10 Best Dividend Stocks to Buy According to Stanley Druckenmiller

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In this article we discuss the 10 best dividend stocks to buy according to Stanley Druckenmiller. If you want to skip our detailed analysis of these stocks, and go directly to the 5 Best Dividend Stocks to Buy According to Stanley Druckenmiller.

With the present economic uncertainty caused by the COVID-19 outbreak, investors are leaning towards investing in dividend-paying growth firms that are more predictable and less volatile.  According to a study published by investment bank and wealth management firm Morgan Stanley, dividend-growth portfolios may generate notable long-term returns regardless of the market cycle. Data in the study also suggests that from 1991 to 2015, non-dividend paying equities gained +4.18% per year, while dividend-paying stocks posted an average annual return of +9.7%.

According to a separate study from Janus Henderson Global Index, the forecast for dividends in 2021 is expected to improve in April. The report forecasts that dividends will climb by 5% on a headline basis to $1.32 trillion in 2021, with an underlying rise of 2%. 

Many investors are leaning towards dividend-paying stocks because they provide investors regular income even when the market is volatile and capital gains are difficult to achieve. For instance, amidst the pandemic in April 2020, healthcare manufacturer Johnson & Johnson (NYSE:JNJ) announced a 6.3% rise in its quarterly dividend to $1.01 per share, marking the 58th consecutive year of dividend increases. Johnson & Johnson (NYSE:JNJ) currently has a market cap of $445 billion and offers a dividend yield of 2.51%. Shares of JNJ increased 13% over the last twelve months. The company’s net revenue in the first quarter of 2021 came in at $22.3 billion, up 7.9% compared to the first quarter of 2020.

Another dividend stock with decent yield and strong history is  International Business Machines Corporation (NYSE:IBM). During the pandemic, the company marked its 25th year of paying dividends. International Business Machines Corporation (NYSE:IBM) currently offers a dividend yield of 4.56% and has a market cap of $128.4 billion. Shares of International Business Machines Corporation (NYSE:IBM) rose 15% over the last twelve months. On April 20, Credit Suisse maintained an Outperform rating on International Business Machines Corporation (NYSE:IBM) and raised the price target to $165.

Another notable stock that raised its dividends in April 2020 is the wholesale distributor of swimming pool supplies Pool Corporation (NASDAQ:POOL). Pool Corporation increased its dividend by 5.5% in April, marking the tenth consecutive year of increases. The company has a market cap of $17.5 billion and currently offers a dividend yield of 0.73%. Shares of Pool Corporation (NASDAQ:POOL) rose 62% over the last twelve months. On May 18, Goldman Sachs initiated coverage On Pool Corporation (NASDAQ:POOL) with a Buy rating and announced a price target of $535.

Legendary investor Stanley Druckenmiller bought a new stake in JPMorgan Chase & Co. (NYSE:JPM) in the first quarter. The New York-based firm is engaged in serving individuals, organizations, institutions, and governments across the world. The company’s services include consumer banking, investment banking, commercial banking, and asset management. JPMorgan Chase & Co. (NYSE:JPM)’s net income came in at $8.1 billion in the first quarter of 2021, up from $4.0 billion in the first quarter of 2020. JPMorgan Chase & Co. (NYSE:JPM) currently offers a dividend yield of 2.19%. The shares of JPM surged 68% over the last three months

Stanley Druckenmiller likes to diversify his portfolio. As of the end of the first quarter of 2021, Druckenmiller’s hedge fund Duquesne Capital has stakes in stocks like Microsoft Corporation (NASDAQ:MSFT), Starbucks Corporation (NASDAQ:SBUX), and Amazon.com, Inc. (NASDAQ:AMZN). But in this article, our focus will be on the best dividend stocks in Druckenmiller’s portfolio.

Investing in dividend stocks offers a high potential for capital gains during the most difficult times. 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.

With this context in mind, here is our list of the 10 best dividend stocks to buy according to Stanley Druckenmiller. We used Duquesne Capital’s Q1 portfolio for this analysis.

Best Dividend Stocks to Buy According to Stanley Druckenmiller

10. First Horizon Corporation (NYSE:FHN)

Number of Hedge Fund Holders: 27   

We start our list of the 10 best dividend stocks to buy according to Stanley Druckenmiller with bank holding company First Horizon Corporation (NYSE:FHN). First Horizon Corporation operates as one of the largest banks in Tennessee with over 250 bank locations across the Southeast. In 2020, the company increased its number of locations by acquiring 30 branches of Truist Financial Corporation (NYSE:TFC). The acquisition strengthened the bank’s presence in important growing regions such as Durham, Chapel Hill, Winston-Salem, Virginia, and Georgia. On January 27, 2021, First Horizon’s board declared a $0.15 per share quarterly common stock dividend. The dividend will be paid on April 1, 2021, to stockholders who were on the books on March 12, 2021.

First Horizon Corporation (NYSE:FHN) has a market cap of $10.53 billion and currently offers a dividend yield of 3.15%.

9. Vale S.A. (NYSE:VALE)

Number of Hedge Fund Holders: 31

Ranking 9th in our list of the 10 best dividend stocks to buy according to Stanley Druckenmiller is Vale S.A. (NYSE:VALE), a metals and mining company that operates in over 30 countries worldwide. Earlier this year, Vale S.A. (NYSE: VALE) agreed to buy Mitsui & Co’s investment in the Moatize metallurgical and thermal coal mine and port project in Mozambique. The acquisition is part of the Brazilian miner’s plan to phase out fossil fuels by 2050. 

Vale S.A. (NYSE: VALE) has a market cap of $110.4 billion and currently offers a dividend yield of 5.61%. Vale S.A.’s net operating revenue in the first quarter of 2021 came in at $12.6 billion, an 81% increase year over year. Shares of VALE surged 120% over the past twelve months. On March 12, BNP Paribas downgraded Vale S.A. to an Underperform rating and announced a price target of $18.3.

8. Cummins Inc. (NYSE:CMIVGI Partners

Number of Hedge Fund Holders: 37   

Indiana-based electric power generation manufacturer Cummins Inc. (NYSE:CMI) ranks 8th on 10 best dividend stocks to buy according to Stanley Druckenmiller list. The company was founded in 1919 and has over 5,000 facilities in 197 countries worldwide. On May 11, Cummins Inc.’s board of directors announced a cash dividend of $1.35 per share on the common stock, payable on June 3, 2021, to shareholders of record on May 21, 2021. In 2019, the company made one of its biggest acquisitions when it purchased fuel-cell maker Hydrogenics in a $290 million deal. The acquisition allowed the firm to provide a complete, distinctive hydrogen solution for its clients.

Cummins Inc. (NYSE:CMI) has a market cap of $37.6 billion. The company’s revenue in the first quarter of 2021 came in at $6.1 billion, a 22% increase compared to the same period in 2020. On May 17, BofA Securities upgraded Cummins Inc. to Buy and announced a $325 price target.

Like JPMorgan Chase & Co (NYSE:JPM) and Citigroup Inc (NYSE:C), Cummins Inc. (NYSE:CMI) is one the best dividend stocks to buy according to Stanley Druckenmiller.

7. Linde plc (NYSE:LIN)

Number of Hedge Fund Holders: 43 

Ireland-based Linde plc (NYSE:LIN) ranks 7th in our list of the 10 best dividend stocks to buy according to Stanley Druckenmiller. Linde plc operates one of the largest industrial gas companies in the world. The company operates together with its notable subsidiaries, Praxair and Yara Praxair Holding AS, among others. On April 26, Linde plc (NYSE:LIN) Board of Directors announced a quarterly dividend of $1.06 per share, the dividend will be paid on June 17, 2021, to owners who had their shares registered by June 3, 2021. In 2020, gas company Gasum acquired Linde’s liquefied natural gas (LNG) and biogas business in Sweden and Norway. The acquisition helped Gasum boost cleaner transportation solutions in the Nordic region.

Linde plc (NYSE:LIN) has a market cap of $156 billion and currently offers a dividend yield of 1.41%. The company’s revenue in the first quarter of 2021 came in at $979 million, a 74% increase compared to the same period of 2020. 

 VGI Partners mentioned Linde plc (NYSE:LIN) in its FY 2019 investor letter:

“Linde plc (NYSE: LIN) contributed +1.3% to performance for the twelve months to 30 June 2019, with the share price increasing 27.0% over the course of the year.

Linde plc is the result of a merger between two of the big four industrial gas providers, Praxair Inc. and Linde AG. The merger closed in March 2019 and the combined business, Linde plc, is now the largest industrial gas player in the world, further consolidating an already highly concentrated industrial gas industry.

We believe a number of factors make the industrial gas industry an attractive investment. The product is a fraction of their customers’ total cost base but an essential input, providing substantial pricing power. Industrial gas facilities require substantial initial capital requirements and often it will take three years to see any return on this investment. The industry has very long-term contracts with ‘Take or Pay’ provisions, improving earnings visibility. In addition, the industry has a highly consolidated market structure, with the top three players holding ~80% of the global market. Finally, the industry tends to form regional monopolies, as production must occur within 200km of the end customer.

We have been Praxair shareholders for many years as, in addition to the above factors, Praxair has a very high-quality, long term focused management team who are aligned with shareholders as a result of their substantial shareholding.

This Praxair management team is, as of March, in control of the merged business and we believe their best-in-class execution combined with Linde AG’s assets will result in significant pricing opportunities and margin improvement over the coming years.”

6. Caterpillar Inc (NYSE:CAT)

Number of Hedge Fund Holders: 53   

Illinois-based construction equipment manufacturer Caterpillar Inc (NYSE:CAT) ranks 6th in our list of 10 best dividend stocks to buy according to Stanley Druckenmiller. The company was founded in 1925 and has consistently been paying an annual dividends since its inception. In 1933, the company started paying a quarterly dividend. On April 14, Caterpillar Inc.’s (NYSE:CAT) Board of Directors announced that they will continue the quarterly cash dividend of $1.03 per share of common stock, which will be paid on May 20, 2021, to shareholders of record on April 26, 2021.

In 2020, the company acquired robot autonomy technology solutions company Marble Robot, Inc. The acquisition allowed the company to deliver scalable solutions to the construction, quarry, industrial, and waste industries to accommodate growing demand.

Caterpillar Inc (NYSE:CAT) has a market cap of $132 billion and currently offers a dividend yield of 1.71%. The company’s first-quarter 2021 revenue came in at $11.9 billion, up 12% compared to the first quarter of 2020. Shares of CAT increased 100% over the past twelve months.

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Disclosure: None. 10 Best Dividend Stocks to Buy According to Stanley Druckenmiller is originally published on Insider Monkey.