Bill And Melinda Gates Foundation's Top Dividend Stocks

Includes: BP, KO, MCD, WMT, XOM
by: Rash Menaria

The following is a list of some of the top holdings of Bill & Melinda Gates foundation with good dividend yields.

Company Name


Shares Held - 12/31/2011

Dividend Yield

Payout Ratio

Wal-Mart Stores, Inc





Coca-Cola Company





BP Plc





Exxon Mobil Corporation





McDonald's Corporation





Click to enlarge

Source: 13F filing

I like Wal-Mart, Coca-Cola and BP Plc among above stocks. However, I would like to avoid Exxon Mobil and McDonald's.

Wal-Mart is world's largest retailer. I am bullish on the company as I see good chances of same store sales acceleration going forward. WMT began adding back SKUs and stepping up price investment in mid-2010. Most of these changes are now bearing fruits. Last quarter, Wal-Mart saw positive comparable store sales for the first time since 2009. Going forward, I see a good potential for a continued same-store-sales acceleration. Some of the key drivers for it include recent improvement in in-stock levels to the mid 90s; EDLP emphasis; opening price points/small pack size merchandising; inventory reinvestment & space allocations; and local merchandising efforts. In addition, the company plans to invest $2 billion in the U.S. over the next 2 fiscal years should also support the U.S. comp. outlook. Wal-Mart is available at 11.55x forward earnings and I believe it is a very attractive buy at current levels.

The Coca-Cola Company is another good company to have in a portfolio. The company gave a good 11% plus return in 2011. Coca-Cola is a high-dividend-yielding company with a consistent growth rate and stable business. It is a good defensive pick. Its stock price has corrected in the past few months as investors have moved to "risk-on" mode. However, I would recommend long-term investors utilize this recent underperformance as a buying opportunity in this quality company.

I also like BP Plc primarily due to the money-printing binge of U.S. government which is fueling inflation across the globe and commodities are expected to benefit from it. I am bullish about prospects of oil in particular. Since oil and gas stocks directionally trade in line with the crude oil price, I see a good upside in them. BP, in particular, should also benefit from settlement of Macando liability. BP is trading at very attractive levels at less than 7x forward PE and I see a good potential upside in its stock price.

However, I am not very positive on the other Oil Company in the list - Exxon Mobil Corporation. Exxon's exposure towards natural gas is likely to cause the company underperforming broader Oil & Gas sector. Exxon is the world's largest gas producer. Despite a bleak natural gas outlook in the U.S., XOM continues to be bullish on natural gas demand, as is evident from its production increase in Q4 2011 and also by its most recent acquisition of XTO Energy, a natural gas company.

At a time when its competitors Chesapeake (NYSE:CHK) and ConocoPhillips (NYSE:COP) have announced natural gas drilling cuts, XOM has continued to look for growth in natural gas production. While this move clearly points to the company's approach towards developing a long term resource, it is expected to affect the near term earnings potential.

Given the fact that XOM trades at a premium to its peers and its near term headwinds, I expect its stock to see a correction in the near term. I have recently written a fairly detailed article on, "Why You Should Avoid Exxon Despite Surging Oil Prices." Please refer it for more details on my short thesis.

McDonald's is the largest fast food restaurant chain by revenue. It operates in 120 countries with about 81% of its units operating as independent franchisees. It derives about half of its revenue from the U.S., one-third from Europe and remaining from APMEA regions.

Although McDonald's posted strong Q4 results driven by same-stores sales growth and franchised margin expansion, things may become a bit more difficult in 2012 as the macroeconomic forces are likely to be less supportive. Cost outlook for 1H 2012 looks challenging with food inflation trending above 4.5-5.5% in Europe. Strong negative FX pressure is also expected because of weakening euro and other currencies. Both these factors are expected to add to margin compression in the near term. Other factors affecting the bottom line include G&A expense, which is expected to be up by 6% due to the Olympics and technology investments.

In addition to these headwinds, McDonald's PE multiple at 16x is almost near its post-recovery high and I see little chance of any appreciation from here.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.