3 Dividend-Paying Stocks Billionaires Are Buying Hand Over Fist

If you’re looking for good stocks to invest in, following professionals with successful track records is usually a good place to start. Luckily for us, institutional investors with billions under management have to disclose their stock purchases on a regular basis.

These three already successful investors recently made significant purchases of some dividend-paying stocks. Here’s why they were so eager to pad their portfolios with these stocks during the second quarter.

Image source: Getty Images.

1. Ally Financial

Ally Financial (ALLY -4.23%) was one of the largest purchases made by Warren Buffett in the second quarter. The holding company he’s managed since 1965, Berkshire Hathaway acquired more than 21 million shares of the online bank. That works out to nearly 7% of Ally’s outstanding shares.

At recent prices, Ally Financial stock offers a nice 3.3% yield that could grow significantly over the next several years. Buffett is famous for buying great businesses at a good price and Ally certainly fits the bill. The stock is currently trading slightly below its book value.

Ally is a direct-to-consumer bank with lots of auto loans on its books but no physical footprint to maintain. This makes it tremendously profitable and the bank isn’t shy about distributing extra cash to its shareholders. Ally has raised its dividend payout by 150% over the last five years. Extensive share buybacks reduced its outstanding share count by more than 30% over the same period.

2. Constellation Energy

David Tepper put Appaloosa Management on the map by focusing on distressed assets. His recent bet on Constellation Energy (CEG -2.31%) isn’t raising as many eyebrows as the trades that made him famous but it’s an interesting one.

Constellation Energy is a supplier of clean energy, mostly in the form of nuclear, wind, and solar. The company is barely profitable but it began paying quarterly dividends this year. The stock currently offers a 0.7% yield that isn’t terribly tempting.

Despite Constellation’s less than thrilling track record, Tepper acquired 2.7 million shares of the company in the second quarter. That made it 9.7% of Appalossa’s total portfolio and it’s a new holding.

Appaloosa is likely looking forward to rapidly rising demand for clean energy spurred into existence by the recently passed Inflation Reduction Act of 2022. The new law includes production tax credits for nuclear power and hydrogen, two areas where Constellation Energy has a big footprint.

3. CVS Health

Ray Dalio and Bridgewater Associates bought 1.9 million shares of CVS Health (CVS -2.05%) during the second quarter. That was one of the biggest bets Bridgewater made in the second quarter.

At recent prices, CVS Health shares offer a decent yield of 2.2% that investors can reasonably expect to rise. The company’s famous for having thousands of retail pharmacies but it also owns a pharmacy benefits manager with over 110 million plan members. CVS Health also owns Aetna, a healthcare benefits manager that reliably collects insurance premiums from an estimated 35 million Americans. 

Decreased COVID-19 vaccinations lowered the retail segment’s contribution to the bottom line but this challenge didn’t stop overall second-quarter profits from growing 6% year over year. It was the company’s diversified operation that allowed profits to grow despite a retail operation suffering from a COVID-19 hangover.

Acquiring Aetna caused CVS Health to pause raising its dividend payout for a few years but the company resumed annual raises this year with a big 10% bump. Despite the years-long pause, CVS Health’s dividend has more than tripled over the past decade. With no end to America’s demand for healthcare, the next decade could be another great one for this company and its investors.

Ally is an advertising partner of The Ascent, a Motley Fool company. Cory Renauer has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Constellation Energy Corporation. The Motley Fool recommends CVS Health and CVS Health Corporation. The Motley Fool has a disclosure policy.

Leave a Reply

Your email address will not be published.