Cribbing notes from billionaire investors is a great way to find stocks to buy. You don’t want to blindly follow their lead without doing your own due diligence, but with thousands of publicly traded companies, using the stock picks of these super investors is an effective place to start. It helps narrow the field and stops analysis paralysis from the information overload.
nextstayCCSettingsOffArabicChineseEnglishFrenchGermanHindiPortugueseSpanishFont ColorwhiteFont Opacity100%Font Size100%Font FamilyArialText ShadownoneBackground ColorblackBackground Opacity50%Window ColorblackWindow Opacity0%WhiteBlackRedGreenBlueYellowMagentaCyan100%75%50%25%200%175%150%125%100%75%50%ArialGeorgiaGaramondCourier NewTahomaTimes New RomanTrebuchet MSVerdanaNoneRaisedDepressedUniformDrop ShadowWhiteBlackRedGreenBlueYellowMagentaCyan100%75%50%25%0%WhiteBlackRedGreenBlueYellowMagentaCyan100%75%50%25%0%Below are three star candidates to consider. Billionaire investors have piled into these companies, spending billions of dollars to initiate or built out their positions. If nothing else, they warrant closer consideration for your own portfolio.
24/7 Wall St. Insights:
- Riding the coattails of billionaire investors by examining the stocks they are buying is a great way to narrow the field of stocks to consider.
- The three stocks below are examples of top dividend payers that these super investors have been piling into in a big way.
- Sit back and let dividends do the heavy lifting for a simple, steady path to serious wealth creation over time. Grab a free copy of “2 Legendary High-Yield Dividend Stocks“ now.
Diamondback Energy (FANG)
Oil and gas drillerDiamondback Energy(NASDAQ:FANG) is the largest pure play energy stock in the important Permian Basin. AlthoughExxon Mobil(NYSE:XOM) andChevron(NYSE:CVX) are larger in terms of revenues derived from the region, Diamondback focuses solely on the oil-rich formation.
It completed its $26 billion acquisition of Endeavor Energy Partners in September, adding an additional 470,000 net acres in the region, including 344,000 net acres in the Permian component Midland Basin, giving Diamondback some 838,000 net acres total. The merged company is expected to produce 816,000 barrels of oil and gas per day.
Shares of the oil and gas stock are up 17% in 2024, even though the price of West Texas Intermediate crude oil has fallen 7% over the past two weeks. While Donald Trump’s election ought to be bullish for the fossil fuels industry, global demand is expected to weaken due to a slowing Chinese economy, which is pressuring oil prices.
That, apparently, hasn’t worried billionaireCitadel Advisors‘ Ken Griffin who increased his stake in Diamondback Energy by 80%. He bought some 364,000 shares worth nearly $68 million in the third quarter.
The oil and gas stock began paying a dividend in 2018 and has rapidly grown the payout. The dividend has grown from $0.38 per share when initiated to $8.29 per share today. Diamondback previously had a policy to return 75% of its free cash flow to shareholders in the form of dividends, but beginning in the first quarter, it lowered the rate to 50%, but would supplement it with a variable dividend payment. The payout currently yields a robust 4.7% annually.
MSCI (MSCI)
Market volatility benefits the index business of MSCI, which accounts for the majority of its profits
The investment firm and market index operatorMSCI(NYSE:MSCI) has a remarkable track record of its own for raising its dividend. The data and analytics firm for institutional investors began making dividend payments a decade ago and has increased the payout at a whopping 43% compound annual growth rate. The dividend has grown from $0.18 per share at its initiation to $6.40 per share today. The yield is 1.1% annually.
As an index fund operator, it benefits from market volatility, particularly in a rising market and shares are up 18% over the last six months. As funds flow into passive assets such as index funds, MSCI’s revenue rises. Index revenue represents about 70% of the operators adjusted EBITDA and remains its largest profit vehicle.
With over $1.1 billion in free cash flow produced last year and growing at a 15% CAGR for the past 10 years, MSCI has plenty of capacity to support its fast-rising payout. It probably helped push super investor Stan Moss atPolen Capital Managementto boost the firm’s position in MSCI to $1.3 billion last quarter.
Domino’s (DPZ)
Even Warren Buffett wants to grab a slice of pizza shop operator Domino’s
Pizza shopDomino’s(NYSE:DPZ) is one I’ve long-considered to be a dividend stock to buy and hold for the long-term. Not only has it grown its payout at a 20% CAGR for the past decade, but its stock has enjoyed incredible share price appreciation.
DPZ stock is up 373% over the past 10 years without including dividends compared to a 188% gain by theS&P 500index. Yet when you add in the payout, that jumps to a 426% total return.
Domino’s was able to achieve this stellar growth due to an expansion strategy called “fortressing,” where it floods a market with stores so that it creates mindshare in potential customers. There are other economies achieved, such as minimizing the marketing spend necessary to support its stores, while also reducing the time it takes to deliver a pie. That increases customer satisfaction.
The pizzeria’s dividend has grown from $0.80 per share in 2013 to $5.74 per share today. At the same time, only 35% of its FCF is used to support the dividend so it is both secure and offers significant opportunity for future growth.
We know Warren Buffett loves his dividend stocks, which may be why he bought nearly 1.3 million shares of DPZ forBerkshire Hathaway(NYSE:BRK-A)(NYSE:BRK-B) for $550 million. It makes Domino’s a stock you should also consider buying for your own portfolio.
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