It seems that the appeal of dividend income has been waning on smart money investors, including hedge fund managers.
In a total return framework, investors should view returns from price appreciation the same as returns from dividend income. However, when expectations for stock price movements change, so does the popularity of dividend income. That is, if investors expect big price increases in the stock market, they will be less likely to buy dividend-yielding names in favor of more growth-oriented ones.
We decided to take a look at the current popularity of S&P 500 dividend stocks among the smart money by comparing the number of those stocks seeing significant net purchases from institutional investors to those seeing significant net sales. The numbers were pretty decisive.
Out of the roughly 130 dividend stocks of the S&P 500 with dividend yields above 2% and sustainable payout ratios below 50%, only two saw significant net institutional purchases over the current quarter, whereas 14 saw significant net institutional sales. This could indicate a general aversion to dividend stocks from smart money investors.
Business section: Investing ideas
Below we list the S&P 500 dividend stocks seeing either strong net buying or net selling from institutional investors.
Do you think dividends are out of style? (Click here to access free, interactive tools to analyze these ideas.)
Institutional Buying:
1. BlackRock: Provides its services to institutional, intermediary, and individual investors. Dividend yield at 2.98%, payout ratio at 32.34%. Net institutional purchases in the current quarter at 12.0M shares, which represents about 7.31% of the company's float of 164.13M shares
2. M&T Bank (NYSE: MTB): Operates as the holding company for M&T Bank and M&T Bank, National Association that provide commercial and retail banking services to individuals, corporations and other businesses, and institutions. Dividend yield at 3.26%, payout ratio at 44.80%. Net institutional purchases in the current quarter at 4.2M shares, which represents about 3.64% of the company's float of 115.37M shares.
Institutional Selling:
1. Amgen (Nasdaq: AMGN): Develops, manufactures, and markets human therapeutics based on advances in cellular and molecular biology for grievous illnesses primarily in the United States, Europe, and Canada. Dividend yield at 2.16%, payout ratio at 12.73%. Net institutional sales in the current quarter at -59.0M shares, which represents about 7.46% of the company's float of 790.53M shares
2. ConocoPhillips (NYSE: COP): Operates as an integrated energy company worldwide. Dividend yield at 3.45%, payout ratio at 29.05%. Net institutional sales in the current quarter at -47.1M shares, which represents about 3.68% of the company's float of 1.28B shares
3. Gannett: Operates as a media and marketing solutions company in the United States and internationally. Dividend yield at 5.15%, payout ratio at 12.47%. Net institutional sales in the current quarter at -7.6M shares, which represents about 3.24% of the company's float of 234.73M shares
4. Corning (NYSE: GLW): Manufactures and processes specialty glass and ceramics products worldwide. Dividend yield at 2.14%, payout ratio at 12.71%. Net institutional sales in the current quarter at -62.7M shares, which represents about 4.15% of the company's float of 1.51B shares
5. Harris: Operates as a communications and information technology company that serves government and commercial markets worldwide. Dividend yield at 3.00%, payout ratio at 24.02%. Net institutional sales in the current quarter at -3.7M shares, which represents about 3.27% of the company's float of 113.11M shares
6. The Interpublic Group of Companies: Provides advertising and marketing services worldwide. Dividend yield at 2.11%, payout ratio at 21.34%. Net institutional sales in the current quarter at -16.3M shares, which represents about 3.68% of the company's float of 442.45M shares
7. Kohl's: Operates department stores in the United States. Dividend yield at 2.66%, payout ratio at 23.41%. Net institutional sales in the current quarter at -7.1M shares, which represents about 3.16% of the company's float of 224.66M shares
8. Lexmark International: Develops, manufactures, and supplies printing and imaging solutions for offices. Dividend yield at 2.92%, payout ratio at 5.61%. Net institutional sales in the current quarter at -4.2M shares, which represents about 6.05% of the company's float of 69.45M shares
9. The McGraw-Hill Companies: Provides various information services for financial, educational, and business information markets worldwide. Dividend yield at 2.16%, payout ratio at 35.19%. Net institutional sales in the current quarter at -12.4M shares, which represents about 4.6% of the company's float of 269.64M shares
10. Northrop Grumman (NYSE: NOC): Provides products, services, and solutions in aerospace, electronics, information systems, shipbuilding, and technical service sectors. Dividend yield at 3.30%, payout ratio at 26.03%. Net institutional sales in the current quarter at -13.2M shares, which represents about 5.67% of the company's float of 232.90M shares.
11. PPG Industries: Manufactures and supplies protective and decorative coatings. Dividend yield at 2.43%, payout ratio at 32.42%. Net institutional sales in the current quarter at -4.6M shares, which represents about 3.04% of the company's float of 151.25M shares.
12. Safeway: Operates as a food and drug retailer in North America. Dividend yield at 2.74%, payout ratio at 36.31%. Net institutional sales in the current quarter at -24.4M shares, which represents about 9.2% of the company's float of 265.28M shares.
13. The Travelers Companies: Provides various commercial and personal property and casualty insurance products and services to businesses, government units, associations, and individuals primarily in the United States. Dividend yield at 2.82%, payout ratio at 47.31%. Net institutional sales in the current quarter at -22.2M shares, which represents about 5.67% of the company's float of 391.38M shares.
14. Wyndham Worldwide: Provides various hospitality products and services to individual consumers and business customers in the United States and internationally. Dividend yield at 2.06%, payout ratio at 23.74%. Net institutional sales in the current quarter at -5.2M shares, which represents about 3.82% of the company's float of 136.12M shares.
Interactive Chart: Press Play to compare changes in analyst ratings over the last two years for the stocks mentioned above. Analyst ratings sourced from Zacks Investment Research.
Kapitall's Alexander Crawford does not own any of the shares mentioned above. Institutional data sourced from Fidelity.
