In this article, we discuss 10 dividend stock picks of legendary value investor Joel Greenblatt. If you want to see some more dividend stocks in his portfolio, click Legendary Value Investor Joel Greenblatt’s 5 Dividend Stock Picks.
Joel Greenblatt is an American value investor and hedge fund manager, who received his MBA from The Wharton School at the University of Pennsylvania. Joel Greenblatt founded Gotham Capital in 1985, which dealt in special events such as corporate spinoffs and similar business restructurings. The fund also helped Michael Burry establish Scion Asset Management in 2000, by investing $1 million in seed capital.
In 2008, Gotham Asset Management was formed as a successor of Gotham Capital. Greenblatt’s “magic formula investing” strategy for the hedge fund consists of focusing on cheap yet high quality stocks, ensuring that the securities offer attractive earnings yield and high return on invested capital.
The fund’s top purchases for the fourth quarter of 2021 included Global Payments Inc. (NYSE:GPN), Canadian National Railway Company (NYSE:CNI), and GoDaddy Inc. (NYSE:GDDY), while the fund sold Palantir Technologies Inc. (NYSE:PLTR), Robinhood Markets, Inc. (NASDAQ:HOOD), and Snap Inc. (NYSE:SNAP).
Some of the top stocks in legendary value investor Joel Greenblatt’s Q4 portfolio are Alphabet Inc. (NASDAQ:GOOG), Amazon.com, Inc. (NASDAQ:AMZN), and ServiceNow, Inc. (NYSE:NOW), among others discussed in detail below.
Joel Greenblatt of Gotham Asset Management
Our Methodology
We used the fourth quarter portfolio of Joel Greenblatt’s Gotham Asset Management for this analysis, selecting the fund’s top 10 dividend stock picks. We have ranked the list according to the hedge fund’s stake value in each holding.
Data from 900+ elite hedge funds tracked by Insider Monkey in Q4 2021 was used to identify the number of hedge funds that hold stakes in each firm.
Legendary Value Investor Joel Greenblatt’s Dividend Stock Picks
10. Cisco Systems, Inc. (NASDAQ:CSCO)
Gotham Asset Management’s Stake Value: $16,639,000
Dividend Yield as of March 25: 2.77%
Number of Hedge Fund Holders: 57
Cisco Systems, Inc. (NASDAQ:CSCO) is a California-based company operating in the communications and technology industry. Securities filings for Q4 2021 reveal that Joel Greenblatt’s fund owns 262,569 Cisco Systems, Inc. (NASDAQ:CSCO) shares, worth $16.6 million, representing 2.77% of the total 13F portfolio.
Cisco Systems, Inc. (NASDAQ:CSCO) is a notable dividend payer from Greenblatt’s portfolio, yielding 2.77% as of March 25. The company declared on February 16 a $0.38 per share quarterly dividend, a 2.7% increase from its prior dividend of $0.37. The dividend will be distributed on April 27, to shareholders of record on April 6.
The board of directors on February 16 also authorized a $15 billion increase to the share repurchase program, which has no fixed termination date. The remaining authorized amount for repurchases now equals approximately $18 billion.
On March 10, Wells Fargo analyst Aaron Rakers downgraded Cisco Systems, Inc. (NASDAQ:CSCO) to Equal Weight from Overweight with a price target of $65, down from $70. The analyst cited limited multiple expansion from current share levels as investors focus on increasing backlog, a weak subscription model, and higher competition in core markets.
Among the hedge funds tracked by Insider Monkey, 57 funds reported owning stakes in Cisco Systems, Inc. (NASDAQ:CSCO) at the end of December 2021, worth $3.4 billion. Fisher Asset Management owns the leading position in the company, with 12.7 million shares worth approximately $810 million.
In addition to Alphabet Inc. (NASDAQ:GOOG), Amazon.com, Inc. (NASDAQ:AMZN), and ServiceNow, Inc. (NYSE:NOW), elite hedge funds are pouring into Cisco Systems, Inc. (NASDAQ:CSCO).
Here is what ClearBridge Large Cap Value Strategy has to say about Cisco Systems, Inc. (NASDAQ:CSCO) in its Q3 2021 investor letter:
“We reinvested a portion of the proceeds into existing holding Cisco Systems, which also has highly valuable technology and an improving secular growth story with its leading position in core networking hardware, as well as in its growing software and services business. Cisco has refocused on winning share in the large and growing hyperscale market and has been investing aggressively in R&D to support growth. We believe Cisco has found new legs after previously ceding some growth opportunities in cloud while maintaining its strong presence in the carrier and enterprise markets. Cisco boasts a strong balance sheet and accelerating multi-year growth while trading at a modest multiple of earnings.”
9. The Coca-Cola Company (NYSE:KO)
Gotham Asset Management’s Stake Value: $16,815,000
Dividend Yield as of March 25: 2.86%
Number of Hedge Fund Holders: 70
Joel Greenblatt’s Gotham Asset Management increased its stake in The Coca-Cola Company (NYSE:KO) by 31% in the fourth quarter of 2021. This makes the hedge fund’s total position in the multinational beverage corporation equal 283,982 shares worth $16.8 million. The company announced on March 8 that it is exiting business in Russia, which contributed approximately 1%-2% to its consolidated net operating revenues and operating income.
On February 17, The Coca-Cola Company (NYSE:KO) declared a $0.44 per share quarterly dividend, a 4.8% increase from its earlier dividend of $0.42. The dividend is payable on April 1, to shareholders of record on March 15. The company is a dividend king, with 60 consecutive years of dividend increases under its belt. It also expects to resume share repurchases of up to $500 million in 2022.
Evercore ISI analyst Robert Ottenstein raised the price target on The Coca-Cola Company (NYSE:KO) on February 15 to $70 from $63 and maintained an Outperform rating on the shares, arguing that he sees drivers for multiple expansion. He cited an improving business model, a strong portfolio, and solid long-term outlook for the company.
Hedge fund sentiment around The Coca-Cola Company (NYSE:KO) improved in Q4. According to the fourth quarter database of Insider Monkey, 70 funds were bullish on the company, compared to 61 funds in the earlier quarter. Warren Buffett’s Berkshire Hathaway remains the largest stakeholder, with 400 million shares worth $23.6 billion.
8. Johnson & Johnson (NYSE:JNJ)
Gotham Asset Management’s Stake Value: $17,544,000
Dividend Yield as of March 25: 2.40%
Number of Hedge Fund Holders: 83
Johnson & Johnson (NYSE:JNJ) is a multinational consumer health and medical devices corporation. Heading into 2022, Joel Greenblatt’s fund owned 102,556 shares of Johnson & Johnson (NYSE:JNJ), worth $17.5 million, accounting for 0.56% of the total investments for the fourth quarter.
Johnson & Johnson (NYSE:JNJ) yields 2.40% as of March 25. The company is a notable dividend king, with a rich history of increasing dividends that dates back to 59 years. On January 4, Johnson & Johnson (NYSE:JNJ) declared a quarterly dividend of $1.06 per share, which was paid on March 8.
On March 16, Bernstein analyst Lee Hambright downgraded Johnson & Johnson (NYSE:JNJ) to Market Perform from Outperform but raised the price target to $183 from $180. The analyst contended that the next several years “will be an uphill battle” for Janssen, Johnson & Johnson (NYSE:JNJ)’s pharmaceutical business, as multiple core franchises face loss of exclusivity challenges.
In the fourth quarter of 2021, there was mixed hedge fund sentiment around Johnson & Johnson (NYSE:JNJ). The Q4 database of Insider Monkey suggests that 83 hedge funds were bullish on the stock, with collective stakes of $7.3 billion, compared to 88 funds the previous quarter, holding stakes in Johnson & Johnson (NYSE:JNJ) worth $6.8 billion. Terry Smith’s Fundsmith LLP is the leading shareholder of the company, owning 7.2 million shares worth $1.2 billion.
Distillate Capital mentioned Johnson & Johnson (NYSE:JNJ) in its Q2 2021 investor letter. Here is what the firm has to say:
“The largest additions in the rebalance, Johnson & Johnson (NYSE:JNJ) was around 50 and 40 basis points incrementally. J&J underperformed in the quarter while its normalized free cash flows held steady and so its position size was topped off to match the stable cash flows.”
7. Oracle Corporation (NYSE:ORCL)
Gotham Asset Management’s Stake Value: $17,800,000
Dividend Yield as of March 25: 1.57%
Number of Hedge Fund Holders: 57
Oracle Corporation (NYSE:ORCL) is an American multinational corporation that offers enterprise information technology and cloud-based enterprise resource planning solutions to customers worldwide. Gotham Asset Management 204,102 Oracle Corporation (NYSE:ORCL) shares, worth $17.80 million. The hedge fund increased its stake in the company by 28% in Q4 2021.
On March 10, Oracle Corporation (NYSE:ORCL) announced a quarterly dividend of $0.32 per share, in line with previous. The dividend is payable on April 21, to shareholders of the company as of April 8.
Stifel analyst Brad Reback lowered the price target on Oracle Corporation (NYSE:ORCL) to $83 from $87 and reiterated a Hold rating on the shares after the company’s “mixed” fiscal third quarter results. While the results reflect stability in Oracle Corporation (NYSE:ORCL)’s revenue base, the analyst thinks that there is insufficient new database business, which will make it hard to increase sales consistently above a mid-single digit rate.
Among the hedge funds tracked by Insider Monkey, First Eagle Investment Management held the largest stake in Oracle Corporation (NYSE:ORCL) at the end of December 2021, with 25.7 million shares worth $2.2 billion. Overall, 57 hedge funds were bullish on the stock in Q4 2021.
Here is what ClearBridge Large Cap Value Strategy has to say about Oracle Corporation (NYSE:ORCL) in its Q3 2021 investor letter:
“While the information technology (IT) sector in the benchmark stalled amid rising rates, our holdings outperformed in relative terms, helped in part by a strong quarter from Oracle, the dominant provider of on-premise database software for large enterprises globally and an increasingly viable cloud competitor. Solid quarterly results, raised guidance, healthy underlying metrics and an attractive valuation contributed to strong performance during the period.”
6. Merck & Co., Inc. (NYSE:MRK)
Gotham Asset Management’s Stake Value: $18,897,000
Dividend Yield as of March 25: 3.39%
Number of Hedge Fund Holders: 80
Merck & Co., Inc. (NYSE:MRK) is an American healthcare company that develops pharmaceutical drugs and animal health products. Securities filings for the reporting period Q4 2021 disclose that Joel Greenblatt owns 246,569 Merck & Co., Inc. (NYSE:MRK) shares, worth $18.8 million, representing 0.60% of the total investments for the period.
On January 25, Merck & Co., Inc. (NYSE:MRK) announced a quarterly dividend of $0.69 per share, which is payable on April 7 to shareholders of record on March 15. The stock delivers a dividend yield of 3.39% as of March 25.
JPMorgan analyst Chris Schott maintained an Overweight recommendation on Merck & Co., Inc. (NYSE:MRK) on January 28, but lowered the price target to $95 from $100 ahead of the company’s Q4 results. The analyst believes there will be no major surprises in store with the 2022 guidance, owing to the positive momentum in Merck & Co., Inc. (NYSE:MRK)’s core business.
According to the Q4 database of Insider Monkey, 80 hedge funds held long positions in Merck & Co., Inc. (NYSE:MRK), up from 77 funds in the prior quarter. Arrowstreet Capital owns a prominent stake in the company, with shares worth $637.5 million.
Merck & Co., Inc. (NYSE:MRK) is a notable pick of Joel Greenblatt from the fourth quarter of 2021, just like Alphabet Inc. (NASDAQ:GOOG), Amazon.com, Inc. (NASDAQ:AMZN), and ServiceNow, Inc. (NYSE:NOW).
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Disclosure: None. Legendary Value Investor Joel Greenblatt’s 10 Dividend Stock Picks is originally published on Insider Monkey.
