Bill Ackman has done quite well as an investor. Not only has he amassed a fortune and become a billionaire through his career, but his fund, Pershing Square Capital Management, has generated annualized returns of 17% since launching in 2004.
While Ackman has never been known as a dividend investor, he's definitely purchased stocks over the years that have strong dividends.
Currently, Pershing Square Capital Management only owns six stocks, and two of those are raking in $97 million worth of annual passive income. Let's take a look at these two dividend stocks and see whether or not they would also make good dividend stocks for investors.
1. Restaurant Brands International: $53.2 million in annual dividend income
As one of the largest fast food chains in the world, Restaurant Brands International (QSR +1.50%) is the second-largest position in Pershing Square Capital Management's portfolio. The company owns Burger King, Tim Horton's, Popeye's, and Firehouse Subs. Pershing owns about 24.2 million shares, and RBI pays a quarterly dividend of $0.55 ($2.20 annually), which would amount to roughly $53.2 million of annual passive income if Pershing maintains the same share count.
NYSE: QSR
Key Data Points
RBI has paid out and raised its dividend every year for the last 10 years, which is right around when the company came together through a large merger. With an annual dividend yield of around 3.3%, RBI is currently paying an industry-leading dividend, and management has said they do want to continue to grow the dividend over time.
But the company currently has a payout ratio of more than 96%, and profits are currently expected to come down slightly this year from 2022, according to consensus estimates, which are subject to frequent change. So I suspect the dividend will continue to grow very minimally, as it has in recent years, but the yield is solid.
2. Lowe's: $43.7 million in annual dividend income
The home improvement retailer Lowe's (LOW +0.56%) is the largest position in Pershing's portfolio, and it's a stock that has done quite well for Ackman. With Pershing owning roughly 10.4 million shares at the end of 2022 and Lowe's quarterly dividend at $1.05 per share ($4.20 annually), that would result in roughly $43.7 million in annual dividend income.
Lowe's has paid out and grown its dividend for 48 years, meaning it's close to becoming a Dividend King.
NYSE: LOW
Key Data Points
In recent years, Lowe's has gotten even more aggressive in growing its dividend. In 2021, it grew its quarterly dividend by about 33%, and last year it grew the dividend by more than 31%. Lowe's currently has an annual dividend yield of 1.95%, which is not exactly a high yield. But the company's dividend payout ratio is still only 34%, so it has plenty of room to grow the dividend.
Over the nine months ending Oct. 28, 2022, Lowe's generated about $8.1 billion of cash from its operating activities, paid out more than $1.7 billion of cash dividends, and had close to $3.2 billion of cash and cash equivalents at the end of that period. Given management's track record of paying a dividend, the recent growth of the dividend, and the payout ratio, I'd say this is a good dividend stock to own.
