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10 Best Dividend Stocks to Buy According to Billionaire Cliff Asness

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·14 min read
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In this article, we will take a look at the 10 best dividend stocks to buy according to billionaire Cliff Asness. You can skip our detailed analysis of Asness's history, investment philosophy, and hedge fund performance, and go directly to 5 Best Dividend Stocks to Buy According to Billionaire Cliff Asness.

Cliff Asness, hedge fund manager and investment guru, is the manager and co-founder of AQR Capital Management, the hedge fund whose 13F holdings we will be going over in detail in this article. Asness graduated from the University of Pennsylvania with dual degrees in Economics and Engineering, and later enrolled in and graduated from the University of Chicago, for his MBA and Ph.D. in Finance. During his academic career, Asness worked as a research assistant for Eugene Fama, a theorist of efficient markets.

Before founding AQR Capital Management, Asness began working as a manager of Goldman Sachs Asset Management's (GSAM) quantitative research desk when he was 24 and still a Ph.D. student. He, along with two friends from the University of Chicago, went on to develop "models to evaluate risk in currencies, bonds, and entire economies." While he was working as a manager at GSAM, Asness pulled in a $10 million investment to employ computer-driven models developed by his team to invest in the market. This initial investment eventually reached $100 million, when Goldman Sachs opened the fund to the public under the name of the Goldman Sachs Global Alpha Fund. This new fund was what sped up Asness's career. He managed the fund and aimed to make it rake in money regardless of the market's direction, but the fund declined by 2011 and was shut down despite once having been "one of the biggest and best performing hedge funds in the world."

Come 1998 then, Asness finally co-founded AQR Capital Management at the age of 31. This quantitative hedge fund firm has since proven to be highly successful, since in 2002, Asness made about $37 million, and a year later, he made $50 million. While the fund itself suffered some losses during the 2007 quant meltdown and the 2008 financial crisis as well, by 2010 end, the hedge fund had around $33 billion AUM. AQR Capital Management continued to morph and transform over the years, as according to Forbes in 2017, Asness had "moved away from hedge funds" and towards the promotion of lower-fees, more "liquid and transparent products" like mutual funds.

AQR Capital Management is one of the hedge funds more prone towards diverse portfolios, and adopted factor-investing to boost the fund's quantitative approach to investments. The hedge fund is also prone to alternative investment strategies, like risk parity strategies focusing on volatility instead of capital allocation. AQR Capital Management remains to this day, one of the giants in the financial world, and was managing around $140 billion as of the end of March. The fund's portfolio value is currently over $61 billion.

Reports also indicate that AQR's Style Premia Alternative Fund gained 19.3% in the first four months of 2021, compared to a decline of 19.23% in 2020.

10 Best Dividend Stocks to Buy According to Billionaire Cliff Asness
10 Best Dividend Stocks to Buy According to Billionaire Cliff Asness

Cliff Asness of AQR Capital Management

A glance at AQR’s Q1 portfolio shows that the fund has big stakes in several major tech companies, including Apple Inc (NASDAQ: AAPL), Taiwan Semiconductor Mfg. Co. Ltd. (NYSE: TSM) and Microsoft Corporation (NASDAQ: MSFT).

The fund owns 16.11 million shares of Apple Inc (NASDAQ: AAPL) as of the end of the first quarter, worth $1.2 billion. Apple Inc (NASDAQ: AAPL) has gained about 45% over the last 12 months.

In Microsoft Corporation (NASDAQ: MSFT), AQR cut its stake by 7% in the first quarter, still ending the period with 7.5 million shares of the company, worth $1.8 billion.

As of the end of the first quarter, Cliff Asness owns a $819.1 million stake in Taiwan Semiconductor Mfg. Co. Ltd. (NYSE: TSM), one of the leading semiconductor giants in the world which makes chips that power millions of devices all over the world, including iPhones, laptops and electric cars. Taiwan Semiconductor Mfg. Co. Ltd. (NYSE: TSM) is up 106% over the last 12 months.

But in this article our focus would be on dividend stocks in Asness's portfolio. You will see major dividend-paying stocks like PepsiCo, Inc. (NASDAQ: PEP), The Procter and Gamble Company (NYSE: PG) and Johnson and Johnson (NYSE: JNJ) in AQR's portfolio, along with several others.

The stocks on this list are all from AQR Capital Management's 13F Holdings and have been selected after considering their dividend yields and overall stock performance in the past 6 months and year to date. They have been ranked in terms of lowest to highest dividend yield as of the first quarter of 2021.

Investing is becoming difficult by the day, even for the smart money. 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.

Best Dividend Stocks to Buy According to Billionaire Cliff Asness

Let's now discuss the 10 best dividend stocks to buy according to billionaire Cliff Asness.

10. The Allstate Corporation (NYSE: ALL)

Asness's Stake Value: $397,516,000 Percentage of Cliff Asness's 13F Portfolio: 0.65% Number of Hedge Fund Holders: 41 Dividend yield: 2.47%

The Allstate Corporation (NYSE: ALL) is a company operating in the Property and Casualty industry, and provides the two through its subsidiaries, alongside providing other insurance products in the US and Canada. Some of its segments are Allstate Protection, Allstate Life, and Allstate Benefits. The Allstate Corporation (NYSE: ALL) ranks 10th on our list of the best dividend stocks to buy according to billionaire Cliff Asness.

This June, the company entered into an acquisition agreement for $300 million to acquire SafeAuto, an auto insurance carrier. The transaction will be completed in Q3'21. In the first quarter of 2021, The Allstate Corporation (NYSE: ALL) reported revenue of $12.45 billion, which is higher than the $12.02 billion revenue in Q4'20. As for the company's EPS for this quarter, it managed to beat EPS estimates by $2.24, with its EPS standing at $6.11. The Allstate Corporation's (NYSE: ALL) EPS for this quarter is also higher than that of the previous quarter which was $5.87, demonstrating steady improvement between quarters. The Allstate Corporation (NYSE: ALL) also gained 23.66% in the past 6 months and 21.19% year to date.

By the first quarter of 2021, 41 hedge funds held stakes in The Allstate Corporation (NYSE: ALL) worth over $893 million, up from Q420 numbers of 38 hedge fund holders holding stakes worth over $838 million. Asness's AQR Capital Management is one such holder with 3.45 million shares in the company worth over $397 million.

Like PepsiCo, Inc. (NASDAQ: PEP), The Procter and Gamble Company (NYSE: PG), Apple Inc (NASDAQ: AAPL), Taiwan Semiconductor Mfg. Co. Ltd. (NYSE: TSM), Microsoft Corporation (NASDAQ: MSFT) and Johnson and Johnson (NYSE: JNJ), The Allstate Corporation (NYSE: ALL) is one of the best stocks to buy based on Cliff Asness's Q1 portfolio.

9. Johnson & Johnson (NYSE: JNJ)

Asness's Stake Value: $671,689,000 Percentage of Cliff Asness's 13F Portfolio: 1.09% Number of Hedge Fund Holders: 81 Dividend yield: 2.56%

Johnson & Johnson (NYSE: JNJ) is a healthcare company selling a variety of products in the industry and operating through its Consumer Health, Pharmaceutical, and Medical Devices segments. Some of the company's brands include Johnson's and Clean and Clear. Johnson & Johnson (NYSE: JNJ) ranks 9th on our list of the best dividend stocks to buy according to billionaire Cliff Asness.

The company's first-quarter 2021 reports showed revenue of $22.32 billion and earnings of $6.2 billion for the quarter, the latter significantly up from the $1.74 billion earnings from the last quarter. Johnson & Johnson (NYSE: JNJ) was also able to beat EPS estimates this quarter by $0.25, with EPS of $2.59, significantly up from the EPS of last quarter which was $1.86.

As of the first quarter of 2021, 81 hedge funds held stakes in Johnson & Johnson (NYSE: JNJ) worth over $6.91 billion, and while the number of hedge funds has remained the same in both the first quarter and Q420, the stake value has significantly increased from Q420's $5.82 billion stake value. AQR Capital holds 4.1 million shares in the company worth over $671 million.

8. The Procter & Gamble Company (NYSE: PG)

Asness's Stake Value: $604,984,000 Percentage of Cliff Asness's 13F Portfolio: 0.98% Number of Hedge Fund Holders: 70 Dividend yield: 2.58%

The Procter and Gamble Company (NYSE: PG) is a consumer defensive company providing branded consumer packaged goods to consumers in North and Latin America, Europe, Asia Pacific, and several other regions. Some of the company's famous brands include Head & Shoulders, Pampers, and Pantene, and the company ranks 8th on our list of the best dividend stocks to buy according to billionaire Cliff Asness.

In a Nielsen report on June 2, The Procter and Gamble Company (NYSE: PG) fared well and Wells Fargo commented on "feeling better" about top-line estimates for several companies including The Procter and Gamble Company (NYSE: PG). In the first quarter of 2021, the company's reported revenue was $18.11 billion and earnings stood at $3.27 billion, and it also managed to beat EPS estimates for the quarter by $0.07 with an EPS of $1.26 in Q1.

In the first quarter, 70 hedge funds held stakes in the company worth over $8.53 billion, down from Q420 numbers of 83 hedge fund holders with stakes worth $10.4 billion. Asness's fund currently holds 4.46 million shares in The Procter and Gamble Company (NYSE: PG) worth over $604 million. Like PepsiCo, Inc. (NASDAQ: PEP), Apple Inc (NASDAQ: AAPL), Taiwan Semiconductor Mfg. Co. Ltd. (NYSE: TSM), Microsoft Corporation (NASDAQ: MSFT) and Johnson and Johnson (NYSE: JNJ), The Procter and Gamble Company (NYSE: PG) is one of the best stocks to buy based on Cliff Asness's Q1 portfolio.

7. HP Inc. (NYSE: HPQ)

Asness's Stake Value: $285,313,000 Percentage of Cliff Asness's 13F Portfolio: 0.46% Number of Hedge Fund Holders: 43 Dividend yield: 2.64%

HP Inc. (NYSE: HPQ) is a computer hardware company and provides personal computing and other access devices, imaging, and printing products, among others. The company operates in the US and internationally and has consumers in the government, health, and education sectors, as well as serving individual customers and businesses. HP Inc. (NYSE: HPQ) is ranked 7th on our list of the best dividend stocks to buy according to billionaire Cliff Asness.

On June 1, the company completed its $425 million acquisition of Kingston Technology's gaming division, HyperX. The company's Q1 non-GAAP EPS of $0.93 beat estimates by $0.04 and its GAAP EPS of $0.98 beat estimates for the quarter by $0.12. Additionally, HP Inc.'s (NYSE: HPQ) $15.9 billion revenue for the quarter also beat estimates by $940 million. Earnings for the quarter stood at $1.23 billion.

In the first quarter of 2021, 43 hedge funds held stakes in HP Inc. (NYSE: HPQ) worth over $1.52 billion, up from Q420 numbers of 39 hedge funds with a $1.04 billion stake. APQ Capital holds 8.98 million shares in the company worth over $285 million. Like PepsiCo, Inc. (NASDAQ: PEP), The Procter and Gamble Company (NYSE: PG), Apple Inc (NASDAQ: AAPL), Taiwan Semiconductor Mfg. Co. Ltd. (NYSE: TSM), Microsoft Corporation (NASDAQ: MSFT) and Johnson and Johnson (NYSE: JNJ), HP Inc. (NYSE: HPQ) is one of the best stocks to buy based on Cliff Asness's Q1 portfolio.

6. The Clorox Company (NYSE: CLX)

Asness's Stake Value: $283,412,000 Percentage of Cliff Asness's 13F Portfolio: 0.46% Number of Hedge Fund Holders: 38 Dividend yield: 2.66%

The Clorox Company (NYSE: CLX) is a consumer defensive company that manufactures consumer and professional products worldwide. Some of the company's brands include CloroxPro and NeoCell, and it has a collaboration with Cleveland Clinic and the CDC Foundation. The Clorox Company (NYSE: CLX) ranks 6th on our list of the best dividend stocks to buy according to billionaire Cliff Asness.

The Clorox Company (NYSE: CLX) recently announced its new $1.16 per share quarterly dividend which demonstrated a 4.5% increased from its previous $1.11 dividend. The new dividend will be payable on August 13th. Additionally, the company's first-quarter of 2021 revenue was revealed to be $1.78 billion and The Clorox Company (NYSE: CLX) also managed to beat EPS estimates for this quarter by $0.14 with its $1.62 EPS. The company has a forward PE ratio of 22.64.

In the first quarter, 38 hedge funds held stakes in The Clorox Company (NYSE: CLX) worth over $1.19 billion, down from Q420 numbers of 39 hedge fund holders holding stakes worth $1.65 billion in the company. AQR Capital currently holds 1.47 million shares in The Clorox Company (NYSE: CLX) worth over $283 million. Like PepsiCo, Inc. (NASDAQ: PEP), The Procter and Gamble Company (NYSE: PG), Apple Inc (NASDAQ: AAPL), Taiwan Semiconductor Mfg. Co. Ltd. (NYSE: TSM), Microsoft Corporation (NASDAQ: MSFT) and Johnson and Johnson (NYSE: JNJ), The Clorox Company (NYSE: CLX) is one of the best stocks to buy based on Cliff Asness's Q1 portfolio.

LRT Capital Management, in its Q1 2021 investor letter, mentioned The Clorox Company (NYSE: CLX). Here is what LRT Capital Management has to say about The Clorox Company in its letter:

"For several months now, our largest position has been Clorox – the cleaning products company. Besides wipes, the company also manufactures bleach, charcoal, cat litter, plastic bags, and container products. Clorox benefited during the Covid-19 pandemic from an increased demand for cleaning products. Companies and consumers trust the Clorox brand – a source of the company’s huge competitive advantage.

United Airlines, for example, chose to partner with Clorox in its push to reassure consumers about the safety of air travel. The company is a typical “defensive” holding – subject to very small fluctuations in end market demand. Its branded consumer products remain in strong demand. Historically (pre-Covid), the company’s sales grew in line with GDP, while earnings-per-share grew slightly faster due to operational and financial leverage. We expect sales will decline slightly in the next few quarters as the Covid-19 pandemic comes to an end, but we believe this decline is more than accounted for by the company’s low valuation.

On February 4th, Clorox reported results for Q4 2020, with both earnings and sales beating estimates. Sales grew by +27% (vs. 20% estimate) from the prior year’s Q4, and EPS increased +39% ($2.03 vs. $1.75 expected). The company continues to see robust demand and raised its sales and EPS guidance for the rest of the year. Shares are down 4% year-to-date. We believe the shares are undervalued at 20x trailing and 24x forward earnings and currently represent an excellent opportunity.”

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Disclosure: None. 10 Best Dividend Stocks to Buy According to Billionaire Cliff Asness is originally published on Insider Monkey.