In this article, we will take a look at 12 cash-rich dividend stocks to buy now. If you want to skip our discussion and see the top stocks, go to 5 Cash-Rich Dividend Stocks To Buy Now.
The persistent sell-off in equity markets last year is a powerful sign that the U.S. economy is heading for a hard landing amid the central bank’s fight to beat inflation. As investors brace for an expected recession in 2023, the benchmark S&P 500 index was down 18.2% in 2022 and had its biggest annual decline since 2008, as the Federal Reserve mounts its most aggressive monetary policy tightening cycle in decades to fight surging inflation. Whether or not a bona fide recession is in the cards for 2023, the period of “slow growth” outlined by the Fed could just as well foreshadow further economic stagnation and job losses that characterize periods of recessions.
William Dickens, a University Distinguished Professor and the chair of the Department of Economics at Northeastern University, states that:
“Normally we think of just having to deal with a supply shock, which we’ve had plenty of over the last few years between COVID-19, Russia’s [war in Ukraine], with the food and energy crisis, and so on. On the other hand, we’ve also seen overstimulated economies before—ones where the unemployment rate gets so low that employers are having a hard time finding workers so they start jacking up wages, which is another source of inflation.”
In periods of high inflation, dividend stocks have recorded strong performance relative to the broader market. Cash-rich companies that hold long dividend growth track records are particularly popular in this regard. The best dividend stocks this year exhibited strong performance and hold decades-long dividend growth track records. These include cash-rich companies that consistently grow their dividends in order to significantly increase portfolio returns for the long term during turbulent market conditions. Some dividend stocks that remained famous the previous year include Johnson & Johnson (NYSE:JNJ), Pfizer Inc. (NYSE:PFE) and Microsoft Corporation (NASDAQ:MSFT), among others discussed in detail below.
It is important to note that the performance of individual dividend stocks can vary greatly during a recession, and there is no guarantee that a particular dividend stock will perform well. As with any investment, it is important to carefully research and evaluate the financial health and prospects of a company before making an investment decision.
Photo by NeONBRAND on Unsplash
For this article we used stock screeners to list down companies that pay dividends and have enterprise values less than their market caps. A higher EV to Market Capitalization ratio is generally not preferred as it shows that the company has high levels of debt. Such firms are deemed risky. A lower EV to Market Capitalization ratio, on the other hand, is more favorable as that would mean that the firm has low debt levels and is, in turn, considered a relatively safer investment.
The stocks in this list are ranked in ascending order according to the difference between their enterprise value and market capitalization. Additionally, Insider Monkey makes use of its database of 920 elite funds to track hedge fund holdings as of the third quarter of the year to gauge the hedge fund sentiment around each stock. We have mentioned number of hedge funds having stakes in these companies with each stock.
Cash-Rich Dividend Stocks To Buy Now
12. Pfizer Inc. (NYSE:PFE)
Number Of Hedge Fund Holders: 77
Dividend Yield As Of January 20: 3.64%
Market Capitalization: $253.22 billion
Enterprise Value (EV): $253 billion
Pfizer Inc. (NYSE:PFE) is an American multinational pharmaceutical and biotechnology corporation that Pfizer develops and produces medicines and vaccines for immunology, oncology, cardiology, endocrinology, and neurology. The company boasts several standout drugs and products that each generate more than $1 billion in annual revenues.
Earlier this December, Goldman Sachs analyst Chris Shibutani upgraded Pfizer Inc. (NYSE:PFE) to Buy from Neutral with a price target of $60, up from $47. According to the analyst, positive updates from the company’s pipeline, and the potential for outperformance from the commercial new product launch portfolio over the course of the coming year, can drive “meaningful upside” to the value ascribed to Pfizer’s base business. He also believes that there is a “sufficiently lessened degree of uncertainty” regarding dynamics that will impact Pfizer’s COVID-19 franchise, and the “trough sales” scenarios for the portfolio do not present “thesis-changing downside.”
Pfizer Inc. (NYSE:PFE) has been consistently growing its dividends for the past 12 years. The company offers a quarterly dividend of $0.41 per share and has a dividend yield of 3.64%, as of January 20.
Pfizer Inc. (NYSE:PFE) was a part of 77 hedge fund portfolios in Q3 2022, up from 70 in the previous quarter, as per Insider Monkey’s database. The collective value of stakes owned by these hedge funds is over $2.4 billion. Among these hedge funds, AQR Capital Management was the company’s leading stakeholder in Q3.
Similar to Johnson & Johnson (NYSE:JNJ), NVIDIA Corporation (NASDAQ:NVDA), and Microsoft Corporation (NASDAQ:MSFT), Pfizer Inc. (NYSE:PFE) is a dividend stock that pays handsomely.
Here’s what Diamond Hill Capital said about Pfizer Inc. (NYSE:PFE) in its Q3 2022 investor letter:
“Also among our bottom contributors were health care products manufacturer Abbott Labs, global pharmaceutical company Pfizer Inc. (NYSE:PFE), media and technology giant Alphabet, and insurance company American International Group (AIG). Although Pfizer continues to report strong performance of its core drugs, sales of its COVID vaccine and treatment have likely peaked and sales are expected to decline going forward. We remain optimistic about the company long term as we believe management is taking the company in the right direction, focusing R&D, and making strategic acquisitions with profits generated from COVID vaccine sales.”
11. Johnson & Johnson (NYSE:JNJ)
Number Of Hedge Fund Holders: 85
Dividend Yield As Of January 20: 2.56%
Market Capitalization: $440.07 billion
Enterprise Value (EV): $439.12 billion
Johnson & Johnson (NYSE:JNJ) is an American multinational corporation founded in 1886 that develops medical devices, pharmaceuticals, and consumer packaged goods. A premier dividend stock with over 60 consecutive years of dividend increases, Johnson & Johnson (NYSE:JNJ) paid a $1.13 per share quarterly dividend to shareholders with a yield of 2.56% on January 20.
At the beginning of December, Morgan Stanley analyst Terence Flynn raised the price target on Johnson & Johnson (NYSE:JNJ) to $178 from $170 and maintained an Equal Weight rating on the shares as he refreshed his sum-of-the-parts valuation ahead of the company separating its Consumer Health segment into an independent company, to be called “Kenvue,” in the second half of 2023.
According to Insider Monkey’s third quarter database, 85 hedge funds were bullish on Johnson & Johnson (NYSE:JNJ), compared to 83 funds in the last quarter. Ken Fisher’s Fisher Asset Management is the biggest stakeholder of the company, with nearly 6 million shares worth $967.2 million.
In its Q2 2022 investor letter, Mayar Capital, an asset management firm, highlighted a few stocks and Johnson & Johnson (NYSE:JNJ) was one of them. Here is what the fund said:
“Johnson & Johnson (NYSE:JNJ) is currently our largest position and a long-standing holding. The majority of the group’s sales comes from its collection of pharmaceutical franchises, but a large majority (~45%) comes from its collection of medical device businesses and its consumer brands.
Here’s how JNJ makes and spends a dollar of revenues: As of 2021, about 55 cents of that dollar comes from its pharmaceutical sales – sales of drugs to pharmacies and distributors – while 30 cents come from the sale of medical devices, such as surgery equipment and orthopedics. The rest of that dollar in sales comes from sales of JNJ’s consumer brands such as Listerine mouthwash, Nicorette nicotine tablets and Neutrogena cosmetics (…read more)
10. Texas Instruments Incorporated (NASDAQ:TXN)
Number Of Hedge Fund Holders: 59
Dividend Yield As Of January 20: 2.87%
Market Capitalization: $157 billion
Enterprise Value (EV): $155.86 billion
Texas Instruments Incorporated (NASDAQ:TXN) is an American technology company headquartered in Dallas, Texas, that designs and manufactures semiconductors and various integrated circuits, which it sells to electronics designers and manufacturers globally.
Texas Instruments Incorporated (NASDAQ:TXN) currently pays a quarterly dividend of $1.24 per share and has a dividend yield of 2.87%, as recorded on January 20.
Citi analyst Christopher Danely raised the firm’s price target on Texas Instruments to $175 from $155 and maintained a Neutral rating on the shares on January 18. Although the analyst expects consensus estimates for the U.S. semiconductors group to further decline during earnings season driven by continued downside from the PC, wireless, consumer and auto end markets, he thinks the industrial end market appears to be holding up better than expected. Danely remains hopeful that semiconductor stocks will bottom in the first half “after every company has aggressively cut estimates.”
According to Insider Monkey’s database, 59 hedge funds owned stakes in the company at the end of the September quarter. First Eagle Investment Management held the biggest stake in Texas Instruments Incorporated (NASDAQ:TXN) at the end of Q3 2022.
9. Costco Wholesale Corporation (NASDAQ:COST)
Number Of Hedge Fund Holders: 69
Dividend Yield As Of January 20: 0.79%
Market Capitalization: $214.08 billion
Enterprise Value (EV): $207.91 billion
Costco Wholesale Corporation (NASDAQ:COST) is an American multinational corporation that engages in the operation of membership warehouses, leading as one of the biggest retailers in the world across several selected categories.
Costco Wholesale Corporation (NASDAQ:COST) has been raising its dividends consistently for the past 17 years. The company pays a quarterly dividend of $0.90 per share for a dividend yield of 0.79%, as of January 20.
On December 9, Truist analyst Scot Ciccarelli lowered the price target on Costco Wholesale Corporation (NASDAQ:COST) to $538 from $557 after its Q1 earnings miss but maintained a Buy rating on the shares. Despite some big-ticket softness, the analyst stated that Q1 sales remained extremely steady on a stacked basis, while sales of necessities like food and sundries also remain “very strong”. Ciccarelli adds that he is positive on Costco given the potential for a membership fee increase, a special dividend/payout to shareholders, and the company’s continual share gains.
As of the close of Q3 2022, 69 hedge funds tracked by Insider Monkey owned stakes in Costco Wholesale Corporation (NASDAQ:COST), up from 64 in the previous quarter. These stakes have an aggregate value of over $4.42 billion. With stakes over $1.2 billion, Fisher Asset Management owned the largest position in the company in Q3.
Cooper Investors shared its outlook on Costco Wholesale Corporation (NASDAQ:COST) in its Q3 2022 investor letter. Here’s what the firm said:
“The US economy continues to run hot – the labour market is extremely tight and a number of executives we spoke to described their challenges in retaining staff and preventing competitors from poaching talent. Industrial companies in particular continue to see record backlogs, with the easing of logistics and supply chain constraints only just starting to have an impact on deliveries and lead times.
In terms of inflationary pressures, the vast majority of our holdings have been able to leverage strong market positions and stakeholder relationships to push pricing through in 2022 such that minimal impact to earnings has occurred. Clearly this is not a lever than can be pulled indefinitely but the more experienced management teams have kept some of their powder dry. Our meeting with management at Costco in Seattle was memorable for several reasons but one was their latent ability to increase member pricing which they have not done in over 5 years (and thus likely to do in 2023)…
…To conclude we’ll return to our meeting with Costco mentioned earlier. The business quality is no secret after decades of incredible execution, but the meeting gave us renewed conviction around Value Latencies in terms of the runway for growth, the focus on enhancing customer value, Costco’s vast buying power (it purchases 30% of the world’s jumbo cashews as one example) and management’s feral focus on the business model and cost discipline.”
8. Cisco Systems, Inc. (NASDAQ:CSCO)
Number Of Hedge Fund Holders: 68
Dividend Yield As Of January 20: 6.85%
Market Capitalization: $192.18 billion
Enterprise Value (EV): $181.27 billion
Cisco Systems, Inc. (NASDAQ:CSCO), commonly known as Cisco, is an American-based multinational digital communications technology conglomerate corporation that specializes in switches, routers, cybersecurity, and IoT.
Earlier this November, BofA analysts added Cisco Systems, Inc. (NASDAQ:CSCO) to their “US 1 List,” which represents a collection of the best investment ideas that are drawn from the universe of Buy-rated, U.S.-listed stocks covered by BofA Global Research fundamental equity research analysts.
On January 17, Piper Sandler analyst James Fish raised his price target on Cisco Systems, Inc. (NASDAQ:CSCO) to $49 from $47 and kept a Neutral rating on the shares. The analyst adjusted estimates and valuations across the cloud automation software sector ahead of earnings.
On December 7, Cisco Systems, Inc. (NASDAQ:CSCO) declared a $0.38 per share quarterly dividend, in line with previous. The dividend is payable on January 25, to shareholders of record on January 5.
According to Insider Monkey’s data, 68 hedge funds were long Cisco Systems, Inc. (NASDAQ:CSCO) at the end of Q3 2022, compared to 63 funds in the prior quarter. John Overdeck and David Siegel’s Two Sigma Advisors is the largest stakeholder of the company, with 9.70 million shares worth $388 million.
In its Q1 2022 investor letter, Carillon Tower Advisers, an asset management firm, highlighted a few stocks and Cisco Systems, Inc. (NASDAQ:CSCO) was one of them. Here is what the fund said:
“Cisco Systems (NASDAQ:CSCO) traded lower as investors weighed how supply chain concerns would impact sales growth. The company has been upgrading its switching and routing offerings, which should lead to strong demand as on-site locations upgrade infrastructure.”
7. NVIDIA Corporation (NASDAQ:NVDA)
Number Of Hedge Fund Holders: 89
Dividend Yield As Of January 20: 0.09%
Market Capitalization: $448.04 billion
Enterprise Value (EV): $436.65 billion
NVIDIA Corporation (NASDAQ:NVDA) is a California-based technology company known for designing and manufacturing graphics processing units (GPUs). A global leader in artificial intelligence hardware and software, its professional line of GPUs are used in workstations for applications in such fields as architecture, engineering and construction, media and entertainment, automotive, scientific research, and manufacturing design.
On January 11, KeyBanc analyst John Vinh maintained an Overweight rating on NVIDIA Corporation (NASDAQ:NVDA) but lowered the firm’s price target on the shares to $220 from $230. Although his quarterly supply chain findings were mostly negative, the analyst continues to see a “soft landing” scenario and believes that semiconductor companies are in a much better position to navigate a downturn given better visibility, more secular drivers, and better pricing leverage.
According to Insider Monkey’s data, 89 hedge funds were bullish on NVIDIA Corporation (NASDAQ:NVDA) at the end of September 2022, compared to 84 funds in the prior quarter. Ken Fisher’s Fisher Asset Management is a prominent stakeholder of the company, with 12 million shares worth $1.5 billion.
Ave Maria made the following comment about NVIDIA Corporation (NASDAQ:NVDA) in its Q3 2022 investor letter:
“NVIDIA Corporation (NASDAQ:NVDA) Corporation primarily designs and sells the accelerated computer hardware and software that is indispensable for autonomous vehicle, gaming, and artificial intelligence applications. Near term uncertainty from the crypto market correction and the semiconductor cycle have weighed on shares and offered an attractive entry point for long-term investors.”
6. Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM)
Number Of Hedge Fund Holders: 87
Dividend Yield As Of January 20: 1.54%
Market Capitalization: $442.49 billion
Enterprise Value (EV): $421.18 billion
Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) is a Taiwanese multinational semiconductor contract manufacturing and design company that operates as one of the world’s largest integrated circuit foundries that holds a significant edge over its competitors when it comes to the manufacture and production of advanced semiconductor chips.
Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) currently pays a quarterly dividend of $0.44 with a yield of 1.54% as of January 20.
At the end of Q3 2022, 87 hedge funds in Insider Monkey’s database were long Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM). Berkshire Hathaway remained the leading stakeholder of the company at the end of Q3 2022.
Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) ranks among the likes of Johnson & Johnson (NYSE:JNJ), NVIDIA Corporation (NASDAQ:NVDA), and Microsoft Corporation (NASDAQ:MSFT) as a decent cash-rich dividend stock.
Here is what Baron Funds had to say about Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) in its third-quarter 2022 investor letter:
“Semiconductor giant Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) detracted from performance due to the global macroeconomic slowdown and softening demand for consumer electronics. We retain conviction that Taiwan Semi’s technological leadership, pricing power, and exposure to secular growth markets, including high-performance computing, automotive, and IoT, will allow the company to deliver strong revenue growth over the next several years.”
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Disclosure. None. 12 Cash-Rich Dividend Stocks To Buy Now is originally published on Insider Monkey.