If you're an investor, the past month has probably felt like a data and news tsunami. Everything from geopolitical unrest to domestic inflation data has, in some capacity, influenced the stock market.
But what if I told you that one of the most important data releases occurred less than two weeks ago, and you very well may have missed it.
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Feb. 15 marked the deadline for money managers with over $100 million in assets under management to file Form 13F with the Securities and Exchange Commission (SEC). In simple terms, a 13F provides a detailed snapshot of what the most successful money managers were buying and selling in the most recently ended quarter (i.e., the fourth quarter of 2021). Even though these snapshots are now roughly two months old, they still provide useful clues as to what trends and stocks are tickling the fancy of top-notch fund managers.
If there's one trend that stood out in the fourth quarter, it's that billionaire money managers took a liking to popular dividend stocks. This shouldn't come as too big of a surprise given that income stocks are almost always profitable and time-tested.
Additionally, dividend stocks have a rich history of handily outperforming non-dividend payers over the long run. With growth stock valuations stretched entering 2022, fund managers might have believed that rotating into income stocks would be a smart move.
Billionaire money managers can't stop buying these widely held dividend stocks
After perusing the 13F filings of widely followed billionaire money managers from the fourth quarter, it's pretty clear that they've been piling into the following three popular dividend stocks.
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Pfizer
First up is pharmaceutical giant Pfizer (PFE -0.19%), which has excelled during the pandemic.
The company, which was sporting a 3.5% yield as of Feb. 24, was bought hand over fist in the fourth quarter by Philippe Laffont's Coatue Management and John Overdeck's and David Siegel's Two Sigma Investments. Coatue opened a more than 10.3 million share position in the company, with Two Sigma acquiring almost 4.6 million shares, making it the funds' fourth-largest holding.
The buzz surrounding Pfizer continues to be its leading position in coronavirus therapeutics. The company's COVID-19 vaccine, known as Comirnaty, generated $36.8 billion in worldwide sales in 2021, making it the top-selling global therapy by a longshot. Only three COVID-19 vaccines have managed to hit the 90% vaccine efficacy (VE) mark, with Comirnaty leading the way -- 95% VE from a U.S. trial in late 2020. Being in the pole position with VE has made Pfizer's COVID-19 vaccine the popular choice.
Furthermore, Pfizer could benefit immensely from the rollout of Paxlovid, the company's oral five-day treatment for patients who have COVID-19. Just as Comirnaty blew the doors of expectations with its 95% VE, Pfizer's oral therapeutic dazzled in clinical trials with an 89% reduction in risk of death or hospitalization if taken within three days of symptom onset, and an 88% reduction if taken within five days of symptom onset.
This year, Pfizer has guided for global sales of $32 billion from Comirnaty and $22 billion from Paxlovid. If these treatments comes anywhere close to these sales total, Pfizer should have no issue maintaining its above-average payout.
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ExxonMobil
Another extremely popular dividend stock that billionaire fund managers piled into in the fourth quarter is integrated oil and gas stock ExxonMobil (XOM 0.02%).
ExxonMobil, which is doling out a truly impressive 4.6% yield, was aggressively bought by three billionaires last quarter. Jim Simons of Renaissance Technologies, Ken Griffin of Citadel Advisors, and Overdeck and Siegel of Two Sigma, respectively purchased around 3.6 million shares, 2 million shares, and 1.1 million shares.
One of the reasons investors tend to flock to ExxonMobil is its integrated operating model. When most people think of ExxonMobil, they're likely relating the company to its upstream drilling and exploration operations. While this upstream segment does generate the juiciest margins for the company, it's not its only source of cash flow.
ExxonMobil also operates downstream refineries and petrochemical plants. Think of the company's downstream operations as a hedge against falling crude oil prices. Though lower prices are bad for drillers, it means the company's refining and chemical segments benefit from lower input costs. This ability to hedge has helped buoy ExxonMobil's operating performance in even the most challenging environments.
Billionaires are probably impressed with the company's cost-management initiatives, too. Capital and exploratory spending totaled only $16.6 billion last year, which with crude oil prices rising significantly helped the company generate $48 billion in operating cash flow and pay down $20 billion in debt.
Following significant balance sheet improvements in 2021, ExxonMobil appears well-positioned to advance key global projects while continuing to reward shareholders via dividends and share buybacks.
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Apple
The third highly popular dividend stock billionaires can't stop buying is tech kingpin Apple (AAPL 1.27%).
In particular, Israel Englander of Millennium Management and Jeff Yass of Susquehanna International have been aggressive buyers. Millennium more than tripled its stake by adding over 6.1 million shares, while Susquehanna tacked on close to 1.6 million shares to its existing position.
Although Apple's dividend yield is only 0.5%, this is more a reflection of the outperformance of Apple's shares over the past nine years than a knock against the company's payout. In fact, Apple's payout has more than doubled since it was initiated in 2012. What's more, it's one of the largest nominal annual payouts in the world (about $14.4 billion).
The love billionaires have for Apple has to do with product dominance, customer loyalty, and innovation. For instance, Apple's iPhone is the leading smartphone sold in the United States. The debut of 5G-capable iPhones led the company to report record sales and profits. In fact, almost every time Apple debuts a new or upgraded product, you can count on a long line of loyal customers forming at its stores.
There's also a lot to be excited about with regard to Apple's focus on subscription services. CEO Tim Cook is overseeing this transformation, which should help the company improve its operating margins over time and avoid the revenue lumpiness that occasionally accompanies the tail end of product replacement cycles.
An absolute cash cow ($112.2 billion in trailing 12-month operating cash flow), Apple continues to be viewed as a safe-haven tech stock.
