Dodge & Cox Is Piling Into These Dividend Stocks

U.S. equities made a strong comeback last week, with the S&P 500 index gaining nearly 4% and shrugging off recession woes. This marks the strongest week since 2023, with the benchmark index levels just 2% behind the record-high set last month. 

This can be attributed to the strong advanced retail sales levels in July, which rose 1% month-over-month, beating the modest 0.3% increase expectations set by Dow Jones economists. 

Inflation is also showing signs of cooling down, as the consumer price index rose by just 2.9% last month, marking the lowest increase since March 2021. As a result, investors now think there's a 75% chance of a 25 basis point rate cut in September. 

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Is The Worst Over? 

While the markets seem to have recovered from the rout earlier this month, many analysts are still predicting that the carry trade woes will continue soon. 

"I'd push back on a lot of those narratives. You don't have any real data to price your carry trades that we know," said Richard Kelly, head of global strategy at TD Securities. "I think there is still a lot that can unwind, especially if you look at how undervalued yen is. That is going to change the valuations for the next one to two years to come. That's going to have spillover effects."

Goldman Sachs strategists also predict that the carry trade unwinding has further room to run, as U.S. stocks still have substantial exposure to the Japanese Yen. 

“We are skeptical that the Yen has been used so extensively as an outright funder of longs elsewhere, especially in the case of U.S. tech stocks," they stated.

Dodge & Cox's Full-Proof Strategy 

It's no secret that investment gurus believe one of the safest bets in a volatile market backdrop is to stick your money in stable dividend-paying stocks. Dodge & Cox, a premier mutual fund company operating since 1930, has been steadily investing more in renowned defensive industry stalwarts with a healthy dividend payout, according to its 13F filing for the second quarter of 2024 (ended June 30). 

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CVS Health

CVS Health Corporation CVS, one of the largest retail pharmaceutical giants in the U.S., has been an investor favorite dividend stock for quite some time. While the company had paused its payouts in 2017 following its acquisition of Aetna, CVS had raised its dividends at a compound annual growth rate (CAGR) of 25% in the preceding five years. 

The company seems back in action, as it raised its quarterly dividend payouts by 9.92% to $0.665 earlier this year, following a 10% hike last year. CVS Health pays $2.66 in dividends annually, yielding 4.56% on the current price. 

Dodge & Cox increased its investment in CVS Health by 49.7% in the last quarter. The mutual fund company currently owns over 41 million shares of the retail pharmacy chain, valued at over $2.4 billion as of June 30. 

Johnson Controls 

Based in Ireland, Johnson Controls International plc JCI is the world’s largest provider of building technology and software solutions. The company is renowned in the investment community as a reliable dividend source, having paid dividends every year since 1887. 

Johnson Controls pays $1.48 in dividends annually, yielding 2.13% on the current price. The company has recently been restructuring its HVAC and Air Distribution business to streamline its operations, which is expected to improve its profit margins. 

For fiscal 2024, Johnson Controls expects its organic sales and adjusted segment EBITDA to rise by 3% and 110 basis points year-over-year, respectively. The company also updated its adjusted EPS (before special items) guidance to $3.66-$3.69, up from the previous forecast range of $3.60-$3.75. 

Interestingly, Dodge & Cox has increased its stake in Johnson Controls by 8.93% in the fiscal second quarter, bringing the total number of JCI shares owned to over 41.7 million. Dodge & Cox's stake in Johnson Controls is valued at over $2.77 billion as of June 30. 

Are You Missing Out On Higher Yields?

The current high-interest-rate environment has created an incredible opportunity for income-seeking investors to earn massive yields, but not through dividend stocks… Certain private market real estate investments are giving retail investors the opportunity to capitalize on these high-yield opportunities and Benzinga has identified some of the most attractive options for you to consider. 

For example, the Jeff Bezos-backed investment platform just launched its Private Credit Fund, which provides access to a pool of short-term loans backed by residential real estate with a target 7% to 9% net annual yield paid to investors monthly. The best part? Unlike other private credit funds, this one has a minimum investment of only $100. 

Don't miss out on this opportunity to take advantage of high-yield investments while rates are high. Check out Benzinga's favorite high-yield offerings.