One of the greatest aspects of putting your money to work on Wall Street is that there’s more than one right answer. With thousands of publicly traded companies and exchange-traded funds (ETFs) to choose from, investors of all walks and risk tolerances are bound to find one or more securities that check all the appropriate boxes.
But among theses countless investment strategies, few have proved more effective over the long run than buying high-quality dividend stocks.
Last year, investment advisory firm Hartford Funds released a lengthy report (“The Power of Dividends: Past, Present, and Future”) extolling the many ways dividend stocks have run circles around their non-paying counterparts. This outperformance is particularly noticeable over long periods.
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According to Hartford Funds, in collaboration with Ned Davis Research, dividend-paying companies averaged a 9.17% annual return over the prior half century (1973-2023), and did so while being 6% less volatile than the broad-based S&P 500. Meanwhile, the non-payers delivered a less impressive 4.27% annualized return over 50 years and were 18% more volatile than the benchmark S&P 500.
But just because dividend stocks have, as a whole, outperformed, it doesn’t mean all income stocks have been stellar investments. A number of brand-name ultra-high-yield dividend stocks, whose yields are at least 4 times higher than the current yield of the S&P 500 (1.34%), have badly lagged in this bull market.
Nevertheless, the latest round of Form 13F filings, which detail buying and selling activity for Wall Street’s top money managers in the latest quarter, show that three underperforming, yet extremely well-known, ultra-high-yield dividend stocks were popular buys among billionaire investors.
Ford Motor Company: 5.71% yield
The first beaten-down ultra-high-yield dividend stock that billionaire money managers can’t stop buying is one of Detroit’s prized automakers, Ford Motor Company (NYSE: F). Ford and its outsize yield, which is approaching 6%, attracted four billionaire buyers during the second quarter,…
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