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In this article we will take a look at the billionaire Stan Druckenmiller's top 10 dividend stock picks. You can skip our detailed discussion on Druckenmiller’s investment philosophy, history, and hedge fund performance and go directly to 5 Best Dividend Stocks to Buy According to Billionaire Stan Druckenmiller.
Stanley Freeman Druckenmiller is an American investor, hedge fund manager, and philanthropist with a long-standing career in the financial industry. He first joined the financial sector management trainee at Pittsburgh National Bank in 1977 before becoming the head of the equity research group a year later. He is also one of the leading experts to follow when looking for recommendations for the top dividend stock picks. Druckenmiller is the former chairman and president of Duquesne Capital, which he founded in 1981.
In 1986, he was named head of the Dreyfus Fund, having joined the fund as a contract consultant a year before. In 1988, he replaced Victor Niederhoffer at Quantum Fund, owned by George Soros, where he raised $260 million in 2008. In 1992, Druckenmiller and Soros made a fortune betting against British pound sterling, which crashed on "Black Wednesday."
He parted with Soros in 2000 after the fund registered huge losses in technology stocks and has since concentrated on Duquesne Capital which posts average annual returns of 20%.
Druckenmiller likes to diversify his portfolio, with stakes in both technology and non-tech stocks. For example, the investor has a $586.8 million stake in Microsoft Corporation (NASDAQ: MSFT) as of the end of the fourth quarter of 2020. Microsoft Corporation (NASDAQ: MSFT) takeover talks of Discord has ended, when the later rejected $1.2 billion bid. Microsoft is still expanding its investment portfolio and recently announced plans to invest $1 billion in Malaysia in the next five years. The tech giant also has a partnership program with several government agencies in Malaysia and several private companies and startups. Just recently, Microsoft Corporation (NASDAQ: MSFT) announced the acquisition of Nuance Communications, Inc for $56.00 per share for a total sum of $19.7 billion. Nuance is a leading cloud and AI software company with decades of accumulated healthcare and enterprise AI experience.
The billionaire is also bullish on Amazon.com, Inc. (NASDAQ: AMZN). Even though his hedge fund slashed its stake in the retail and Cloud giant by 5% in the fourth quarter of 2020, it still owns 82,753 shares of the company, worth $269.52 million. The stake seems to be paying off as Amazon’s stock soared recently after the company crushed analysts’ forecasts for Q1, reporting a 44% rise in its revenue. Amazon.com, Inc. (NASDAQ: AMZN)'s AWS net sales also jumped 32%, beating the estimate of a 22.5% growth. Operating income came in at $8.9 billion, versus the Street’s estimate of $6.1 billion consensus.
A notable non-tech company in Druckenmiller's portfolio is mining giant Freeport-McMoRan Inc. (NYSE: FCX). It recently announced the appointment of David P. Abney and Robert “Bob” W. Dudley to its Board of Directors. Mr. Abney initially served as the Chairman and CEO of United Parcel Service, Inc. (NYSE: UPS) before retiring in 2020. The stock of Freeport-McMoRan Inc. (NYSE:FCX) is up 337.78% over the past one year.
But in this article we focus on Druckenmiller’s dividend picks. It has become extremely important for average investors to pay attention to reliable dividend stocks in the current age of financial volatility, job losses and recession. The entire hedge fund industry is feeling the reverberations of the changing financial landscape. Its reputation has been tarnished in the last decade, during which its hedged returns couldn’t keep up with the unhedged returns of the market indices. On the other hand, Insider Monkey’s research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 124 percentage points since March 2017. Between March 2017 and February 26th 2021 our monthly newsletter’s stock picks returned 197.2%, vs. 72.4% for the SPY. Our stock picks outperformed the market by more than 124 percentage points (see the details here). We were also able to identify in advance a select group of hedge fund holdings that significantly underperformed the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 16th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to. You can subscribe to our free newsletter on our homepage to receive our stories in your inbox.
Here is the list of billionaire Stan Druckenmiller's top dividend stock picks:
Best Dividend Stocks to Buy According to Billionaire Stan Druckenmiller
10. General Electric Co (NYSE: GE)
Number of Hedge Fund Holders: 69 Dividend Yield: 0.29%
General Electric Co (NYSE:GE) is a U.S company with more than 125 years of experience in the healthcare, aviation, renewable energy, and power industries. To improve its operations and boost the balance sheet, GE has been selling off some of its assets to offsets its debts, with the GECAS sale expected to offset much of the company's debt without loss of earnings.
UBS recently reiterated its “Buy” rating for General Electric Co (NYSE:GE) and raised its target price to $17 from $15 but at the same time lowered Q1 EPS estimates to $0.02 from $0.03 FY 2021 to $0.26 from $0.29 and FY 2022 estimates to $0.65 from $0.76. UBS analyst Markus Mittermaier sees an improved strategic optionality medium and long term for the company. The company will also benefit from reopening of the economy. The stock ranks 10th in our list of best dividend stocks to buy according to billionaire Stan Druckenmiller.
General Electric won a dispute with U.K. tax authority, where the company was accused of underpaying $1 billion in taxes.
Boykin Curry’s Eagle Capital Management tops the list of 69 hedge funds holding this stock at the end of Q4 2020 with 125.10 million GE shares.
Here is what Longleaf Partners Global Fund has to say about General Electric Company in their Q4 2020 investor letter:
“General Electric (GE) (-3%, -0.28%; 74%, 3.32%), the Aviation, Healthcare and Power conglomerate, was among the top two contributors in the fourth quarter after a very difficult first half. The company’s crown jewel Aviation business sells and maintains commercial and military jet engines. With air travel frozen, this year’s second quarter was its worst in over a century of operating history with a $680 million operating loss. 3Q revenues improved sequentially as some flights resumed but still declined 39% year-over-year. Yet GE Aviation earned a remarkable $356 million in the third quarter due to extreme cost discipline. With fewer expenses, the same world-class competitive position and favorable long-term air-travel growth prospects, Aviation should keep improving incrementally with the potential to emerge stronger than ever within several years. GE Healthcare revenues, excluding non-recurring ventilator sales for COVID treatment, also improved 3% year-over-year in an encouraging performance. GE also took steps to give back in 2020 by working to help develop thousands of ventilators to aid coronavirus patients. The stock has roughly doubled from its March low as business results improved, in large part due to CEO Larry Culp’s excellent management. Please stay tuned for the next episode of the Price-to-Value Podcast in which Vice-Chairman Staley Cates interviews Larry Culp on Lean manufacturing, GE’s culture, navigating COVID and his outlook for the business. The episode will air in January and will be available on our website at https://southeasternasset.com/podcasts/, as well as all major podcast streaming platforms.”
9. Teck Resources Limited (NYSE: TECK)
Number of Hedge Fund Holders: 31 Dividend Yield: 0.71%
Teck Resources Ltd (USA) (NYSE:TCK) is a diversified resource company specializing in mineral development and responsible mining with a business interest in copper, steelmaking coal, and zinc. Recently, the stock declared a quarterly dividend of CAD 0.05/share.
To support the fight against the COVID-19 pandemic, Teck Resources recently pledged $1 million to support UNICEF Canada. The funds will support increased access to COVID-19 Tools (ACT) Accelerator, a partnership that has been set up to enhance testing for COVID-19, treatment, and ensuring equitable distribution of vaccines.
For Q1 2021, Teck Resources Ltd (USA) (NYSE:TCK) reported a revenue of CAD$2.55 billion up from CAD$2.38 billion in Q1 2020, while the EPS was $0.61 in the recent quarter up from $0.17 in comparable quarter last year. The price of copper recently hit $10,000 per tonne for the first time since 2011. This helped boost the company's profit by 246.8%. The stock ranks 9th in our list of best dividend stocks to buy according to billionaire Stan Druckenmiller.
Arrowstreet Capital owned by Peter Rathjens, Bruce Clarke and John Campbell holds 12.12 million shares of Teck as of the end of the fourth quarter.
8. Barrick Gold Corporation (NYSE: GOLD)
Number of Hedge Fund Holders: 53 Dividend Yield: 0.72%
Barrick Gold Corporation (NYSE:GOLD) specializes in producing and selling gold and related activities like mine development and exploration. The company is also engaged in the production of copper and has interests in oil and gas exploration in Canada. It has mines in North America, South America, Africa, and Australia Pacific. GOLD ranks 8th in our list of best dividend stocks to buy according to billionaire Stan Druckenmiller.
Barrick Gold Q1 2021 production was 93M lbs. of copper and 1.1M oz. of gold; sales were 113M lbs. of copper and 1.09M oz. of gold, in line with the company's FY 2021 guidance.
As part of plans to restart operations, Barrick Gold Corporation (NYSE:GOLD) has entered into a partnership with the Papua New Guinea government that will see the government acquire a majority stake in the Porgera gold mine. Porgera will now be owned by the joint venture of PNG stakeholders and Barrick Niugini Ltd, which is jointly owned by Barrick and China's Zijin Mining. This will help reopen the Porgera gold mine in PNG.
Here is what GoodHaven Capital Management has to say about Barrick Gold Corporation in their Q4 2020 investor letter:
“Barrick’s recent results have been consistent with our expectations. Barrick has begun inching up the dividend as planned, which should continue increasing absent them finding a large acquisition (they want more copper assets) or a materially lower price of gold. We’d also expect periodic special dividends during stronger gold price environments. At current gold prices we estimate normalized free cash flow at Barrick of over $1.60/share. The company is now about net-debt free. We see plenty of upside and absent a collapse in gold not too much downside. Missing from much of the public discussions about gold, but potentially interesting, is the supply/demand backdrop. As the Wall Street Journal (8/16/20) recently said “gold is amongst the rarest metals in the earth’s crust and much of the easier to get to ore has already been mined. What is left is harder to find and more expensive to extract…” According to the World Platinum Council, it was forecasted that there will be a supply and demand imbalance of 1.2 million ounces globally. The potential macro tailwinds that could add value to an alternate currency like gold including currency concerns, excessive debt and continuing negative real interest rates are still out there. While the shares performed well for the year they were weak in the second half and now stand more attractively priced.”
7. Linde plc (NYSE: LIN)
Number of Hedge Fund Holders: 50 Dividend Yield: 1.46%
Linde plc (NYSE:LIN) is a global industrial gas and engineering company serving several end markets like manufacturing, healthcare, electronics, food & beverage, and chemicals & refining.
At the close of 2020, the company announced the appointment of Mr. Sanjiv Lamba as the company’s Chief Operating Officer. The board also announced a new share repurchase program for close to $5 billion. The new share repurchase program replaces a similar one for $6 billion, launched on January 22, 2019, and expired in February 2021. Linde plc (NYSE:LIN) declared a quarterly dividend of $1.06, up 10%.
Q4 2020 sales were $7,272 million up 3% compared to previous year same quarter. While sales for FY 2020 was $27.2 billion, 3% down compared to 2019. FY 2020 diluted EPS was $4.70. The stock ranks 7th in our list of best dividend stocks to buy according to billionaire Stan Druckenmiller.
Ako Capital managed by Nicolai Tangen owns 3.69 million shares amongst 50 hedge fund holding Linde’s stock at the end of Q4 2020 down from 60 in Q3 2020.
6. Starbucks Corporation (NASDAQ:SBUX)
Number of Hedge Fund Holders: 67 Dividend Yield: 1.55%
Starbucks Corporation (NASDAQ: SBUX) has been sourcing and roasting high-quality coffee since 1971 when the company was established. The beverage company currently has around 33,000 stores spread around the world.
Over the past five years, Starbucks’ share price has risen 104%. The stock price went up 15% in the last quarter of 2020, mainly driven by a highly buoyant market. Despite the strong performance in the last five years, Starbucks' earnings per share have gone down by 19% annually within that period.
In the first quarter of 2021, Starbucks Corporation (NASDAQ: SBUX) showed significant recovery from the pandemic, opening 278 new stores (4% YoY growth) during the quarter. The company reported a GAAP EPS of $0.53 and a non-GAAP EPS of $0.61.
Atlantic Equities recently gave Starbucks an “Overweight” rating, and the analyst firm also named Starbucks its top pick. According to Atlantic Equities, Starbucks has remained innovative and is always expanding to new markets. The firm gave Starbucks a price target of $128. Starbucks ranks 6th in our list of best dividend stocks to buy according to billionaire Stan Druckenmiller.
Wedgewood Partners, in their Q1 2021 investor letter, mentioned Starbucks Corporation (NASDAQ: SBUX). Here is what Wedgewood Partners has to say about Starbucks Corporation in their Q1 2021 investor letter:
"As we have observed Starbucks through the unpredictable events of the past year, we believe all the things we liked about the Company’s competitive position before the pandemic have been turbocharged by the pandemic. We always have maintained the Company had no serious competition, anyway, and that in both large growth markets (U.S. and China), there was enormous fragmentation of share that would allow the Company to continue to expand through market expansion (especially in China) and through share gain versus small competitors. In fact, when we last discussed Starbucks, there was a lot of noise about competition in China from a newly established domestic competitor, Luckin Coffee, and that situation quickly dissolved into farce. In any case, had Luckin been a legitimate business, we had maintained that China was a massive market – and one in which coffee consumption was massively underpenetrated in comparison to other markets. We believed too that there was plenty of room for multiple large competitors to exploit.
The pandemic disaster over the past year truly highlights the Company’s financial strength in comparison to its small competitors, most of which struggled to survive, and many of which didn’t make it. While there is no perfect data, we have seen estimates from industry groups and restaurant distributors that as many as 15-20% of small, independent restaurants across the broad food and beverage industry may have closed permanently as a result of the pandemic, sadly. Starbucks not only survived due to its superior financial position; they also used its financial resources to invest in a variety of expanded or new capabilities, including the addition of drive-through capacity, new “walk-through” pick-up locations in urban areas, increased investment in technology to drive speed within the stores and drive-through lanes, and expansion of its loyalty program. These could have been viewed, prior to the pandemic, as a fairly big advantage in terms of convenience alone versus the Company’s small primary competitors. In the age of the pandemic, though, one might consider something like a drive-through an absolute necessity, as customers choose not to expose themselves to the interior of restaurants or to other people.
Another sign of the Company’s superior financial strength has been the continued expansion of the store base, even in the face of the pandemic. As of the end of the Company’s last fiscal year, September 2020, Starbucks had opened +4% more stores, including +13% growth in China. Additionally, Starbucks not only opened stores as competing stores folded; the Company is seeing more attractive lease terms on new stores (and on existing stores, for that matter), meaning that a store opening program that already had generated attractive financial returns will now generate even more attractive returns.
Short-term results, of course, have been quite poor all over the world, with some portion of the Company’s locations closed or operating on reduced hours for the last several quarters. Customers are simply reticent to show up even when stores have been open. We expect shorter-term results to remain unpredictable, as they will be tied to the ebb and flow of various COVID-related lockdowns around the world. However, Starbucks said it expected sales at established locations in both the U.S. and China to rebound to pre-pandemic levels in the March quarter that just ended. In addition, despite reduced operating hours still, and despite customers’ work and school routines being completely disrupted, a surprisingly early development in comparison to what we, at least, expected only a few quarters ago, is proof of the Company’s entrenched position in its customers’ lives. In contrast, the National Restaurant Association in the U.S. recently predicted that 2021 industry sales would recover significantly versus 2020, but would still come in nearly (-15%) below 2019 levels.
On the Company’s most recent Analyst Day in December 2020, management took its longerterm expectations a bit higher, primarily driven by a modest expected improvement in sales versus its prior expectations. Considering smaller competitors went belly-up and the Company’s investments in enhanced capabilities further improved its competitive position, we believe this improvement in longer-term sales trends is a layup. We also believe the technological investments and the improved terms from landlords create obvious benefits for to an already attractive margin and return profile. Our bullishness on the Company has not wavered and, in fact, we feel better than we did about the Company’s business model over the next several years than we did when we bought the stock originally.”
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Disclosure: None. 10 Best Dividend Stocks to Buy According to Billionaire Stan Druckenmiller is originally published on Insider Monkey.