Investing

Top Hedge Funds Love These 5 Big Blue-Chip Dividend-Paying Stocks

McDonald’s

The fast-food giant has been on fire over the past six months but still remains a solid pick for investors seeking dividends and a degree of safety. Hedge funds are very bullish on the company and 20 now own the stock. McDonald’s Corp. (NYSE: MCD) is the world’s leading global foodservice retailer, with over 36,000 locations serving approximately 69 million customers in over 100 countries each day. More than 80% of McDonald’s restaurants worldwide are owned and operated by independent local business men and women.

Many on Wall Street are very pleased with the efforts from new CEO Stephen Easterbrook, who has taken the bull by the horns with a strategic corporate reset by changing the menu, updating the hours breakfast is served and modernizing the restaurants. Management has prioritized dividend growth as a key element of its shareholder value proposition. McDonald’s has increased its dividend every year for the past 39 years.

The company reported outstanding fourth-quarter results in late January, with U.S. same-store sales rising an impressive 5.7%, boosted by all-day breakfast. The analysts raised their 2016 earnings estimate from $5.25 to $5.30 per share.

McDonald’s investors receive a 3.05% dividend. The consensus price target is posted at $126, and the stock closed Tuesday at $116.90.

General Electric

This iconic company was on a strong roll to end last year, but it sold off last month, giving investors a nice entry point. A total of nine hedge funds currently own General Electric Co. (NYSE: GE), which is a highly diversified, global industrial corporation with products and services that include power generation equipment, aircraft engines, locomotives, medical equipment, appliances, commercial leasing and personal finance. Merrill Lynch feels that GE will be a large player in the efficient energy field.

The company is in the middle of a huge effort to scale back many of its operations and return capital to shareholders. The restructuring plan GE announced last year includes buying back up to $50 billion of its shares, selling about $30 billion in real estate assets over the next two years and divesting more GE Capital operations. The continued restructuring and sale of the appliance division provides some cushion to earnings estimates

Fourth-quarter numbers were solid, though somewhat hampered by slower organic growth and the Alstom power division purchase, which the company purchased from the French turbine maker. The deal was finalized in November for $10 billion, creating a $50 billion turbine services backlog.

Investors receive a 3.15% dividend. The consensus price target is $32.29. Shares closed Tuesday at $29.22.

Microsoft

This old-school technology company has a massive $99 billion sitting on the balance sheet, and 24 hedge funds own the stock now. Microsoft Inc. (NASDAQ: MSFT) develops, licenses and supports software products, services and devices worldwide. Its Devices and Consumer Licensing segment licenses Windows operating system and related software, Microsoft Office for consumers and the Windows Phone operating system. Its Computing and Gaming Hardware segment provides Xbox gaming and entertainment consoles and accessories, second-party and third-party video games and Xbox Live subscriptions, as well as Surface devices and accessories and Microsoft PC accessories.

Numerous Wall Street analysts feel that Microsoft has become a clear number two in the public or hyper-scale cloud infrastructure market with Azure, which is the company’s cloud computing platform offering. Some have flagged Azure as a solid rival to Amazon’s AWS service. This could be one major reason so many hedge funds are bullish on the company.

Microsoft investors receive a 2.8% dividend, and the forward valuation remains compelling. The consensus price target is $58.56. Shares closed trading on Tuesday at $51.55.


There you have it, five top blue chip dividend stocks that the hedge fund community are big fans of. All these stocks make good sense for long-term patient investors that have a growth and income total return bias in their portfolios.