Kevin O'Leary Stock Portfolio List | His Top 10 Dividend Picks Now

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Kevin O’Leary Stock Portfolio List | His Top 10 Dividend Picks Now


Updated on December 7th, 2021 by Nikolaos Sismanis

Kevin O’Leary is Chairman of O’Shares Investments, but you probably know him as “Mr. Wonderful”.

He can be seen on CNBC as well as the television show Shark Tank. Investors who have seen him on TV have likely heard him discuss his investment philosophy.

Mr. Wonderful looks for stocks that exhibit three main characteristics:

  1. First, they must be quality companies with strong financial performance and solid balance sheets.
  2. Second, he believes a portfolio should be diversified across different market sectors.
  3. Third, and perhaps most important, he demands income—he insists the stocks he invests in pay dividends to shareholders.

Note: 13F filing performance is different than fund performance. See how we calculate 13F filing performance here.

You can download the complete list of all of O’Shares Investment Advisor 13F filing stock holdings, along with quarterly performance, by clicking the link below:

 

Click here to download your Excel spreadsheet of O’Shares Investment Advisor’s 13F stock holdings, including metrics that matter like dividend yield and the forward price-to-earnings ratio.

OUSA owns stocks that display a mix of all three qualities. They are market leaders with strong profits, diversified business models, and they pay dividends to shareholders. The list of OUSA portfolio holdings is an interesting source of quality dividend growth stocks.

This article analyzes the fund’s largest holdings in detail.

Table of Contents

The top 10 holdings from the O’Shares FTSE U.S. Quality Dividend ETF are listed in order of their weighting in the fund, from lowest to highest.

No. 10: Lockheed Martin Corporation (LMT)

Dividend Yield: 3.26%

Percentage of OUSA Portfolio: 2.44%

Lockheed Martin Corporation is the world’s largest defense company. About 60% of the company’s revenues comes from the US Department of Defense, with other US government agencies (10%) and international clients (30%) making up the remainder. The company consists of four business segments: Aeronautics (~40% sales) – which produces military aircraft like the F-35, F-22, F-16 and C-130; Rotary and Mission Systems (~26% sales) – which houses combat ships, naval electronics, and helicopters; Missiles and Fire Control (~16% sales) – which creates missile defense systems; and Space Systems (~17% sales) – which produces satellites. The company has significant strength and exposure in military aircraft. The company had total revenue of over $65.4B in 2020.

Lockheed Martin reported weaker results for Q3 2021 on October 26th, 2021. Company-wide net sales declined to $16,028M from $16,495M and diluted GAAP earnings per share decreased to $2.21 from $6.05 on a year-over-year basis after a $1.7 billion pension charge. All four business segments reported lower net sales.

The Aeronautics segment net sales fell (-2%) to $6,568M from $6,680M in the prior year due to lower volumes of F-35 and sustainment offset by higher F-16 production. The Missiles and Fire Control segment sales decreased (-5%) to $2,781M from $2,971M in comparable periods due to lower sales of tactical and strike missiles and sensors. Rotary and Mission Systems net sales were flat to $3,980M from $3,998M in the prior year due to decreases in integrated warfare systems, sensors, radars, Littoral Combat Ship, and C6ISR offset by higher volumes on Sikorsky helicopter programs. The Space segment sales fell (-5%) to $2,699M from $2,846M due to renationalization of the Atomic Weapons Establishment program offset by increases in strategic and missile defense programs.

Lockheed Martin’s backlog fell to approximately $134.85B with only an increase in Space. The company’s outlook for 2021 has been reduced to revenue of ~$67,000 and diluted earnings per share of $22.45 due to rebasing of revenue from the F-35 program, US exit from Afghanistan, and accelerated payments to suppliers. The company expects lower revenue in 2022 too. Lockheed Martin is acquiring Aerojet Rocketdyne for $4.4B subject to regulatory approval.

The company has grown its DPS for 20 consecutive years, with the latest increase coming in at 8.33%

We expect the dividend to grow ~8% on average annually and the payout ratio to range from 35% to 45%.

No. 9: Comcast Corporation (CMCSA)

Dividend Yield: 1.60%

Percentage of OUSA Portfolio: 2.52%

Comcast reported its Q3 2021 results on 10/28/21. For the quarter, the company’s revenues climbed 18.7% to $30.3 billion, adjusted EBITDA rose 18.1% to almost $9.0 billion, adjusted earnings-per-share (EPS) climbed 33.8% to $0.87, and free cash flow (FCF) of $3.2 billion.

Comcast Chairman and CEO Brian L. Roberts highlighted that “Each of our businesses posted significant growth in Adjusted EBITDA, contributing to a double-digit increase in our Adjusted EPS.” Specifically, Comcast’s Cable customer relationships were boosted by 4.2% to 34.0M. The company experienced net additions of 255K Cable Communications customer relations.

It also had broadband customer net additions of 300K as well as added 285K wireless lines (the best quarter since launch Xfinity Mobile in 2017). NBCUniversal revenue and adjusted EBITDA rebounded with massive jumps of 57.9% and 48.2%, respectively. The Sky segment saw revenue growth of 4.1% and adjusted EBITDA growth of 76.2% year over year.

We continue to believe that the company will remain a healthy solid dividend-paying company as it continues to generate substantial FCF. We updated our 2021 EPS estimate to $3.07 to reflect a strong rebound from last year’s disrupted results.

The company has grown its DPS for 13 consecutive years, with the latest hike being by 8.7%


No. 8: McDonald’s Corporation (MCD)

Dividend Yield: 2.15%

Percentage of OUSA Portfolio: 2.92%

McDonald’s, founded in 1940 and headquartered in Chicago IL, is the world’s leading global foodservice retailer with nearly 40,000 locations in over 100 countries. Approximately 93% of the stores are independently owned and operated. The $186.9 billion market cap company has raised its dividend every year since paying its first dividend in 1976, qualifying the company as a Dividend Aristocrat. In September McDonald’s declared a $1.38 quarterly dividend, marking a 7.0% year-over-year increase.

Related: The Best Fast Food Stock Now: Ranking The 6 Biggest U.S. Fast Food Stocks

On October 27th, 2021, McDonald’s reported Q3 2021 results for the period ending September 30th, 2021. For the quarter, total revenue came in at $6.20 billion, a 14% increase compared to Q3 2020. Revenue growth was strong in both company-operated restaurants and franchised restaurants, which have notably higher margins. Net income equaled $2.15 billion or $2.86 per share compared to $1.76 billion or $2.35 per share in the year-ago quarter. On an adjusted basis, earnings-per-share equaled $2.76 versus $2.22 prior. In the first nine months of the year, McDonald’s has generated adjusted earnings-per-share of $7.05 versus $4.35 in 2020.

Over the last twelve months, McDonald’s has produced an all-time high EPS of $9.76. The stock trades for a premium based on its forward P/E as compared to its historical average, but that could be justified due to being a high-quality stock in the current environment of ultra-low yields.


No. 7: Apple (AAPL)

Dividend Yield: 0.54%

Percentage of OUSA Portfolio: 3.49%

Apple is the largest company in the world by market capitalization. Considering that Kevin O’Leary prefers companies that return capital to shareholders, this weighting might be a surprise.

Related: The 10 Biggest Dividend Paying Tech Stocks Ranked

Apple is the youngest dividend-paying stock analyzed in this article (based on dividend history), having only distributed income to shareholders since 2012. Since then, the dividend has grown more than 8x in a very short amount of period. This is in addition to the massive number of shares that have been repurchased over the years.

Apple’s sub-1.0% dividend yield, however, is the lowest yield among the top 10 largest holdings, but investors likely approve of this trade-off in income for the potential for high capital returns ahead.

Despite an expanding valuation multiple, Apple shares keep running higher, with analysts raising their expectations in terms of the company’s future earnings potential. Apple’s future continues to be bright.

In the most recent Q4-2021 results, Apple generated revenue of $83.4 billion, a 28.8% increase compared to Q4 2020. Product sales were up 29.8%, led by a 47.0% increase in iPhones (47% of total sales). Service sales increased 25.6% and made up 22% of all sales in the quarter. Net income equaled $20.55 billion or $1.24 per share compared to $12.7 billion or $0.73 per share in Q4 2020.

Earnings growth and dividend yield may be offset by a significant headwind from valuation reversion as the stock trades with a multiple of 25x earnings compared to our target multiple of 18x earnings.

Therefore, we expect the stock to produce subpar shareholder returns over the medium term.

No. 6: Pfizer Inc. (PFE)

Dividend Yield: 3.07%

Percentage of OUSA Portfolio: 3.53%

Pfizer Inc. is a global pharmaceutical company that focuses on prescription drugs and vaccines. It is a mega-cap stock with a market cap of $304.1 billion. You can see our complete list of mega-cap stocks here.

Pfizer’s new CEO completed a series of transactions in 2019 significantly altering the company structure and strategy. Pfizer formed the GSK Consumer Healthcare Joint Venture with GlaxoSmithKline plc (GSK), which will include Pfizer’s over-the-counter business. Pfizer owns 32% of the JV.

Pfizer also completed an $11 billion deal acquiring ArrayBioPharma. The spinoff of the Upjohn segment was announced as well. Pfizer’s top products include Eliquis, Ibrance, Prevnar 13, Enbrel (international), Chantix, Sutent, Xtandi, Vyndaqel, Inlyta, and Xeljanz.

Pfizer’s current product line is expected to produce robust top-line and bottom-line growth in the medium term. This should be powered by a robust demand outlook for its medicines as well as the ongoing vaccine rollout which may result in recurring revenues going forward due to the possibility for multiple shots needed to fight COVID-19.

Currently, Eliquis (cardiovascular), Ibrance (oncology) and Xeljanz (rheumatoid artacritis) are all posting robust sales growth. New launches of Vyndaqel and Inlyta are growing rapidly as well.

Growth will come from increasing U.S. and international sales for approved indications and extensions. On the other hand, growth is offset by patent expirations and also competition for Enbrel and Prevnar 13. Going forward Pfizer also has a strong pipeline in oncology, inflammation & immunology, and rare diseases. We are expecting a 5% EPS growth each year.

Source: Investor Presentation

Pfizer also pays a solid 3.07% dividend. In all, we expect 12.4% annual returns over the next five years, making Pfizer an attractive dividend stock to buy now

No. 5: Verizon Communications (VZ)

Dividend Yield: 4.96%

Percentage of OUSA Portfolio: 4.14%

Verizon is a telecommunications giant. Wireless contributes three-quarters of revenues, and broadband and cable services account for about a quarter of sales. The company’s network covers ~300 million people and 98% of the U.S. Verizon has now launched 5G Ultra-Wideband in several cities as it continues its rollout of 5G service. Verizon was the first of the major carriers to activate the 5G service.

Verizon announced third-quarter earnings results on 10/20/2021. Revenue grew 4.4% to $32.9 billion, but this was $340 million lower than expected. Adjusted earnings-per-share of $1.41 was a 13% increase from the prior year and $0.05 ahead of estimates.

Wireless retail postpaid net adds of 699K topped consensus estimates of 566K. Net phone additions totaled 429K. On a sequential basis, retail postpaid phone churn was higher by 2 basis points to 0.74%. Total retail postpaid phone churn was 0.94%. Revenue for the consumer segment was higher by 7.3% to $23.53 billion, primarily due to higher rates of 5G-phone adoption and 98K Fios net additions. Business revenue fell 0.8% to $7.7 billion, but this segment had 276K wireless retail postpaid net additions, including 162K net phone additions.

Verizon again offered revised guidance for the year. The company expects adjusted earnings-per-share of $5.35 to $5.40 for 2021, up from $5.25 to $5.35 and $5.00 to $5.15 previously. Wireless revenue is projected to reach the top end of prior guidance of up 3.5% to 4%.

Source: Investor Presentation

We expect 4% annual EPS growth over the next five years. The stock also has a 4.96% dividend yield. In addition to a considerable bump from an expanding P/E multiple, we expect total returns of ~12.8% per year for Verizon stock. This makes Verizon a high yielding security with decent growth potential.

No. 4: Procter & Gamble (PG)

Dividend Yield: 2.34%

Percentage of Portfolio: 4.62%

Procter & Gamble is a stalwart among dividend stocks. It has increased its dividend for the past 65 years in a row. This makes the company one of only 32 Dividend Kings, a list of stocks with 50+ years of rising dividends.

It has done this by becoming a global consumer staples giant. It sells its products in more than 180 countries around the world with annual sales of more than $70 billion. Some of its core brands include Gillette, Tide, Charmin, Crest, Pampers, Febreze, Head & Shoulders, Bounty, Oral-B, and many more.

These products are in high demand regardless of the state of the economy, making the company rather recession-proof. Many of these product categories have seen solid organic growth rates in the first three quarters of fiscal 2021.

And due to the company’s portfolio restructuring, renewed efficiency resulted in accelerating organic growth over FY2021.

Source: Investor Presentation

On April 13th, 2021, Procter & Gamble increased its dividend 10.0% to $0.8698 per quarter from $0.7907.

On October 19th, 2021, Procter & Gamble released Q1 fiscal year 2022 results for the period ending September 30th, 2021. (Procter & Gamble’s fiscal year ends June 30th.) For the quarter, the company generated $20.3 billion in sales, a 5% increase compared to Q1 2021. This result was led by sales increases of 5%, 5%, 8%, 5% and 3% in the company’s Beauty, Grooming, Health Care, Fabric & Home Care, and Baby, Feminine & Family Care segments, respectively. Adjusted earnings-per-share equaled $1.61 versus $1.63 in the year-ago quarter.

Procter & Gamble also reiterated its fiscal 2022 guidance, continuing to anticipate 2% to 4% sales growth and 3% to 6% adjusted earnings-per-share growth.

Procter & Gamble is seen as delivering 4% earnings growth going forward. However, the stock is also overvalued at the current level, trading for a P/E ratio of 23.7 compared with our fair value estimate of 20. If shares were to revert from the present price-to-earnings ratio to our target of 20, then valuation would be a ~3.4% headwind to annual returns over the next five years.

While we do not currently rate P&G stock as a buy due to its valuation, P&G is a strong stock for long-term dividend growth and current yield.

No. 3: Johnson & Johnson (JNJ)

Dividend Yield: 2.65%

Percentage of OUSA Portfolio: 4.62%

Johnson & Johnson is one of the most well-known dividend stocks in the marketplace, so it should come as no surprise that it is a top holding for OUSA.

Johnson & Johnson is a healthcare giant with a market capitalization of around $419.1 billion. It has very large businesses across healthcare, including pharmaceuticals, medical devices, and consumer health products. The company has annual sales in excess of $82 billion.

On 10/19/2021, Johnson & Johnson released third-quarter earnings results for the period ending 9/30/2021. Revenue grew 10.7% to $23.3 billion but missed estimates by $380 million. Adjusted earnings-per-share of $2.60 was a $0.40, or 18.2%, improvement from the prior year and $0.25 better than expected.

Leadership stated that the revenue miss was due largely to the timing of vaccine shipments. Pharmaceutical continued its streak of double-digit growth as revenue improved nearly 14%. Oncology was higher by 17.1%. Darzalex, which treats multiple myeloma, saw another quarter of market share growth in all regions. Imbruvica, which treats lymphoma, had higher demand even as new patient starts have been limited due to COVID-19 related restrictions.

Immunology increased 12.2%, driven by higher demand for Stelara, which treats immune-mediated inflammatory diseases, in Crohn’s Disease and Ulcerative Colitis. Consumer sales were up more than 5%. Over-the-counter improved 20.1% due to gains in pediatric fever and strength in cold, cough, and flu. Skin Health & Beauty fell 2.2% due to supply constraints and the recall of the company’s Sun aerosol products.

Medical Devices continues to see a rebound from COVID-19 related surgical procedure postponements as sales were up 8%. Interventional Solutions was the top-performing business again, growing 14.5% due to new products. Surgery grew 11.8%, with double-digit growth seen in endocutters, biosurgery, and energy.

Johnson & Johnson also provided updated guidance for the year. The company now expects adjusted earnings-per-share of $9.77 to $9.82 for the year, up from $9.50 to $9.60 and $9.42 to $9.57 previously. At the midpoint, this would be a 22% increase from 2020. Revenue is now expected to be between $92.8 billion to $93.3 billion, up from prior estimates of $92.5 billion to $93.3 billion.

Source: Investor Presentation

Johnson & Johnson’s key competitive advantage is the size and scale of its business. It invested over $3.4 billion in R&D in the last quarter alone to grow its market share. J&J is a worldwide leader in a number of healthcare categories, with 26 individual products or platforms that generate over $1 billion in annual sales each. J&J’s diversification allows it to grow each year. It has increased its adjusted operating earnings for 37 consecutive years.

It is also one of the most recession-resistant businesses investors will find. In the Great Recession, earnings-per-share grew by 10% in 2008, and 1% in 2009, at a time when many other companies were struggling. This resilience gives J&J steady profits, even during recessions, which allows it to continue increasing its dividend each year.

We expect earnings-per-share to grow at a rate of 6% per year through 2026 due to gains in revenue and share repurchases. This is consistent with Johnson & Johnson’s earnings growth composition in the past, however, most growth will come from revenue expansion as the buyback is good for a low-single-digit gain annually.

On 4/20/2021, Johnson & Johnson announced a 5% dividend increase for the 6/8/2021 payment date, giving the company 59 consecutive years of dividend growth.

Last month, Johnson & Johnson announced that they would be splitting the company into two separate businesses. One is to hold the company’s pharmaceuticals and medical devices divisions, while the other would comprise the relatively smaller consumer health assets.

The pharmaceuticals and medical devices division includes Johnson & Johnson’s biggest revenue contributors. This year, they should generate close to $78 billion in revenues, with more than half attributed to pharmaceutical operations and more than 1/3 attributed to the medical device category.

The pharmaceutical category includes prescription medications such as DARZALEX, ERLEADA, IMBRUVICA, STELARA, and TREMFYA, as well as medical device solutions including Johnson & Johnson’s orthopedics, surgery, and vision divisions. Specifically, around 21% of the pharmaceutical revenues are attributable to the immunology businesses, while 19% are attributable to oncology. Surgery makes for approximately 13% of this division’s revenues.

The other business coming out of this spin-off is to be focused on consumer health. It will comprise various household name brands that can be broken down into three main categories. Specifically: health and specialty products, over-the-counter and self-care products, and skin health and beauty products. These brands include well-known names such as Neutrogena, AVEENO, Tylenol, Listerine, JOHNSON’s, and BAND-AID.

Four of the brands under this division produce annual revenues that exceed $1 billion, while 20 of the division’s brands each produce yearly revenues north of $150 million. The new business will, in total, be generating more than $15 billion per annum, while management anticipates that sales will keep on growing at a rate of 5% or more annually.

While the actual results of this spin-off are to be seen, investors should generally be excited about it, as it should unlock substantial value and operating efficiencies amongst Johnson & Johnson’s massive portfolio of healthcare brands.

J&J is a Dividend King, and it has an excellent balance sheet to help maintain its dividend growth. It has a AAA credit rating from Standard & Poor’s. The combination of valuation changes, EPS growth, and the 2.65% dividend yield lead to total expected returns of ~8.0% per year over the next five years.

No. 2: Microsoft Corporation (MSFT)

Dividend Yield: 0.73%

Percentage of OUSA Portfolio: 5.51%

Microsoft Corporation, founded in 1975 and headquartered in Redmond, WA, develops, manufactures, and sells both software and hardware to businesses and consumers. Its offerings include operating systems, business software, software development tools, video games and gaming hardware, and cloud services.

Related: Five Top Gaming Stocks.

On September 14th, 2021, Microsoft declared a $0.62 quarterly dividend, marking the 20th consecutive yearly increase.

On October 26th, 2021, Microsoft reported Q1 fiscal year 2022 results for the period ending September 30th, 2021. (Microsoft’s fiscal year ends June 30th.) For the quarter, the company generated revenue of $45.3 billion, a 22% increase compared to Q1 2021. The growth was across the board with Productivity and Business Processes, Intelligent Cloud and Personal Computing growing 22%, 31%, and 12% respectively. Azure, Microsoft’s high-growth cloud platform, grew by 48% year-over-year. Adjusted net income equaled $17.2 billion or $2.27 per share compared to $13.9 billion or $1.82 per share in Q1 2021.

After years of solid growth, Microsoft had a hard time growing its profits during the 2011 through 2015 time frame. After some change-up in its management and a strategic shift towards cloud computing and mobile, Microsoft’s growth has been reinvigorated. Growth rates for revenues and especially profits have been compelling during recent years.

Microsoft’s cloud business is growing at a rapid pace thanks to Azure, which has been growing tremendously for a few years. Microsoft’s Office product range, which had been a low-growth cash cow for many years, is showing strong growth rates as well after Microsoft changed its business model towards the Office 365 software-as-a-service (SaaS) system. Due to low variable costs, Microsoft should be able to maintain a solid earnings growth rate for the foreseeable future. Buybacks are an additional factor for earnings-per-share growth, although this form of capital allocation becomes less attractive with an elevated valuation.

Further, Microsoft displays a fine dividend growth record, numbering 20 years of consecutive annual dividend increases.

Microsoft has a great moat in the operating system & Office business units and a strong market position in cloud computing. It is unlikely that the company will lose market share with its older, established products, whereas cloud computing is such a high-growth industry that there is enough room for growth for multiple companies.

The company has a renowned brand and a global presence, which provides competitive advantages. Microsoft is also relatively resilient against recessions, and like J&J has a AAA credit rating.

Unfortunately, Microsoft stock appears overvalued, with a forward P/E ratio of 36.2. Our fair value estimate is a P/E ratio of 24. Expected EPS growth of 7% and the 0.73% dividend yield will boost returns, but overall total returns are estimated at a negative 0.4% per year.

No. 1: Home Depot (HD)

Dividend Yield: 1.60%

Percentage of OUSA Portfolio: 6.02%

Home Depot was founded in 1978, and since that time has grown into the leading home improvement retailer with almost 2,300 stores in the U.S., Canada, and Mexico. In all, Home Depot generates annual revenue of approximately $130 billion.

Home Depot reported third-quarter results on November 16th. The company reported record third-quarter sales of $36.8 billion, an 9.8% increase year-over-year. Comparable sales increased 6.1%, and 5.5% specifically in the U.S. Net earnings of $4.1 billion were up 20.5% from $3.4 billion, YoY. EPS of $3.92 for the third quarter increased 23.3% from the same period a year ago.

Source: Investor Presentation

Home Depot’s most compelling competitive advantage is its leadership position in the home improvement industry. Not only is demand for home improvement products growing at a high rate in the U.S., but the industry is highly concentrated with just two major operators (Home Depot and Lowe’s) taking the vast majority of market share.

Home Depot has also proven to be extremely resilient to recessions, including the coronavirus pandemic, which has arguably helped Home Depot as consumers spend much more time at home. Home Depot has a projected 2021 dividend payout ratio just above 45%, which indicates a safe dividend.

The company has generated strong earnings growth in the past decade, as it has successfully capitalized on the housing and construction boom that ensued following the Great Recession of 2008-2010. E-commerce is another growth catalyst for Home Depot, as the company has invested heavily to expand its digital footprint.

Final Thoughts

Kevin O’Leary has become a household name due to his appearances on the TV show Shark Tank. But he is also a well-known asset manager, and his investment philosophy largely aligns with Sure Dividend’s. Specifically, Mr. Wonderful typically invests in stocks with large and profitable businesses, with strong balance sheets and consistent dividend growth every year.

Not all of these stocks are currently rated as buys in the Sure Analysis Research Database, which ranks stocks based on expected total return due to a combination of earnings per share growth, dividends, and changes in the price-to-earnings multiple.

However, several of these 10 stocks are valuable holdings for a long-term dividend growth portfolio.

Additional Resources

See the articles below for analysis on other major investment firms/asset managers:

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