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The 5 Dividend Stocks the Most Gurus Own
Posted by: Holly LaFon (IP Logged)
Date: February 22, 2012 05:28PM
Hedge fund and mutual fund managers have finished submitting their fourth quarter filings, and GuruFocus has compiled which dividend stocks the most gurus are finding attractive. The top five stocks the most gurus own are: Pfizer Inc. (PFE), Vodafone Group Plc (VOD), Merck & Co. Inc. (MRK), AT&T (T) and Altria Group (MO).
Pfizer Inc. (PFE)
Twelve gurus currently own Pfizer stock. Four bought shares in the fourth quarter, and five sold shares.
Pfizer Inc. is a research-based, global pharmaceutical company that discovers and develops innovative, value-added products. It has a market cap of $162.89 billion; it trades at $21.345 with a P/E ratio of 9.1 and P/S ratio of 2.4.
Pfizer will pay its 293rd consecutive quarterly dividend in the first quarter of 2012. Its dividend yield is 4.2%.
Although Pfizer has consistently paid and increased dividends, it had to cut back during the financial crisis. In 2008, the company paid a dividend of $1.28 per share, which it reduced to $0.80 per share in 2009. The amount it paid total in dividends in 2009 was $5.6 billion, a 35 percent reduction from $8.5 billion it paid in 2008. It also did not buy back shares in 2009, compared to $500 million of purchases in 2008.
In 2010, Pfizer reached earnings per share of $2.23, exceeding its guidance, and reduced costs by $2 billion of the $4 billion in cost reductions it has set as a multiyear goal. It also paid $6.1 billion in dividends, a 10 percent increase over 2009, though still not as high as its 2010 level of $8.5 billion.
Pfizer increased its dividend again in the first quarter of 2012 to $.22 per share, compared to $.22 the previous quarter.
Pfizer funds its dividend payments with operating cash flows, its financial asset portfolio and short-term commercial paper borrowings. Over the last 10 years its free cash flow per share has increased at an annual rate of 6.3 percent.
Vodafone Group Plc (VOD)
Nine gurus currently own Vodafone stock. Three bought shares in the fourth quarter, and three sold shares.
Vodafone Group Plc is the world's largest international mobile communications firm by market cap and has a 45 percent stake in Verizon Wireless. It has a market cap of $141.32 billion; its shares were traded at around $27.41 with and P/S ratio of 2.
The dividend yield of Vodafone is 5.1%. The company pays dividends twice a year but the amounts are somewhat erratic since payments began in 1999. For instance, from 2004 to 2005 it doubled its dividend, and from 2010 to 2011, it increased it 7.1 percent.
Vodafone does have an emphatic commitment to reward shareholders. In 2010, its board agreed to aim to grow total dividends per share by at least 7 percent over the following three years. It has also committed 6.8 billion to repurchase shares. In total, it returned £15.7 billion, or 17 percent of its market cap, in the year ending March 31, 2011.
The company’s cash holdings help ensure the safety of its dividend. The cash on its balance sheet has more than tripled from $3.4 billion in 2008 to $10.8 billion in 2011. Long-term liabilities and debt are high though at $66.9 billion.
Merck & Co. Inc. (MRK)
Seven gurus own Merck stock. Three added shares in the fourth quarter, and three sold shares.
Merck & Co. Inc. is a global research-driven pharmaceutical company with a market cap of $117.53 billion. Its shares are trading at around $38.22 with a P/E ratio of 10.2 and P/S ratio of 2.5.
The dividend yield of Merck stocks is 4.4%. It has paid dividends since 1969. Merck has paid the same dividend of $1.52 from 2005 to 2010. In November 2010 and February 2011, it increased it to $.38 quarterly, for a total amount of $1.56 that year. It then increased the dividend again 11 percent to $.42 per share in the fourth quarter of 2011.
Cash provided by operating activities is the company’s primary source for paying dividends. Cash from operating activities increased to $10.8 billion in 2010, compared to $3.4 billion in 2009 and $6.6 billion in 2008. The increase was due primarily to the full-year revenue contributions from its merger with Schering-Plough.
The merger had a significant impact on Merck’s operating results overall. Revenue increased from $27.4 billion in 2008 to $46 billion in 2010, and cash flow increased from $2 billion in 2009 to $9 billion in 2010.
Seven gurus currently own AT&T stock. Three bought shares in the fourth quarter, and two sold shares.
AT&T Inc. is a premier communications holding company with a market cap of $177.84 billion. Its shares trade near $30.28 with a P/E ratio of 13.6 and P/S ratio of 1.4.
The dividend yield of AT&T Inc. stocks is 5.9%. The company has consistently increased its dividend over the last 28 consecutive years, including through the financial crisis. It most recently raised it from $1.68 in 2010 to $1.72 in 2011.
AT&T has strong financials. Its revenue has increased from $43 billion in 2002 to $126.7 billion in 2011, and cash flow was $14.5 billion in 2011 and $15.5 billion in 2010. It currently has $3.2 billion in cash with long-term liabilities and debt of $133.7 billion.
Altria Group (MO)
Seven gurus own Altria Group. Two gurus added shares in the fourth quarter, and two sold shares.
Altria Group is the parent company of tobacco company Philip Morris USA. It has market cap of $60.97 billion; its shares trade near $29.65 with a P/E ratio of 14.6 and P/S ratio of 2.6.
The dividend yield of Altria Group stocks is 5.5%, and it has been paying a dividend since 1989. It increased its dividend 10 percent to $1.46 in 2010, from $1.32 in 2009. Its total shareholder returns for 2010 were 32.9 percent, compared to 18.8 percent for the S&P Food, Beverage & Tobacco Index and 14.8 percent for the S&P. Altria’s payout ratio is approximately 80 percent of its adjusted earnings per share.
Altria spun-off Philip Morris in 2008. Its revenue increased from $23.6 billion in 2009 to $24.4 billion in 2010, and earnings per share increased 8.6 percent to $1.90 per share. Its cash holdings have grown each year since the spin-off to $3.3 billion, and it has long-term liabilities and debt of $15.6 billion.
See more high-yield dividend stocks in gurus’ portfolios here.
Stocks Discussed: PFE, VOD, MRK, T, MO,
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