This article explores the top 10 remarkable widow and orphan stocks that are prime for investment. For additional insights into this category, don’t miss our guide on the 5 Best Widow and Orphan Stocks to Buy.
A widow and orphan stock is characterized as an investment that offers a stable dividend and is generally perceived as low-risk, defensive, and non-volatile. These stocks are typically from large-cap, established companies operating in stable, non-cyclical sectors. The dividends provide a cushion for investors, even amidst challenging capital market conditions. Historically, dividend-paying equities have outperformed non-dividend stocks and bonds, particularly in the current financial climate.
Investing in dividend stocks, especially those with a consistent history of annual increases, can significantly enhance long-term portfolio returns in a fluctuating market. However, chasing after the highest-yielding dividend stocks often comes with increased risk. Therefore, investors should prioritize stocks that have a proven track record of steadily growing their dividends over the years. Nick Lentini from the Morgan Stanley Equity Strategy team emphasized on November 9:
“The investing backdrop of the past year, driven by macroeconomic conditions and combined with the rising risk of recession, have fueled outperformance for many dividend-paying stocks.”
Industries poised for consistent dividend growth include Energy, Packaged Food, Beverages, Household Products, Utilities, and Banks. Notable names among the best widow and orphan stocks include Walmart Inc. (NYSE:WMT), The Procter & Gamble Company (NYSE:PG), and Exxon Mobil Corporation (NYSE:XOM).
Our Research Methodology
We identified the following widow and orphan stocks based on robust analyst ratings, sound business fundamentals, and a long-standing history of dividend growth exceeding 30 years. Our assessment included evaluating hedge fund sentiment sourced from Insider Monkey’s extensive database, which tracks 920 elite hedge funds as of the close of Q3 2022. The stocks are ranked based on the number of hedge fund holders associated with each company.
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Explore the Top Widow and Orphan Stocks for Investment
10. Walgreens Boots Alliance, Inc. (NASDAQ:WBA)
Number of Hedge Fund Holders: 39
Dividend Yield as of December 21: 4.98%
Walgreens Boots Alliance, Inc. (NASDAQ:WBA), established in 1901, operates as a key player in the healthcare, pharmacy, and retail sectors across the United States, the United Kingdom, Germany, and beyond. The company is segmented into three primary areas: U.S. Retail Pharmacy, International operations, and U.S. Healthcare. Recently, Walgreens Boots Alliance declared a quarterly dividend of $0.48 per share on December 12, marking an impressive record of 46 consecutive years of annual dividend increases, showcasing its commitment to shareholder returns.
On December 14, Mizuho analyst Ann Hynes adjusted the price target for Walgreens Boots Alliance, increasing it to $41 from a previous $36 while maintaining a Neutral rating. Hynes pointed out that while managed care and drug distributor earnings appear promising, she believes that the outlook for hospitals has significantly improved.
Data from Insider Monkey reveals that 39 hedge funds were optimistic about Walgreens Boots Alliance at the end of September 2022, a slight decrease from 40 in the prior quarter. Arrowstreet Capital, led by Peter Rathjens, Bruce Clarke, and John Campbell, holds the largest stake in Walgreens, with approximately 6 million shares valued at $186.5 million.
Alongside Walmart Inc. (NYSE:WMT), The Procter & Gamble Company (NYSE:PG), and Exxon Mobil Corporation (NYSE:XOM), Walgreens Boots Alliance stands out as one of the most reliable widow and orphan stocks for a stable investment portfolio.
Insights from Aristotle Capital Management Global Equity highlight their perspective on Walgreens Boots Alliance in their Q1 2022 investor letter:
“We first invested in Walgreens Boots Alliance in early 2013. Over our holding period, Walgreens merged with U.K.-based Boots Alliance, establishing itself as a global leading retail pharmacy chain. CEO Stefano Pessina set the company on a path of pursuing strategic partnerships (as opposed to vertical integration deals) to increase store traffic and to, over time, transform the business into a neighborhood health destination around a more modern pharmacy. Using its strong FREE cash flow generation, the company ramped up its investments in technology, aiming to accelerate the digitalization of health information. Mr. Pessina was not successful, however, at turning around the firm’s U.S. retail segment and had to deal with increasing prescription drug reimbursement pressures. He stepped down as CEO in 2020, and in 2021, Roz Brewer took the reins of the firm. We admire Ms. Brewer’s impressive track record at companies that include Starbucks (NASDAQ:SBUX) and Walmart (Sam’s Club). However, given management’s decision to divest core cash-generative businesses and redeploy capital to embryonic healthcare startups, we prefer to step aside while we follow the company’s progress.”
9. Sysco Corporation (NYSE:SYY)
Number of Hedge Fund Holders: 40
<i>Dividend Yield as of December 21: 2.52%</i>
Sysco Corporation (NYSE:SYY), headquartered in Texas, specializes in the marketing and distribution of a wide range of food products tailored for the foodservice industry, including restaurants and other food-away-from-home establishments in the United States, Canada, the United Kingdom, France, and globally. Sysco operates through multiple segments: U.S. Foodservice Operations, International Foodservice Operations, SYGMA, and other ancillary sectors, marking it as a standout option among widow and orphan stock investments.
On November 17, Sysco Corporation announced a quarterly dividend of $0.49 per share, matching previous amounts. This dividend is scheduled for payment on January 27, 2023, to shareholders registered by January 6, 2023. As of December 21, Sysco’s dividend yield was recorded at 2.52%. Notably, Sysco has achieved an impressive track record of increasing its annual dividends for 53 consecutive years, earning it the title of a reliable dividend king.
On November 2, Argus analyst John Staszak raised the price target for Sysco Corporation to $96 from $92, maintaining a Buy rating. Despite an earnings miss in Q1, the analyst remains optimistic about the company’s strategies to counterbalance reduced food sales to restaurants and hotels by managing costs and boosting grocery store sales. Sysco’s solid liquidity and credit access further bolster its resilience during current downturns.
According to data from Insider Monkey, 40 hedge funds were invested in Sysco Corporation as of Q3 2022, an increase from 32 in the previous quarter. Nelson Peltz’s Trian Partners holds the largest stake, with 7.2 million shares valued at $507.5 million.
8. Emerson Electric Co. (NYSE:EMR)
Number of Hedge Fund Holders: 48
Dividend Yield as of December 21: 2.15%
Emerson Electric Co. (NYSE:EMR) is a prominent technology and engineering firm that develops industrial, commercial, and consumer solutions across various regions, including the Americas, Asia, the Middle East, Africa, and Europe. The company is structured into several segments: Automation Solutions, AspenTech, and Commercial & Residential Solutions, and boasts an impressive history of consistent dividend increases, qualifying it as a dividend king with 65 years of consecutive growth.
On November 2, Emerson Electric Co. declared a quarterly dividend of $0.52 per share, reflecting a 1% increase from the prior $0.515. This dividend was paid out on December 9, and as of December 21, Emerson’s dividend yield stood at 2.15%.
Citi analyst Andrew Kaplowitz raised the price target for Emerson Electric to $109 from $99 on December 9, sustaining a Buy rating. The analyst noted that ongoing megatrends and emerging fiscal tailwinds should help mitigate potential downsides for the industrial sector amid a challenging macroeconomic landscape.
As of the end of Q3 2022, 48 hedge funds were bullish on Emerson Electric Co., a slight increase from 47 in the previous quarter according to Insider Monkey’s data. D E Shaw holds the largest position in the company, with approximately 2 million shares worth about $145 million.
7. Colgate-Palmolive Company (NYSE:CL)
Number of Hedge Fund Holders: 57
Dividend Yield as of December 21: 2.39%
Colgate-Palmolive Company (NYSE:CL) is a renowned American multinational corporation specializing in consumer products, operating through two main segments: Oral, Personal and Home Care, and Pet Nutrition. The company’s extensive portfolio includes iconic brands such as Colgate, Darlie, Palmolive, Protex, Sanex, Softsoap, Speed Stick, EltaMD, Filorga, PCA SKIN, Ajax, Axion, Fabuloso, and Murphy. Colgate-Palmolive has maintained uninterrupted dividend payments since 1895, and it has consistently increased its dividend payouts to shareholders for 60 years, reinforcing its position as a top choice among widow and orphan stocks.
On December 6, Deutsche Bank analyst Steve Powers raised the price target for Colgate-Palmolive Company to $87 from $85, sustaining a Buy rating on the shares.
Data from Insider Monkey indicates that Colgate-Palmolive was included in 57 hedge fund portfolios at the end of September 2022, up from 55 in the previous quarter. The total stakes in Q3 2022 surged to $4.13 billion, compared to $2.93 billion in Q2. Dan Loeb’s Third Point holds the largest position, with 11.55 million shares valued at $811.3 million.
Insights from Third Point regarding Colgate-Palmolive Company from their Q3 2022 investor letter include:
“Third Point recently acquired a significant position in Colgate-Palmolive Company (NYSE:CL). The investment fits several important criteria in the current investment environment. First, the business is defensive and has significant pricing power in inflationary conditions. Second, there is meaningful hidden value in the company’s Hill’s Pet Nutrition business, which we believe would command a premium multiple if separated from Colgate’s consumer assets. Third, there is a favorable industry backdrop in consumer health, with new entrants via spin-offs and potential for consolidation. Finally, the current valuation is attractive both because earnings growth is poised to inflect higher, and because shareholders are paying very little for the optionality around Hill’s or Colgate’s ability to participate in further consolidation in the consumer health sector.
Colgate has a strong portfolio of brands and operates across four categories that should perform well across most economic conditions: oral care, home care, personal care, and pet nutrition. Although Colgate has delivered organic sales growth of 5-6% over the past few years, earnings growth has been disappointing, and the stock has become a perennial underperformer. Foreign exchange headwinds have pressured reported results. Business reinvestment, supply chain disruption, and inflationary pressures have weighed heavily on margins; those headwinds are now reversing. Stepped up investments in demand generation, product innovation, and digital capabilities are starting to pay off. Global supply chain bottlenecks are easing and product availability on the shelf is improving. And, most importantly, raw material, transportation, and wage pressures are stabilizing, and even reversing in some areas, at the same time additional pricing takes effect. Taken together, the stage is set for Colgate to deliver several years of outsized earnings growth, as sales continue to increase, foreign exchange movements are annualized, and margins finally recover…” (Click here to view the full text)
6. Abbott Laboratories (NYSE:ABT)
Number of Hedge Fund Holders: 62
Dividend Yield as of December 21: 1.89%
Abbott Laboratories (NYSE:ABT), based in Illinois, is a global leader in the discovery, development, and manufacturing of healthcare products. Operating across four distinct segments—Established Pharmaceutical Products, Diagnostic Products, Nutritional Products, and Medical Devices—Abbott plays a crucial role in the healthcare industry. On December 9, Abbott Laboratories announced a quarterly dividend of $0.51 per share, marking an 8.5% increase from its previous dividend of $0.47. This dividend is payable on February 15, 2023, to shareholders of record as of January 13. Abbott has proudly maintained a continuous growth in dividends for 51 years, underscoring its reliability as a dividend-paying stock.
On December 12, Citi analyst Joanne Wuensch raised the price target for Abbott Laboratories to $125 from $114, sustaining a Buy rating. While there are anticipated challenges for the North America medical supplies and technology group in 2023, the analyst believes these difficulties should ease in the latter half of the year, alleviating some operating margin pressures.
According to Insider Monkey’s third quarter data, 62 hedge funds were long on Abbott Laboratories, an increase from 61 in the preceding quarter. Ken Fisher’s Fisher Asset Management holds the largest stake in the company, with 9.12 million shares valued at $883.2 million.
Abbott Laboratories, alongside Walmart Inc. (NYSE:WMT), The Procter & Gamble Company (NYSE:PG), and Exxon Mobil Corporation (NYSE:XOM), represents a premier choice for investors seeking widow and orphan stocks.
Insights from Stewart Asset Management regarding Abbott Laboratories in their Q3 2022 letter include:
“We also need to point out one global consequence of the rapid rise in interest rates: an irrepressibly strong dollar. This hurts the reported earnings of U.S. companies who sell their goods and services overseas. Foreign currency earnings translate into fewer dollars and thus lower earnings. Most of the companies in your portfolios gain a notable amount of earnings from their international operations. While the strength or weakness of a currency doesn’t change the quality of a business or its longer-term earnings power, it can change the reported earnings of a company over short periods of time. It is difficult to forecast this effect accurately because many of our companies manufacture where they sell, which to some extent dulls the sharp negative effect of a surging dollar. Abbott (NYSE:ABT), among others, is a good example.”
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Disclosure: None. 10 Best Widow and Orphan Stocks To Buy is originally published on Insider Monkey.