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We are concerned about the Fed’s inflationary monetary policy and the huge budget deficits of the Federal government. We think high dividend stocks will perform much better than treasury bonds over the next decade. Under the current market situation, we strongly recommend investors to play defensively by investing in high dividend stocks instead of government bonds. One of the practical ways to pick good dividend stocks is to invest in what hedge funds are bullish about. Insider Monkey tracks 300+ hedge funds. Most of these hedge funds employ fundamental analysis to make investments. Below we compiled a list of stocks with at least 5% dividend yield and over $5 billion market cap that hedge funds love the most. The market data is sourced from Finviz.

Ticker

Company

Dividend Yield

No of HF

VZ

Verizon Communications Inc.

5.18%

33

LMT

Lockheed Martin Corporation

5.21%

30

MO

Altria Group Inc.

5.59%

28

T

AT&T, Inc.

5.98%

27

NLY

Annaly Capital Management, Inc.

14.71%

27

CTL

CenturyLink, Inc.

8.30%

21

EWZ

iShares MSCI Brazil Index

6.14%

19

FE

FirstEnergy Corp.

5.18%

18

AGNC

American Capital Agency Corp.

19.34%

17

SCCO

Southern Copper Corp.

8.61%

16

RAI

Reynolds American Inc.

5.53%

15

AVP

Avon Products Inc.

5.59%

15

WIN

Windstream Corporation

8.69%

15

NYB

New York Community Bancorp

8.51%

13

HCN

Health Care REIT Inc.

5.56%

11

EPD

Enterprise Products Partners LP

5.47%

10

AEE

Ameren Corporation

5.08%

10

ETE

Energy Transfer Equity, L.P.

6.35%

7

LINE

Linn Energy, LLC

7.42%

7

JNK

SPDR Barclays Capital High Yield Bond

7.98%

6

Verizon Communications Inc (NYSE:VZ) is the most popular high-dividend stock among hedge funds. There were 33 different funds with VZ positions at the end of September. VZ returned 6.45% since the end of the third quarter, versus 6.98% for SPY. VZ has a dividend yield of 5.18%, a market cap of 109B and a P/E ratio of 15.51. Phill Gross and Robert Atchinson’s Adage Capital Management had the largest position in VZ among the 300+ hedge funds tracked by us. They invested $153 million in VZ shares.

Another mega-cap stock, AT&T Inc (NYSE:T), is also on top of the list. There are 27 different hedge funds invested in T at the end of the third quarter. Since then, T returned 2.31%. It has a market cap of $170B, a P/E ratio of 14.59, and a dividend yield of 5.98%. Phill Gross and Robert Atchinson were bullish about T as well. Their Adage Capital owned $238 million of T shares. Cliff Asness’ AQR Capital Management also had $100+ million invested in T.

Annaly Capital Management Inc (NYSE:NLY) has a double-digit dividend yield. The $15.8B market cap stock has a dividend yield of 14.71%. At the end of September, 27 hedge funds reported to own NLY. Since then, the stock lost 1.86%. It is likely that NLY is trading at a discount as its P/E ratio is relatively low: it has a P/E ratio of only 8.5. Bill Miller’s Legg Mason Capital Management had more than $100 million invested in NLY.

Altria (NYSE:MO), Lockheed Martin (NYSE:LMT), CenturyLink (NYSE:CTL), Brazil ETF (NYSEARCA:EWZ), And First Energy (NYSE:FE) are also among the most popular high dividend stocks. A portfolio of these 20 stocks will provide enough diversification for investors. The fat dividends they pay will deliver better returns than long-term treasury bonds. Moreover, hedge funds do not usually buy these stocks for their dividends. Instead, hedge funds buy these stocks for capital gains. Therefore, we think these stocks will not only deliver decent returns through their high dividend yields, but also generate attractive returns through capital gains.

Source: 20 Dividend Monsters That Hedge Funds Love The Most