Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member.

Hedge Funds Are Piling Into These Dividend Stocks: Part I

With the prevalent low interest rate environment, the prospects of stocks paying healthy dividends look extremely promising for an investor. Keeping this in mind, we at Insider Monkey have formulated a list of top five stocks, which rate the highest in terms of attracting investment from the 737 hedge funds that we track, and deliver not only a considerable dividend yield, but also have a reliable dividend history.

Apple, is AAPL a good stock to buy, David Kirkpatrick, Tim Cook, Steve Jobs,

According to our research, following the top picks of hedge funds isn’t necessarily the best strategy for all investors, especially when you are not tied by the limitations imposed on these funds. The empirical evidence of this lies in the fact that the 30 most popular stocks among hedge funds between 1999 and 2009 outperformed the market by only 2% on an annual basis. On the other hand, our research shows that the small-cap picks of these funds outperformed the market annually by double digit rates during the same period. Hence, it is the small-cap companies that can unlock significant value for most investors.

If this were indeed true, the reader might wonder, why the hedge funds themselves do not follow such a strategy in its entirety. The answer to that is that with the huge size of portfolios that these fund managers have under their control, it becomes essential to diversify and there in comes the need to invest in large-cap companies. Moreover, small-cap companies can only take as much investment before their price is stretched to unattractive levels because of excessive demand.

The importance of dividend investing still cannot be undermined as it affords the reader an idea of how this market looks like and what should be their top candidates, if they do decide to proceed in this direction. Companies included in this compilation, according to the last round of 13F filings included Apple Inc. (NASDAQ:AAPL)Microsoft Corporation (NASDAQ:MSFT)Applied Materials, Inc. (NASDAQ:AMAT)Air Products & Chemicals, Inc. (NYSE:APD)Johnson & Johnson (NYSE:JNJ). These companies have a dividend yield of at least 1.40% and have a solid dividend history for the the last two years.

Apple Inc. (NASDAQ:AAPL) ranked first on this list with an overwhelming 149 hedge funds having a total investment of $20.88 billion at the end of the last quarter. The darling of the fund managers pays a dividend of $0.47, which gives it a yield of 1.48%, which is not the most spectacular among this group of five companies, but given the return of 68% that Apple has delivered over the last 52 weeks, the investment in the $737.4 billion tech company has been rewarding for the investors. The famous activist investor, Carl Icahn of Icahn Capital Lp owns a major chunk of Apple Inc. (NASDAQ:AAPL)’s stock amounting to nearly 52 million shares valued at $5.82 million.

Moving on to the second candidate, Microsoft Corporation (NASDAQ:MSFT), which delivered a dividend yield of 2.93%, the highest in this list. The popularity of the tech giant, in terms of the number of hedge funds invested in it, faced a set back during the last quarter as it declined to 15.5% from 17.5% a quarter earlier. Hedge funds that cut their stakes included Jean-Marie Eveillard’s First Eagle Investment Management,  which owned 36.23 million shares valued at $1.68 billion and Boykin Curry‘s Eagle Capital Management, which had 32.13 million shares valued at $1.49 billion. Microsoft Corporation (NASDAQ:MSFT) has been facing a recent sell off on the stock market and the stock is down 8.7% year to date owing to decline in the second quarter earnings per share (EPS) to $0.71 as compared to the $0.78 in the year-earlier period. However, with the fundamentals of the company looking strong, and future growth opportunities stemming from its latest acquisition of Nokia, suggest that the company could prove to be a good investment.

DOWNLOAD FREE REPORT: Warren Buffett's Best Stock Picks

Let Warren Buffett, George Soros, Steve Cohen, and Daniel Loeb WORK FOR YOU.

If you want to beat the low cost index funds by 19 percentage points per year, look no further than our monthly newsletter.In this free report you can find an in-depth analysis of the performance of Warren Buffett's entire historical stock picks. We uncovered Warren Buffett's Best Stock Picks and a way to for Buffett to improve his returns by more than 4 percentage points per year.

Bonus Biotech Stock Pick: You can also find a detailed bonus biotech stock pick that we expect to return more than 50% within 12 months.
Subscribe me to Insider Monkey's Free Daily Newsletter
This is a FREE report from Insider Monkey. Credit Card is NOT required.