSE:ABBV).

David Smart/

David Smart/

Hedge fund sentiment is an important metric for assessing the long-term profitability. At Insider Monkey, we track over 760 hedge funds, whose quarterly 13F filings we analyze and determine their collective sentiment towards several thousand stocks. However, our research has shown that the best strategy is to follow hedge funds into their small-cap picks. This approach can allow monthly returns of nearly 95 basis points above the market, as we determined through extensive backtests covering the period between 1999 and 2012 (see the details here).

#5 AbbVie Inc (NYSE:ABBV)

– Number of Hedge Fund Holders (as of March 31): 65
– Total Value of Hedge Fund Holdings (as of March 31): $5.28 billion
– Hedge Fund Holdings as Percent of Float (as of March 31): 5.70%

With 65 funds from our database among its shareholders, AbbVie Inc (NYSE:ABBV) is the fifth most popular dividend stock. AbbVie pays an annual dividend of $2.28 per share, which gives its stock a dividend yield of 3.64%. The company’s dividend is relatively safe, given the payout ratio of 64.3% and the expected five-year EPS average growth of 16.4%. The drug company reported better-than-expected earnings for its first quarter, with EPS of $1.15 versus the consensus of $1.13. Humira sales rose 15% year-over-year. Among the funds that own shares of the company is Larry Robbins’ Glenview Capital. Shares are up 8% year-to-date, but trade at a forward P/E of only 11.13.

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#4 General Motors Company (NYSE:GM)

– Number of Hedge Fund Holders (as of March 31): 67
– Total Value of Hedge Fund Holdings (as of March 31): $3.72 billion
– Hedge Fund Holdings as Percent of Float (as of March 31): 7.60%

General Motors Company (NYSE:GM) is betting big on ride sharing. The company made a $500 million investment in ride sharing app Lyft in January, and recently committed to testing self-driving Chevrolet Bolt EVs with Lyft within a year. If the project is successful, Lyft will be a stronger competitor to Uber, making the company a bigger customer of General Motor’s vehicles. Although it has substantial pension liabilities, General Motors has one of the widest moats in the industry given its brand and economies of scale. The company trades for 5.3 times forward earnings and its stock sports a dividend yield of almost 5% at current prices. David Einhorn’s Greenlight Capital was one of the top shareholders of General Motors at the end of March.

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