Billionaire Bill Ackman smokes ‘mentor’ Warren Buffett with these income stocks
Dividend stocks can seem boring, but they can offer attractive returns.
Just ask the famous activist investor and self-proclaimed sidekick of Warren Buffett, Bill Ackman.
Its hedge fund Pershing Square Holdings has generated annualized total returns of over 30% over the past three years, significantly outperforming the S&P 500 and even Buffett’s Berkshire Hathaway.
And it did so largely by owning dividend-paying stocks.
According to Pershing’s latest 13F file with the Securities Exchange Commission, nearly 60% of its holdings at market value are invested in dividend-paying stocks.
Let’s take a look at three stocks in Ackman’s portfolio that regularly distribute money to investors – one of them might be worth buying with your spare currency.
Restaurant Brands International Inc (QSR)
Topping the list is Restaurant Brands International, a fast food holding company formed in 2014 by the merger of Burger King and Canadian coffee chain Tim Hortons.
In 2017, the company added Popeyes Louisiana Kitchen to its portfolio.
Like most restaurant stocks, Restaurant Brands stocks fell during the pandemic-induced market sell off in early 2020. But the stock has since picked up sharply.
This rebound is supported by substantial improvements in the company’s activities. Comparable store sales – a key measure of a retailer’s health – rose 27.6%, according to the latest earnings report.
Adjusted earnings were $ 0.77 per share for the quarter, more than double the $ 0.33 per share earned in the prior year period. The amount also easily covered the payment of the quarterly dividend of $ 0.53 per share of the company.
Restaurant Brands offers a healthy 3.4% annual dividend yield, which is a return investors can earn even if they invest with coins and dimes.
By comparison, that’s a higher return than fast food giants McDonald’s (2.26%), Starbucks (1.6%) and Yum! Brands (1.6%).
Lowe’s Companies Inc (LOW)
Lowe’s is Bill Ackman’s largest stake in terms of market value, and this position has served the billionaire investor rather well.
Shares of the home improvement retail giant have risen 29% year-to-date. The S&P 500 returned 16% over the same period.
What’s more impressive than Lowe’s short-term stock price performance is the company’s dividend growth over the years.
The economy moves in cycles, but Lowe’s payout has only increased. In fact, the company has increased its payments to shareholders every year for the past 59 years.
Decades of dividend increases have taken Lowe’s quarterly dividend to $ 0.80 per share, resulting in an annual return of 1.5%.
Note that its competitors are also dividend-paying companies: Home Depot earns 2.0%, Target pays 1.5%, while Walmart offers an annual return of 1.6%.
Due to Lowe’s rally over the past year, his shares are now trading over $ 200. But you can get a part of the business by using a popular stock trading app that lets you buy fractions of stocks with as much money as you are willing to spend.
Agilent Technologies Inc (A)
Agilent is not a household name, but in its own industry, the company is a force to be reckoned with.
Agilent provides bioanalytical and electronic measurement solutions to a wide range of industries, including communications, life sciences and chemical analysis.
Based in Santa Clara, California, the company’s products are used by 265,000 laboratories around the world. In Agilent’s fiscal year 2020, it generated total revenue of $ 5.34 billion.
And in the last quarter, revenue grew 26% year-on-year to $ 1.59 billion.
Given this type of performance, one would think that Agilent shares would soar. But while the stock has returned a solid 60% in the past year, it is down about 10% from the high in early September.
On the dividend front, Agilent is offering an annual return of 0.5%, which may not seem like much. But the company has an excellent track record of returning money to investors: Since 2014, Agilent’s quarterly payout per share has increased 106%.
Rental income flow?
The great thing about dividend-paying stocks is that they provide a way for investors to earn regular income no matter how the economy goes.
Of course, you don’t have to limit yourself to the stock market to do this.
For example, an investment service helps secure a stable rental income stream by investing in high-end real estate properties, from commercial developments in Los Angeles to residential buildings in New York.
You’ll be exposed to high-end properties that big real estate moguls typically have access to, and you’ll receive regular payouts in the form of quarterly dividend distributions.
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.