Income investors looking for ideas may want to start by looking at the top Bill Gates stocks for dividend growth investors.
Established in 2000, the Bill & Melinda Gates Foundation Trust is one of the largest philanthropic funds in the world. It aims to mitigate disease, poverty and inequality in poor developing nations and improve educational opportunities and create better technology in the United States. The trust is managed by Bill Gate’s personal portfolio manager, Michael Larson.
Most of the foundation’s picks are invested from a long-term perspective. However, over the last few quarters there has been much activity in the portfolio which indicates a change in investment strategy.
At the end of the first quarter of 2022, the Gates Foundation portfolio held 18 equity securities and was valued at $19.8 billion. Almost half of the portfolio was invested in the financial sector, followed by industrial goods, services, consumer goods and technology.
In this column, I have chosen stocks that should provide resilience during the market downturns. Demand for the products and services of these companies should remain unaffected by the downturns of the economy. Given decades-high inflation, an astute investor should prepare to weather further downturns in the economic environment. Defensive stocks tend to outperform during these times.
So let’s look at these top Bill Gates stocks for dividend growth investors you can add to your watchlist.
|KOF||Coca-Cola FEMSA, S.A.B. de C.V.||$55.21|
|CNI||Canadian Pacific Railway Limited||$112.43|
Berkshire Hathaway (BRK-B)
Berkshire Hathaway (NYSE:BRK-A, NYSE:BRK-B) Class B shares are the top pick of Bill & Melinda Gates Foundation Trust. The stock accounts for 51.2% of the Funds total assets, reflecting $10.1 billion worth of equity investment.
The company is the largest conglomerate in the world. It’s engaged in investing through its subsidiaries across wide range of sectors, including insurance and reinsurance, utilities and energy, freight rail transportation, manufacturing, and retailing.
Recently, the company has grabbed headlines for bumping up to a 16.4% investment in Occidental Petroleum (NYSE:OXY) stock on hopes that oil price will remain at an elevated level. Its investment in Chevron (NYSE:CVX) during Q1 2022 also confirms the expectations.
The company has a track record of delivering returns better than its peer group average. Its operating margin of 37.9% is above sector median of 24.8%. In Q1 2022, the company reported EPS of $3.18, beating estimates by 31 cents. Revenues also came in $1.7 billion better than expectations at $70.81 billion, reflecting a growth of 9.6% year-over-year (or YOY).
Waste Management (WM)
Waste Management (NYSE:WM) is another interesting name to consider. The company holds a dominant position in providing environmental cleaning services in North America.
WM has been growing its revenues at a generally steady pace over the last five years. In its first quarter of 2022, the company exceeded consensus expectation for both revenues (by $208 million to $4.6 billion) and net income (by 15 cents per share to reach $1.29).
I expect that rising demand as the economy recovers along with the company’s annuity like contractual agreements will enable it to outperform. It now plans to expand its renewable natural gas infrastructure, which should further propel net income.
The company has also been increasing its dividend over the last 19 years. Its positive free cash flow should support its growth plans future distributions to the shareholders.
On May 9, 2022, the Board of Directors declared its latest quarterly cash dividend of $0.65 cents per share.
Walmart (NYSE:WMT) owns and operates retail superstores, discount stores and grocery stores across the United States. The company is one of the largest retailers in the world, operating 10,500 stores and 46 e-commerce sites across 24 countries.
The inelastic nature of its products also makes it a defensive stock. In the past, WMT has thrived in economic downturns due to its low-priced offerings compared to its peers.
Over the last five years, the company has grown at a compounded annual growth rate of 3.4%. In Q1 2022, its top line exceeded consensus estimates by $2.19 billion to record revenues of $140.3 billion. Healthy same-store sales and e-commerce revenues supported top-line growth. Going forward, Walmart expects to invest heavily to enhance its e-commerce capabilities, which should further spur top line.
The stock comprises 2.28% of the Foundation’s portfolio, making it the sixth-largest holding. The company has been paying dividend consistently over the last 48 years, making it an attractive investment opportunity.
Coca-Cola FEMSA, S.A.B. de C.V. (KOF)
Based in Mexico, Coca-Cola FEMSA, S.A.B. de C.V. (NYSE:KOF) produces, markets and distributes Coca-Cola trademark beverages. It operates in Mexico, Guatemala, Nicaragua, Costa Rica, Panama, Colombia, Brazil, Argentina, and Uruguay.
The Gates Foundation alloted 1.73% of its investment to the company as of the end of Q1 2022, representing eighth largest holding of the portfolio.
The company has been growing steadily at a rate of 2.9% over the last three years. In the last quarter, KOF topped consensus estimates for revenues but missed estimates on earnings. Coca-Cola FEMSA delivered revenue of $2.5 billion in its Q1 results, beating estimates by $131 million.
On May 3, 2022, Benjamin Theurer, a Barclays analyst, upgraded the company’s stock to “overweight” from “equal weight.” The analyst now forecasts price target at $62, up from its previous estimate of $55.
Ecolab (NYSE:ECL) is one of the leading providers of water treatment, hygiene and infection prevention solutions in the United States. The company provides services in more than three million locations globally and holds more than 10,000 patents.
The company has been delivering consistent growth. Revenues have surpassed consensus estimates over seven of the last eight quarters. In Q1 2022, the company delivered top-line growth of 13%to $3.3 billion, fueled by substantial volume gains and price increases. Management expects the company to deliver top-line growth in double digits over the next five years.
ECL’s strong product portfolio, new business wins and growing digital capabilities has well positioned it to support its growth momentum.
Ecolab represents 3.9% of Bill & Melinda Gates Foundation Trust with investment of 4.4 million shares as of Q1 2022. The stock has been part of the portfolio for the last 10 years.
The company also pays dividend and has a dividend yield of 1.3%.
Canadian National Railways Company (CNI)
Established in 1881, Canadian Pacific Railway Limited (NYSE:CNI) operates freight railway, covering all major Canadian economic hotspots.
CNI caters to exporters, importers, retailers, farmers and manufacturers. It also provides vessels and docks, transloading and distribution, automotive logistics, and freight forwarding and transportation management services.
In the first quarter of 2022, the company posted revenues of $2.89 billion, surpassing consensus estimates by $9.1 million. Adjusted diluted earnings per share (EPS) of $1.03 per share missed expectations by 6 cents. The company generated free cash flow of $406 million.
Going forward, CNI should benefit from the rising demand for freight services and higher fuel price. Investment into enhancing capacity, technology and improving network should yield future growth.
The Q1 2022, regulatory filing reveals Bill & Melinda Gates Foundation Trust held more than 13 million shares of the company, representing third highest, 8.87% of the Foundation’s total holdings.
Turning to the Wall Street, consensus rating on the stock is Moderate Buy as per the data by Yahoo Finance. The average price target for the stock is $124.18, representing an upside potential of 10.5% from current price of $112.43.
Sanderson Farms Inc. (SAFM)
Sanderson Farms (NASDAQ:SAFM) is the last pick on this list of the top Bill Gates stocks for dividend growth investors. It’s the third-largest poultry producer in the U.S. The company is engaged in poultry processing and distribution. It is also one of the defensive plays given the nature of the product it sells — chicken.
The company is the latest addition to the Foundation’s portfolio. Sanderson Farm accounts for 0.5% of the total portfolio’s, representing an investment of $100 million for 524,236 shares.
The company has been growing its top line at a compounded annual growth rate of 13.3% over the last five years. Earnings have also been impressive with growth of 31.5% over the same period. Higher selling price for each pound sold compared to its costs led to a stepped-up income growth. With the current inflation peaking near its 40-years average, price for selling chicken will remain elevated.
Management enhances shareholder’s value through share repurchases and dividend increases. The Board of Directors have authorized to repurchase 2 million shares or about 9% of its outstanding shares.
On April 21, 2022 SAFM declared a quarterly dividend of 44 cents per share for shareholders of record on Feb. 1, 2022.
On the date of publication, Sakshi Agarwalla did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.