Are you a successful fund manager with a proven ability to pick stocks that outperform? If your answer is no, it probably isn't a bad idea to learn from the very small population of folks who can honestly answer yes.
You might not know any billionaire fund managers personally, but that doesn't mean you can't track their activity. The Securities and Exchange Commission makes it easy by requiring institutional investors to disclose their activity every three months.
Another round of disclosures recently went live, and it looks like dividend-paying stocks are still in style. Here are three stocks that billionaires bought hand over fist during the last three months of 2022.
McKesson
During the last three months of 2022, Israel Englander and the fund he manages, Millennium Management, bet heavily on McKesson (MCK 0.84%). This is America's largest distributor of prescription drugs by revenue, and it's been in the top position for two decades. As the largest member of its industry, McKesson benefits from economies of scale that its smaller competitors can only dream of.
The stock offers a modest 0.6% dividend yield at the moment. That isn't a lot, but investors should know it could grow by leaps and bounds in the years ahead.
Reliable profitability has allowed the company to raise its quarterly dividend payout by 170% over the past decade. Despite the rapid raises, the company was able to meet its dividend commitment with less than 7% of the free cash flow its operations generated over the past year.
Englander is probably a fan of McKesson because it isn't resting on its prescription-drug-distribution laurels. Last October, it agreed to form a joint venture with America's largest health system, HCA Healthcare, to create a fully integrated oncology research organization.
Microsoft
Shares of Microsoft (MSFT -2.45%) collapsed by a stunning 28.7% in 2022. Billionaire money managers weren't shy about taking advantage of the temporarily discounted pricing. During the last three months of 2022, Philippe Laffont and Coatue Management bought more than 1.1 million shares of the tech giant.
At recent prices, Microsoft stock offers a 1.1% dividend yield. The yield isn't particularly appetizing at the moment but is growing fast. The company has raised its payout a whopping 196% over the past decade.
Microsoft's $10 billion investment in ChatGPT turned a lot of heads, but Laffont is probably more interested in the company's cloud computing business. During the company's fiscal second quarter (ended Dec. 31, 2022), revenue from Microsoft Cloud soared 32% year over year to $22.1 billion.
According to IT analysis firm Gartner, heaps of businesses giving up on self-managed solutions will raise spending on cloud services by 20.7% in 2023. With the second-largest share of this lucrative market, investors can look forward to rapid dividend growth in the years ahead.
CVS Health
Jim Simons and his fund Renaissance Technologies made a big bet on CVS Health (CVS -0.65%) during the last three months of 2022. You're most likely familiar with its retail pharmacy chain, but this company's less visible operations make it an outstanding dividend growth stock.
In 2018, CVS acquired Aetna, a major U.S. health insurer that collects premiums from around 35 million members. With over 9,000 retail pharmacies and more than 1,100 walk-in medical clinics, the company also provides many of the healthcare benefits it's paid to manage. This lucrative position has allowed CVS Health to raise its dividend payout by 21% since mid-2021 and commit to a $10 billion share repurchase program.
At recent prices, the stock offers a 2.8% dividend yield, making it the highest-yielding stock on this list by a mile. Now that the Aetna acquisition is mostly paid for, the company can step on the gas with dividend raises.
Another double-digit percentage raise in 2023 seems likely. The company met its dividend obligation in 2022 with just 22% of the free cash flow its operations generated. With a unique position in America's convoluted healthcare system, this stock looks like a screaming buy right now.
