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In this article, we discuss 10 best Dow Jones dividend stocks that hedge funds love. You can skip our detailed discussion on the Dow and dividend stocks, and go directly to read 5 Best Dow Jones Dividend Stocks that Hedge Funds Love.
The Dow Jones Industrial Average, or DJIA, is a stock market index of 30 prominent companies listed on the US stock exchanges. DJIA is down 13.13% year-to-date, but this decline is comparatively less severe than the 19.7% drop in the S&P 500, as of the close of October 24. Some of the most prominent Dow stocks include The Coca-Cola Company (NYSE:KO), Walgreens Boots Alliance, Inc. (NASDAQ:WBA), and Intel Corporation (NASDAQ:INTC).
The Dow has maintained its individuality by being the price-weighted index in the US stock market. Though the index tracks the performance of just 30 companies, investing in the Dow provides exposure to some of the best names in the market, providing value to beginner investors. Moreover, these industry-leading companies are also favored because of their dividends and yields. Over the years, the S&P 500 and DJIA have shown a strong correlation, however, their performances have branched off in the past. According to a report by S&P Global, the Dow has slightly outperformed the broader market in the last 30 years ending June 2021. During this period, the S&P 500 delivered a 10.6% return, while DJIA returned 11.16%.
Photo by Dan Dennis on Unsplash
Our Methodology:
Nearly all companies in the Dow Jones Industrial Average are dividend players. For this list, we selected dividend stocks that are popular among hedge funds. We analyzed Insider Monkey's Q2 2022 database for measuring hedge fund sentiment around each stock.
Best Dow Jones Dividend Stocks that Hedge Funds Love
10. The Procter & Gamble Company (NYSE:PG)
Number of Hedge Fund Holders: 71
The Procter & Gamble Company is an American multinational consumer goods corporation. The company is one of the best-performing stocks in the consumer staples sector as investors are taking refuge in dividend-paying stocks this year.
The Procter & Gamble Company currently pays a quarterly dividend of $0.9133 per share and has a dividend yield of 2.79%, as of October 26. It is one of the best dividend stocks on our list as it maintains a 66-year track record of consistent dividend growth. Moreover, it has paid dividends consistently for the past 132 years.
In fiscal Q1 2023, The Procter & Gamble Company returned $6.3 billion to shareholders, with dividends amounting to $2.3 billion. The company's free cash flow productivity stood at 86%.
In October, Barclays raised its price target on The Procter & Gamble Company to $145 with an Overweight rating on the shares, appreciating the company’s outperformance in its recent quarter.
Of the 895 hedge funds tracked by Insider Monkey, 71 funds owned stakes in The Procter & Gamble Company (NYSE:PG) in Q2 2022, compared with 72 a quarter earlier. These stakes hold a consolidated value of over $5.5 billion. Ray Dalio’s Bridgewater Associates was the company’s leading stakeholder in Q2.
In addition to The Coca-Cola Company (NYSE:KO), Walgreens Boots Alliance, Inc. (NASDAQ:WBA), and Intel Corporation (NASDAQ:INTC), The Procter & Gamble Company (NYSE:PG) is one of the most prominent stocks in DJIA.
9. NIKE, Inc. (NYSE:NKE)
Number of Hedge Fund Holders: 72
NIKE, Inc. (NYSE:NKE) is an Oregon-based multinational manufacturing company that specializes in footwear, apparel, and other accessories. In fiscal Q1 2022, the company returned $480 million to shareholders in dividends, up 11% from the same period last year. It also repurchased shares worth $1 billion during the quarter. At the end of August, the company had roughly $12 billion in cash and cash equivalents and short-term investments.
NIKE, Inc. (NYSE:NKE) pays a quarterly dividend of $0.305 per share. The company has managed to raise its dividends consistently for the past 20 years, which makes it one of the best dividend stocks on our list. As of October 26, the stock has a dividend yield of 1.33%.
In October, Raymond James initiated its coverage on NIKE, Inc. (NYSE:NKE) with an Outperform rating and a $99 price target. The firm sees NKE as one of the most reliable stocks for long-term investment.
As of the close of Q2 2022, 72 hedge funds tracked by Insider Monkey had investments in NIKE, Inc. (NYSE:NKE), up from 67 in the previous quarter. These investments are collectively worth over $3.3 billion.
Leaven Partners mentioned NIKE, Inc. (NYSE:NKE) in its Q3 2022 investor letter. Here is what the firm has to say:
“In our last quarterly letter, I briefly mentioned that the consensus estimates for corporate profits appeared to be a bit too sanguine. I referenced a Reuters article that reported, as of June 17, Wall Street expected S&P 500 earnings to grow by 9.6% in 2022, which was up from 8.8% in April and from 8.4% in January. That tune began to change at the end of July and accelerated in August and September, as major players, such as NIKE (NYSE:NKE), has recently issued profit warnings and/or have withdrawn guidance. In response, Wall Street has altered its outlook: lowering third-quarter profit growth to 4.6%[2] from 7.2% in early August and slashing full-year profit growth to 4.5%.”
8. Merck & Co., Inc. (NYSE:MRK)
Number of Hedge Fund Holders: 79
Merck & Co., Inc. (NYSE:MRK) was a part of 79 hedge fund portfolios in Q2 2022, according to Insider Monkey's database. The stakes owned by these hedge funds have a total value of over $6.1 billion. Among these hedge funds, Fisher Asset Management was the company's leading stakeholder in Q2.
Merck & Co., Inc. (NYSE:MRK) holds an 11-year track record of consistent dividend growth, which makes it one of the best dividend stocks on our list. The company currently pays a quarterly dividend of $0.69 per share and has a dividend yield of 2.82%, as of October 26.
In the second quarter of 2022, Merck & Co., Inc. (NYSE:MRK) reported strong cash generation. The company's operating cash flow came in at $4.3 billion and its free cash flow was recorded at $3.1 billion. Its worldwide sales amounted to over $1.46 billion, which showed a 28.1% growth from the same period last year.
In October, Barclays raised its price target on Merck & Co., Inc. (NYSE:MRK) to $105 with an Overweight rating on the shares, ahead of the company's Q3 earnings.
Chartwell Investment Partners mentioned Merck & Co., Inc. (NYSE:MRK) in its Q2 2022 investor letter. Here is what the firm has to say:
“In the Dividend Equity accounts, the three best performers in Q2 includes Merck (NYSE:MRK, 3.6%), up 12.0%. Merck, like other pharma companies, is in a defensive business, but the stock also did well as peak-sales estimates for their flagship drug, Keytruda, have gone up (JPMorgan estimates $32 billion in sales by 2026).”
7. The Home Depot, Inc. (NYSE:HD)
Number of Hedge Fund Holders: 80
Another best dividend stock on our list is The Home Depot, Inc. (NYSE:HD), which is a Georgia-based home improvement company. The company has been growing its dividends for 12 consecutive years and has a five-year dividend CAGR of 16.4%. It currently pays a quarterly dividend of $1.90 per share. As of October 26, the stock's dividend yield came in at 2.62%. During Q2 2022, The Home Depot, Inc. (NYSE:HD) returned nearly $4 billion to shareholders in dividends.
In October, Cowen initiated its coverage on The Home Depot, Inc. (NYSE:HD) with an Outperform rating and a $350 price target. The firm remained constructive on the company's sales productivity and share growth. The firm also called HD the best-in-class operator.
The number of hedge funds tracked by Insider Monkey owning stakes in The Home Depot, Inc. (NYSE:HD) grew to 80 in Q2 2022, from 75 in the preceding quarter. These stakes have a total value of over $5.3 billion. Arrowstreet Capital was one of the company's most prominent stakeholders in Q2.
Diamond Hill Capital mentioned The Home Depot, Inc. (NYSE:HD) in its Q2 2022 investor letter. Here is what the firm had to say:
“The Home Depot, Inc. (NYSE:HD) is a high-quality operator in the home improvement industry. Macroeconomic concerns, particularly the rise in mortgage rates, caused the share price to pull back and trade at a greater discount to our estimate of intrinsic value. We believe Home Depot is well positioned to continue gaining share due to its premium real estate locations, strong operations and recent investments in its supply chain. We like Home Depot’s exposure to the professional customer and believe in its ability to take market share in this segment as we believe home improvement spending has the potential to remain resilient in upcoming years.”
6. Johnson & Johnson (NYSE:JNJ)
Number of Hedge Fund Holders: 83
Johnson & Johnson (NYSE:JNJ) specializes in medical devices, pharmaceuticals, consumer products, and other packaged goods. The company has shown strong free cash flow generation over the years, due to which the management has announced the authorization of a buyback program for $5 billion worth of its common stock.
Johnson & Johnson (NYSE:JNJ) has been paying dividends for a long time. In 2022, the company extended its dividend growth streak to 60 years, which makes it one of the best dividend stocks. It currently offers $1.13 per share in quarterly dividends and has a dividend yield of 2.65%, as of October 26.
During the third quarter of 2022, Johnson & Johnson (NYSE:JNJ) returned over $3 billion to shareholders in dividends. Year-to-date, the dividend payments amounted to $8.7 billion. The company's share buyback program is 40% completed as the company repurchased shares worth over $2 billion during the quarter.
In October, Citigroup maintained its Buy rating on Johnson & Johnson (NYSE:JNJ) with a $198 price target, presenting a positive view of the medical device sector.
Johnson & Johnson (NYSE:JNJ) is a popular dividend stock in the Dow alongside The Coca-Cola Company (NYSE:KO), Walgreens Boots Alliance, Inc. (NASDAQ:WBA), and Intel Corporation (NASDAQ:INTC).
As of the close of Q2 2022, 83 hedge funds tracked by Insider Monkey owned stakes in Johnson & Johnson (NYSE:JNJ), with a total value of over $6.7 billion. In the previous quarter, 83 hedge funds owned stakes in the pharmaceutical company as well, worth over $7.4 billion.
Distillate Capital Partners LLC mentioned Johnson & Johnson (NYSE:JNJ) in its Q2 2022 investor letter. Here is what the firm has to say:
“Johnson & Johnson was among the 2 largest trims at around 1% each. Each stock was up 1% in the quarter compared to the 16% price decline for the S&P 500 and the positions were reduced as the valuations became somewhat less appealing, though still attractive enough to warrant inclusion.”
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Disclosure. None. 10 Best Dow Jones Dividend Stocks that Hedge Funds Love is originally published on Insider Monkey.
