In this article, we discuss top 10 high dividend stocks to buy according to hedge funds. You can skip our detailed analysis of high-yield dividend stocks and their previous performance, and go directly to read Top 5 High Dividend Stocks To Buy According To Hedge Funds.
The past year has seen a considerable shift in investment trends due to fluctuating economic conditions. Analysts who forecasted a full-blown recession in Bloomberg’s March 2023 survey have now given up on their predictions. This is due to the fact that American consumers and businesses have proven their mettle to endure and adapt over the past year. That said, the need for cash remains consistent. Investors are actively seeking investment opportunities that can help them stay afloat in the current market situation, which economists have referred to as a ‘no landing’ scenario. Dividend stocks have delivered a consistent performance in periods of market instability. Their past performance, high yields, and their ability to generate stable and regular income have once again captured investors’ attention, following a period of underperformance due to the tech rally in 2023.
Investors consider high yields one of the most important aspects of dividend investing. The previous performance of high-yielding dividend stocks has shown that these equities have shown better results over the long term. In our article titled 12 Best High Dividend Stocks Under $100, we referred to a study by the University of Nevada, which analyzed the performance of dividend stocks by categorizing them into portfolios according to their yields. The results showed that the highest-yielding stocks from the Dow 30 index yielded better returns than portfolios with low and medium dividend yields from 1987 to 2012.
In addition to their outperformance relative to low-dividend stocks, high-yield equities have also surpassed the S&P 500 over the last thirty years. According to a report by Barron’s, high-yield dividend stocks have beaten the S&P 500 by over 20% each year in relative total returns from the lowest to the highest point within cycles lasting nearly a year. The report also mentioned that these stocks normally maintain their strong performance for about two years after reaching their peak.
BMO’s Chief Investment Strategist Brian Belski spoke with Barron’s about the impressive performance of dividend stocks with high yields over the years. Here are some comments from the analyst:
“There have been only two periods where high dividend-yielding stocks have performed worse relative to the S&P 500 on a year-over-year basis: the tech bubble and the pandemic. According to our work, this type of abnormal underperformance has typically proved to be an inflection point historically. These stocks tend to stage an impressive recovery following such levels.”
Though dividend yields have gained the utmost importance in dividend investing, dividend growth also holds a significant position, as it indicates the company’s financial position. Companies with strong dividend growth track records, offering comparatively high yields, can attract long-term investors, who seek benefit from current income and potential future returns. Some of the best dividend stocks in this regard are Philip Morris International Inc. (NYSE:PM), Verizon Communications Inc. (NYSE:VZ), and Bristol-Myers Squibb Company (NYSE:BMY), as these companies have raised their dividends for years consistently and also boast above-average dividend yields. In this article, we will further take a look at high-dividend stocks according to hedge funds.
Top 10 High Dividend Stocks To Buy According To Hedge Funds
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Our Methodology:
For this list, we scanned Insider Monkey’s database of 933 hedge funds as of the fourth quarter of 2023 and picked 1 dividend stocks that have yields above 8%, as of March 29. These companies have strong histories of paying dividends to shareholders. The stocks are ranked in ascending order of hedge funds’ sentiment toward them. Hedge funds’ top 10 consensus stock picks outperformed the S&P 500 Index by more than 140 percentage points over the last 10 years (see the details here).
AGNC Investment Corp. (NASDAQ:AGNC) is an American real estate investment trust company that primarily invests in agency mortgage-backed securities. The company started paying dividends in 2008 and has been making regular dividend payments since then. It currently offers a monthly dividend of $0.12 per share and has a dividend yield of 14.55%. Its high yield makes it one of the best dividend stocks on our list.
At the end of Q4 2023, 14 hedge funds tracked by Insider Monkey reported having stakes in AGNC Investment Corp. (NASDAQ:AGNC), compared with 18 in the previous quarter. The consolidated value of these stakes is over $43.4 million.
Arbor Realty Trust, Inc. (NYSE:ABR) is a New York-based real estate investment trust company that specializes in the acquisition of commercial real estate loans and related investments. In the fourth quarter of 2023, the company reported revenue of $103.5 million, which beat analysts' estimates by $5.93 million. At the end of FY23, it had roughly $929 million available in cash and cash equivalents, up from $534.3 million in FY22.
Arbor Realty Trust, Inc. (NYSE:ABR), one of the best dividend stocks on our list, has been growing its dividends consistently for the past 11 years. The company offers a quarterly dividend of $0.43 per share and has a dividend yield of 12.98%, as recorded on March 29.
The number of hedge funds holding stakes in Arbor Realty Trust, Inc. (NYSE:ABR) grew to 17 in Q4 2023, from 13 in the previous quarter, according to Insider Monkey's database. The overall value of these stakes is more than $91 million. With over 2.3 million shares, Omega Advisors was the company's leading stakeholder in Q4.
NextEra Energy Partners, LP (NYSE:NEP) is an American renewable energy company that operates clean energy projects. The company also aims to provide sustainable income to its investors. It is one of the best dividend stocks on our list as the company has raised its payouts every quarter since 2015. The company offers a quarterly dividend of $0.88 per share and has a dividend yield of 11.70%, as of March 29.
In the fourth quarter of 2023, NextEra Energy Partners, LP (NYSE:NEP) reported revenue of $232 million, which showed a 13.7% growth from the same period last year. The company's cash available for distribution for the quarter came in at $86 million. For FY23, its cash position remained strong as the company generated $731 million in operating cash flow.
As of the close of Q4 2023, 18 hedge funds in Insider Monkey's database reported having stakes in NextEra Energy Partners, LP (NYSE:NEP), down from 19 in the previous quarter. These stakes have a collective value of over $145.2 million.
ClearBridge Investments mentioned NextEra Energy Partners, LP (NYSE:NEP) in its Q3 2023 investor letter. Here is what the firm has to say:
“Many businesses are threatened by a higher cost of capital, but one where reality has set in, and which also touches many other growth areas of the market, is the utility company NextEra Energy. Over the past few years, the company developed into a growth darling thanks to its strong track record in renewable energy development and tailwinds from the global energy transition and incentives in the Inflation Reduction Act. The problem for NextEra, and the transition broadly, is that this transformation is immensely capital intensive and many renewables projects offer lower returns on that capital. This requires high capital expenditures – often resulting in negative free cash flow – to meet the growth and financing needs of companies like NextEra. To help, the company leaned on financial engineering by using a publicly traded limited partnership called NextEra Energy Partners, LP (NYSE:NEP), providing further capacity for its parent to continue its development plans. NEP used layers of its own financial engineering to fund its own negative free cash flow and a large, growing dividend yield that we believe it could not sustain organically. Ultimately, the higher cost of debt from rising rates led NEP to lower its own growth ambitions, driving concerns about whether NextEra can execute on its extensive backlog. As a result, the stock has declined by approximately 30% year to date.”
Starwood Property Trust, Inc. (NYSE:STWD) is an American real estate investment trust that manages commercial mortgage loans and other real estate debt investments. On March 15, the company announced a quarterly dividend of $0.48 per share, which was in line with its previous dividend. With a dividend yield of 9.44% as of March 29, STWD is one of the best dividend stocks on our list.
Insider Monkey's database of Q4 2023, 19 hedge funds tracked by Insider Monkey held stakes in Starwood Property Trust, Inc. (NYSE:STWD), down slightly from 21 in the previous quarter. These stakes have a total value of $191.7 million. Among these hedge funds, Cardinal Capital was the company's leading stakeholder in Q4.
BCE Inc. (NYSE:BCE) ranks sixth on our list of the best dividend stocks. The Canadian telecommunications company has been growing its dividends for the past 14 years and currently offers a quarterly dividend of C$0.9975 per share. The stock's dividend yield on March 29 came in at 8.68%.
At the end of December 2023, 19 hedge funds, up from 15 in the previous quarter, owned stakes in BCE Inc. (NYSE:BCE). These stakes are collectively valued at more than $78.5 million. Israel Englander's Millennium Management was the company's leading stakeholder in Q4.
