Which dividend stocks are fund managers buying?

GlaxoSmithKline (GSK.UK)

Glaxo is found in 15 of the top 18 UK equity income funds, with Threadneedle UK Equity Income taking the largest bet on the pharmaceutical at 6.22% of their portfolio. Glaxo is currently yielding 5.32%.

AstraZeneca (AZN.UK)

Astra is found in all 18 of the funds’ portfolios. Threadneedle UK Equity Alpha Income has the largest weighting of the funds, with a 7.32% allocation to Astra. AstraZeneca has built its leading presence in the pharma and biotech industry on patent-protected drugs and a promising developing pipeline.

Astra continues to generate robust cash flows, says Conovor, However, the firm needs to offset lost cash flows from products losing patent protection over the next couple of years to generate enough cash flow to fund the dividend. The dividend yield sits at 4.47% today.

BP (BP.UK)

BP is in 13 of the funds. JOHCM UK Equity Income is the largest investor, with 6.52% allocated to the stock. With the Deepwater Horizon oil spill largely resolved, BP is now turning its focus to positioning the company to compete in a world of lower oil prices.

Its first step is to improve its cost structure and reduce its capital outlays so that it can cover its dividend at $55 a barrel oil by the end of this year. The yield is currently 6.56%.

HSBC (HSBA.UK)

12 of the top-rated UK equity income funds hold HSBC. SLI UK Equity High Income has a 6.89% weighting, the largest of all the funds. HSBC’s strengths are its positions in the U.K. and Hong Kong banking systems, as well as its overall leadership role in trade finance.

Much attention has been paid to HSBC’s dividend, its future prospects, says banking analyst Derya Guzel. The dividend yield sits at 5.09%.

Royal Dutch Shell (RDSB.UK)

Shell is held in 11 of the funds. JOHCM UK Equity Income is the largest investor, with 8.66% of its portfolio in Shell. Shell is embarking on the necessary steps to compete in a world of $60-per-barrel oil, working to reduce its cost base, which has become bloated during the past five years, by reducing head count and improving its supply chain. After debt reduction, Shell prioritises paying a dividend. The stock yields 6.29%.

British American Tobacco (BATS.UK)

British American is held in 12 funds, with SLI UK Equity High Income allocating the largest portfolio slice at 5.14%. BATS is currently yielding 3.16%. There are two sources to BATS’ wide economic moat: intangible assets and a cost advantage.

Both occur in the tobacco business and have not, yet, transferred to the company’s platform of next generation products. Tobacco brands' intellectual property has created loyalty among tobacco users toward the brands they enjoy. British American has an impressive brand portfolio that is fairly evenly balanced across price points.

Source: Bloomberg Pro Terminal

Jr Trader Ivan Ivanov

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