JPMorgan’s Top Dividend Stocks for 2016, Part 1

AT&T Inc. (NYSE:T)

– Number of Hedge Fund Holders (as of September 30): 60
– Total Value of Hedge Fund Holdings (as of September 30): $3.76 billion
– Hedge Fund Holdings as Percent of Float (as of September 30): 1.90%

JP Morgan thinks AT&T Inc. (NYSE:T) will grow earnings per share by an average annual rate of 7.3% over the next three years, as cost cutting and synergy realization from the company’s recent Direct TV acquisition drive bottom line growth. The fast expected earnings growth is certainly music to dividend investors’ ears, as it makes the AT&T’s 5.7% dividend yield safe and offers potential for future dividend raises or multiple expansion. Many hedge funds agree with JP Morgan’s assessment, as 60 funds, including Warren Buffett’s Berkshire Hathaway, amassed $3.76 billion of the telecom’s stock as of the latest 13F reporting period.

CA, Inc. (NASDAQ:CA)

– Number of Hedge Fund Holders (as of September 30): 25
– Total Value of Hedge Fund Holdings (as of September 30): $342.51 million
– Hedge Fund Holdings as Percent of Float (as of September 30): 2.80%

CA, Inc. (NASDAQ:CA) pays an attractive 3.5% dividend yield and trades at a modest 11.36 times forward P/E. Given the higher expected earnings per share next year, as well as the expected modest margin improvements, more efficient marketing and sales, and faster revenue growth, the analysts at JPMorgan feel CA’s dividend is safe. Hedge fund sentiment towards the stock has remained stable, with 25 funds holding the stock at the end of September, down by one from the previous quarter. Among the elite holders of the stock is Joel Greenblatt’s Gotham Asset Management.

ConAgra Foods Inc (NYSE:CAG)

– Number of Hedge Fund Holders (as of September 30): 38
– Total Value of Hedge Fund Holdings (as of September 30): $2.51 billion
– Hedge Fund Holdings as Percent of Float (as of September 30): 14.40%

ConAgra Foods Inc (NYSE:CAG)’s recent sale of its beleaguered Private Brands division and its future spin-off of Lamb Weston should raise margins and offer more flexibility for management to raise the dividend, which currently yields 2.46%, or do buybacks (which will indirectly increase the dividend payout). Shares of the stock are up by 14.77% year-to-date as investors cheer management’s strategy. Hedge fund sentiment has also been buoyant, with the number of investors bullish on the stock increasing by seven quarter-over-quarter to 38 as of September 30.

Disclosure: none