In this article, we discuss 10 best Dogs of the Dow stocks ranked by hedge fund sentiment. You can skip our detailed analysis of the Dogs’ performance over the years, and go directly to read 5 Best Dogs of the Dow Stocks Ranked By Hedge Fund Sentiment.
‘Dogs of the Dow’ is an investment strategy popularized by Michael B. O’Higgins in his 1991 book titled ‘Beating the Dow’. The strategy focuses on the highest dividend-yielding stocks in the Dow Jones Industrial Average (DJIA). In addition to this, the strategy’s main aim is to generate higher returns than DJIA by investing in high-yielding stocks at the end of the calendar year. This year’s economic situation has turned investors’ attention toward these securities as they can help them to generate stable income.
Over the years, the Dogs of the Dow have generated positive returns for shareholders, becoming investors’ top choice in periods of slow economic growth. According to a report by Wall Street Journal, the Dogs returned 34.3% in 2013 through December 26, compared with a 28.9% return of the Dow during the same period. The report also mentioned that the strategy beat the market through much of the 1970s and 1980s. Another report by CNBC threw light on the positive returns of the Dogs. The report stated that the strategy has beaten the Dow in ten of the 15 years from 2000 to 2015 by an average of about 1.3%. In 2015, the DJIA delivered a 2% return to shareholders, while the Dogs returned 4%.
This year’s returns also showed the supremacy of the Dogs over the broader market. As of October 28, the Dogs fell by 0.3%, compared with a 17.10% decline in the S&P 500 and an 8.20% drop in the DJIA, as reported by Horan Associates. Overall, dividend stocks are performing well given the market situation. Some of the best stocks in this category include Caterpillar Inc. (NYSE:CAT), Exxon Mobil Corporation (NYSE:XOM), and AbbVie Inc. (NYSE:ABBV) as these companies have strong dividend policies and sound financials.
Our Methodology:
We picked the most notable, high-yield, blue-chip dividend stocks from Dow Jones Industrial Average and ranked them by using hedge fund sentiment. The hedge fund sentiment here means the number of hedge funds having stakes in these companies as of the end of the third quarter. We gauged this sentiment from Insider Monkey’s database of 920 hedge funds’ holdings.
Best Dogs of the Dow Stocks Ranked By Hedge Fund Sentiment
10. Walgreens Boots Alliance, Inc. (NASDAQ:WBA)
Number of Hedge Fund Holders: 39
Walgreens Boots Alliance, Inc. (NASDAQ:WBA) is an American pharmacy retail company that also deals in other consumer products. In December, Mizuho raised its price target on the stock to $41 with a neutral rating on the shares, presenting a positive stance on managed care and drug distributors’ earnings this year.
In fiscal Q4 2022, Walgreens Boots Alliance, Inc. (NASDAQ:WBA) reported revenue of $32.4 billion, which beat analysts’ estimates by $278.3 million. The company’s cash position remained stable as its operating cash flow came in at $85 million. It paid $1.6 billion to shareholders in dividends during the quarter, which places it as one of the best dividend stocks on our list.
Walgreens Boots Alliance, Inc. (NASDAQ:WBA) has a 47-year run of consistently raising its dividends. The company currently pays a quarterly dividend of $0.48 per share and has a dividend yield of 4.67%, as of December 14. Its dividend growth history makes it a reliable investment option alongside Caterpillar Inc. (NYSE:CAT), Exxon Mobil Corporation (NYSE:XOM), and AbbVie Inc. (NYSE:ABBV).
As of the end of the September quarter, 39 hedge funds tracked by Insider Monkey owned stakes in Walgreens Boots Alliance, Inc. (NASDAQ:WBA), compared with 40 in the previous quarter. These stakes are collectively worth over $712.6 million. Arrowstreet Capital owned roughly 6 million WBA shares, becoming the company’s largest stakeholder in Q3.
9. International Business Machines Corporation (NYSE:IBM)
Number of Hedge Fund Holders: 40
International Business Machines Corporation (NYSE:IBM) is a technology company that provides a wide range of the latest related services to its consumers. The company is headquartered in New York. The company is a Dividend Aristocrat as it has a 27-year track record of consistent dividend growth. Moreover, the company has been making regular dividend payments to shareholders since 1916, becoming one of the best dividend stocks on our list. It currently pays a quarterly dividend of $1.65 per share and has a dividend yield of 4.37%, as of December 14.
In October, Morgan Stanley maintained an Overweight rating on International Business Machines Corporation (NYSE:IBM) with a $152 price target, appreciating the company’s strong balance sheet and its improving revenue.
International Business Machines Corporation (NYSE:IBM) reported a strong cash position this year. In the first nine months of 2022, the company’s operating cash flow came in at $6.5 billion and it generated $4.1 billion in free cash flow. During the third quarter, it returned $1.5 billion to shareholders in dividends.
As of the close of Q3 2022, 40 hedge funds in Insider Monkey’s database owned stakes in International Business Machines Corporation (NYSE:IBM), the same as in the previous quarter. The collective value of these stakes is over $868.7 million.
8. Dow Inc. (NYSE:DOW)
Number of Hedge Fund Holders: 43
Dow Inc. (NYSE:DOW) is an American multinational chemical company that provides innovative and sustainable solutions in packaging and consumer care. In the third quarter of 2022, the company posted revenue of $14.1 billion, which beat Street estimates by $1.09 billion. Its operating cash flow for the quarter came in at $1.9 billion and its free cash flow stood at $1.5 billion. Moreover, the company paid $493 million to shareholders in dividends, which shows that its cash flow generation is stable.
On October 13, Dow Inc. (NYSE:DOW) declared a quarterly dividend of $0.70 per share, which fell in line with its previous dividend. The company is one of the best dividend stocks on our list as it has been making uninterrupted dividend payments since 1912. As of December 14, the stock has a dividend yield of 5.40%.
In October, Fermium Research maintained a Buy rating on Dow Inc. (NYSE:DOW), following the company’s strong performance in the recent quarterly earnings. In addition to this, the firm also appreciated the stock’s dividend yield.
At the end of September, 43 hedge funds tracked by Insider Monkey had investments in Dow Inc. (NYSE:DOW), valued at nearly $710 million. With over 7.5 million shares, Pzena Investment Management was the company’s leading stakeholder in Q3.
7. 3M Company (NYSE:MMM)
Number of Hedge Fund Holders: 49
3M Company (NYSE:MMM) is a multinational conglomerate that manufactures products related to different industries. The company is one of the best dividend stocks on our list with a 64-year streak of consistent dividend growth. It currently pays a quarterly dividend of $1.49 per share and has a dividend yield of 4.67%, as of December 14.
In the third quarter of 2022, 3M Company (NYSE:MMM) reported revenue of $8.6 billion and its organic sales grew by 2% from the same period last year. The company’s operating cash flow for the quarter came in at $1.5 billion and it generated $1.4 billion in free cash flow. It remained committed to shareholder returns, paying over $1 billion in dividends and share repurchases during the quarter.
Citigroup presented a positive stance on industrials due to the improving supply chains and growing profitability of the group. In view of this, the firm maintained a Neutral rating on 3M Company (NYSE:MMM) in December.
At the end of Q3 2022, 49 hedge funds tracked by Insider Monkey reported owning stakes in 3M Company (NYSE:MMM), down from 54 in the previous quarter. The collective value of these stakes is over $1.45 billion.
Mayar Capital mentioned 3M Company (NYSE:MMM) in its Q2 2022 investor letter. Here is what the firm has to say:
“We also bought back into 3M (NYSE:MMM) as the stock reached attractive levels. We’d sold our shares in 3M last year when the price exceeded our estimated fair value, and as better opportunities to invest in presented themselves at the time. Nonetheless, we’ve always liked this business with its diversified revenues, its R&D leadership and its stable margins.
6. Amgen Inc. (NASDAQ:AMGN)
Number of Hedge Fund Holders: 53
Amgen Inc. (NASDAQ:AMGN) is a California-based multinational biopharmaceutical company that manufactures medicines for patients with serious illnesses. In December, Piper Sandler raised its price target on the stock to $299 with an Overweight rating on the shares, after the company reached a deal to buy Horizon Therapeutics.
In Q3 2022, Amgen Inc. (NASDAQ:AMGN) posted revenue of $6.6 billion, which fell by 0.9% from the same period last year. However, the company’s revenue beat analysts’ consensus by $90 million. Its cash flow generation also remained strong during the quarter, with $2.8 billion in free cash flow, compared with $2.2 billion during the prior-year quarter.
On December 13, Amgen Inc. (NASDAQ:AMGN) declared a 10% hike in its quarterly dividend to $2.13 per share. The company is one of the best dividend stocks on our list as it has raised its payouts every year since 2011. As of December 14, the stock has a dividend yield of 3.15%. In addition to Caterpillar Inc. (NYSE:CAT), Exxon Mobil Corporation (NYSE:XOM), and AbbVie Inc. (NYSE:ABBV), investors are also paying attention to AMGN due to its dividend growth track record.
At the end of Q3 2022, 53 hedge funds in Insider Monkey’s database owned stakes in Amgen Inc. (NASDAQ:AMGN), compared with 55 in the previous quarter. These stakes are worth over $1.55 billion collectively.
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Disclosure. None. Best Dogs of the Dow Stocks Ranked By Hedge Fund Sentiment is originally published on Insider Monkey.