Up to date on July twenty fifth, 2022 by Bob Ciura
Kevin O’Leary is Chairman of O’Shares Investments, however you most likely know him as “Mr. Fantastic”.
He may be seen on CNBC in addition to the tv present Shark Tank. Traders who’ve seen him on TV have seemingly heard him talk about his funding philosophy.
Mr. Fantastic appears for shares that exhibit three essential traits:
First, they have to be high quality firms with robust monetary efficiency and strong stability sheets.
Second, he believes a portfolio ought to be diversified throughout completely different market sectors.
Third, and maybe most vital, he calls for revenue—he insists the shares he invests in pay dividends to shareholders.
Observe: 13F submitting efficiency is completely different than fund efficiency. See how we calculate 13F submitting efficiency right here.
You may obtain the entire listing of all of O’Shares Funding Advisor 13F submitting inventory holdings, together with quarterly efficiency, by clicking the hyperlink under:
OUSA owns shares that show a mixture of all three qualities. They’re market leaders with robust earnings, diversified enterprise fashions, they usually pay dividends to shareholders. The listing of OUSA portfolio holdings is an attention-grabbing supply of high quality dividend development shares.
This text analyzes the fund’s largest holdings intimately.
Desk of Contents
The highest 10 holdings from the O’Shares FTSE U.S. High quality Dividend ETF are listed so as of their weighting within the fund, from lowest to highest.
No. 10: UnitedHealth Group (UNH)
Dividend Yield: 1.2%
Share of OUSA Portfolio: 2.82%
UnitedHealth Group operates as a diversified well being care firm in the US. As it’s common on this business, regardless of UnitedHealth’s large revenues which exceed $250 billion per yr, its web margins stay razor-thin.
UnitedHealth’s high quality operations and recurring money flows haven’t led to a single unprofitable quarter in over 23 years.
UnitedHealth reported second quarter earnings on July fifteenth, 2022, and outcomes have been excellent, as was up to date steerage. Adjusted earnings-per-share got here to $5.57, which was 37 cents forward of expectations, and was virtually 19% higher than the year-ago interval. Income was up virtually 13% to $80.3 billion, which was greater than $600 million forward of estimates.
Each working segments grew income by double-digits as soon as extra, as has been the case for a while. The corporate’s medical care ratio was 81.5% in Q2, down from 82.8% within the year-ago interval. Working prices have been primarily flat at 14.6% of income.
The corporate boosted steerage to adjusted earnings-per-share of $21.40 to $21.90, so our estimate is the midpoint at $21.65.
Click on right here to obtain our most up-to-date Certain Evaluation report on UNH (preview of web page 1 of three proven under):
No. 9: Lockheed Martin Company (LMT)
Dividend Yield: 2.8%
Share of OUSA Portfolio: 3.10%
Lockheed Martin Company is the world’s largest protection firm. About 60% of the corporate’s revenues comes from the US Division of Protection, with different US authorities companies (10%) and worldwide shoppers (30%) making up the rest.
The corporate consists of 4 enterprise segments: Aeronautics (~40% gross sales) – which produces army plane just like the F-35, F-22, F-16 and C-130; Rotary and Mission Methods (~26% gross sales) – which homes fight ships, naval electronics, and helicopters; Missiles and Hearth Management (~16% gross sales) – which creates missile protection techniques; and Area Methods (~17% gross sales) – which produces satellites.
Within the 2022 first quarter,company-wide web gross sales decreased to $14,964M from $16,258M and diluted GAAP earnings per share fell to $6.44 from $6.56 on a year-over-year foundation. Aeronautics web gross sales have been flat at $6,401M from $6,3876M within the prior yr as a result of greater volumes of F-16 offset by decrease gross sales of F-35. Missiles and Hearth Management gross sales decreased 11% to $2,452M from $2,749M in comparable durations as a result of decrease volumes of tactical and strike missiles, built-in air and missile protection, and world sustainment and sensors.
Rotary and Mission Methods web gross sales have been down 14% to $3,552M from $4,107M within the prior yr as a result of decreases inintegrated warfare techniques, C6ISR, coaching and logistics options, and helicopter packages. Area gross sales fell (-15%) to $2,559M from $3,015M as a result of renationalization of the Atomic Weapons Institution program within the UK and decrease volumes in civil house packages offset by greater gross sales for strategic and missile protection packages.
Lockheed Martin’s backlog is roughly $134.23B with a rise in Area and Rotary and Mission Methods and declines within the Aeronautics and Missiles and Hearth Controls.
Lockheed has determined to not pursue the Aerojet Rocketdyne acquisition after the FTC sued to dam it. Lockheed Martin guided for ~$66B in gross sales and ~$26.70 diluted earnings per share in 2022.
Click on right here to obtain our most up-to-date Certain Evaluation report on LMT (preview of web page 1 of three proven under):
No. 8: McDonald’s Company (MCD)
Dividend Yield: 2.2%
Share of OUSA Portfolio: 3.20%
McDonald’s, based in 1940 and headquartered in Chicago IL, is the world’s main world foodservice retailer with practically 40,000 places in over 100 nations. Roughly 93% of the shops are independently owned and operated.
The corporate has raised its dividend yearly since paying its first dividend in 1976, qualifying it as a Dividend Aristocrat.
On April twenty eighth, 2022, McDonald’s reported Q1 2022 outcomes for the interval ending March thirty first, 2022. For the quarter, complete income got here in at $5.67 billion, a ten.6% improve in comparison with Q1 2021. Income grew 6.5% at company-owned shops, whereas income elevated 13.4% at franchised eating places. Internet revenue equaled $1.10 billion or $1.48 per share in comparison with $1.54 billion or $2.05 per share in Q1 2021.
McDonald’s is a really recession-resistant firm. Its aggressive benefit lies in its world scale, immense community of eating places, well-known model, and actual property belongings. Certainly, the corporate’s superior monitor document towards quite a few rivals has illustrated why these features are vital to the corporate’s success.
In the course of the Nice Recession McDonald’s posted wonderful outcomes, with earnings-per-share of $2.91, $3.67, $3.98, and $4.60 over the 2007 via 2010 stretch, whereas the dividend saved on growing as effectively.
Click on right here to obtain our most up-to-date Certain Evaluation report on MCD (preview of web page 1 of three proven under):
No. 7: Apple (AAPL)
Dividend Yield: 0.6%
Share of OUSA Portfolio: 3.69%
Apple revolutionized private know-how with the introduction of the Macintosh in 1984. In the present day the know-how firm designs, manufactures and sells merchandise similar to iPhones, iPads, Mac, Apple Watch and Apple TV. Apple additionally has a companies enterprise that sells music, apps, and subscriptions.
On April twenty eighth, 2022, Apple declared a $0.23 quarterly dividend, marking a 4.5% year-over-year improve. Additionally on April twenty eighth, 2022, Apple reported Q2 fiscal yr 2022 outcomes for the interval ending March twenty sixth, 2022. (Apple’s fiscal yr ends the final Saturday in September).
For the quarter Apple generated income of $97.278 billion, an 8.6% improve in comparison with Q2 2021. Product gross sales have been up 6.6%, led by a 5.5% improve in iPhones (52% of complete gross sales). Service gross sales elevated 17.3% to $19.8 billion and made up 20% of all gross sales within the quarter. Internet revenue equaled $25.01 billion or $1.52 per share in comparison with $23.63 billion or $1.40 per share in Q2 2021.
Apple is the #1 holding of Berkshire Hathaway (BRK.B), making the know-how large one of many prime Warren Buffett shares.
Click on right here to obtain our most up-to-date Certain Evaluation report on AAPL (preview of web page 1 of three proven under):
No. 6: Pfizer Inc. (PFE)
Dividend Yield: 3.1%
Share of OUSA Portfolio: 3.95%
Pfizer Inc. is a worldwide pharmaceutical firm that focuses on pharmaceuticals and vaccines. It’s a mega-cap inventory with a market cap of $287 billion. You may see our full listing of mega-cap shares right here.
Pfizer’s new CEO accomplished a collection of transactions in 2019 considerably altering the corporate construction and technique. Pfizer shaped the GSK Client Healthcare Joint Enterprise with GlaxoSmithKline plc (GSK), which is able to embrace Pfizer’s over-the-counter enterprise. Pfizer owns 32% of the JV.
Pfizer’s prime merchandise embrace Eliquis, Ibrance, Prevnar 13, Enbrel (worldwide), Chantix, Sutent, Xtandi, Vyndaqel, Inlyta, and Xeljanz.
The corporate lately accomplished its acquisition of Enviornment Prescription drugs for etrasimod.
Supply: Investor Presentation
Pfizer reported wonderful Q1 2022 outcomes on Might third, 2022. Companywide income rose 77% to $25,661M from$14,516M and adjusted diluted earnings per share rose 72% to $1.62 versus $0.95 on a year-over-year foundation. DilutedGAAP earnings per share rose 59% to $1.37 from $0.86 in comparable quarters.
Pfizer is benefiting from market management with the COVID-19 vaccine and anti-viral drug. The corporate had practically $15 billion in income from these two merchandise alone within the quarter. The mRNA vaccine know-how will probably be tried in two protease inhibitor antiviral compounds, a flu vaccine, a shingles vaccine, a breast most cancers remedy, hemophilia gene remedy, a Lyme vaccine, RSV Grownup vaccine, and others.
Pfizer maintained income steerage at $98B – $102B and lowered adjusted diluted EPS to $6.25 – $6.45 for 2022.
Click on right here to obtain our most up-to-date Certain Evaluation report on PFE (preview of web page 1 of three proven under):
No. 5: Verizon Communications (VZ)
Dividend Yield: 5.7%
Share of OUSA Portfolio: 3.95%
Verizon is a telecommunications large, and is likely one of the largest wi-fi carriers within the nation. Wi-fi contributes three-quarters of all revenues, and broadband and cable companies account for a couple of quarter of gross sales. The corporate’s community covers ~300 million folks and 98% of the U.S.
Verizon has now launched 5G Extremely-Wideband in a number of cities because it continues its rollout of 5G service. Clients in components of Atlanta, Dallas, Detroit, Indianapolis, Omaha, and Washington, D.C. may entry the corporate’s 5G community. Verizon is the primary of the key carriers to activate the 5G service.
On July 22, 2022, the corporate reported the fiscal yr’s second-quarter and first six months outcomes. Income was flat yr over yr (YoY) at $33.8 billion for the quarter in comparison with the second quarter in 2021. Earnings got here in at $1.24 per share, a lower of 11.4% in comparison with the $1.40 per share the corporate made in 2Q201.
Supply: Investor Presentation
Considered one of Verizon’s key aggressive benefits is that it’s usually thought of the wonderful wi-fi supplier inside the U.S. that is evidenced by the company’s Wi-Fi web additions and really low churn price. This dependable service permits Verizon to protect its client base along with delivering the group the chance to move shoppers to higher-priced plans.
Verizon can be rolling out 5G service, which is able to give it a bonus over different carriers. One other benefit for Verizon is the inventory’s skill to face up to a downturn out there.
Click on right here to obtain our most up-to-date Certain Evaluation report on VZ (preview of web page 1 of three proven under):
No. 4: Dwelling Depot (HD)
Dividend Yield: 2.50%
Share of OUSA Portfolio: 4.07%
Dwelling Depot was based in 1978, and since that point has grown into the main dwelling enchancment retailer with virtually 2,300 shops within the U.S., Canada, and Mexico. In all, Dwelling Depot generates annual income of roughly $130 billion.
Dwelling Depot reported first quarter 2022 outcomes on Might seventeenth. The corporate reported first quarter gross sales of $38.9 billion, a 3.8% year-over-year improve. Comparable gross sales within the quarter rose 2.2%, and 1.7% within the U.S. particularly. Internet earnings equated to $4.2 billion, or $4.09 per share, in comparison with $4.1 billion, or $3.86 per share in Q1 2021.
The corporate spent $2.3 billion in frequent inventory repurchases throughout Q1 2022, lower than the $3.8 billion spent in Q1 2021. Common ticket rose 11.4% in comparison with final yr, from $82.37 to $91.72. Moreover, there was a 2.7% improve in gross sales per retail sq. foot, from $605.60 to $621.99.
As of the tip of the primary quarter, Dwelling Depot has money and money equivalents equal to $2.8 billion. Management has upgraded steerage. For fiscal 2022, administration anticipate gross sales development and comparable gross sales development of roughly 3.0%, with an working margin of roughly 15.4%. The corporate will even pay $1.6 billion in web curiosity expense for 2022. Lastly, diluted EPS development is anticipated to be mid-single digits.
Click on right here to obtain our most up-to-date Certain Evaluation report on HD (preview of web page 1 of three proven under):
No. 3: Microsoft Company (MSFT)
Dividend Yield: 1.0%
Share of OUSA Portfolio: 4.27%
Microsoft Company, based in 1975 and headquartered in Redmond, WA, develops, manufactures and sells each software program and {hardware} to companies and shoppers.
Its choices embrace working techniques, enterprise software program, software program improvement instruments, video video games and gaming {hardware}, and cloud companies.
On April twenty sixth, 2022, Microsoft reported Q3 fiscal yr 2022 outcomes for the interval ending March thirty first, 2022. (Microsoft’s fiscal yr ends June thirtieth.) For the quarter, the corporate generated income of $49.4 billion, an 18% improve in comparison with Q3 2021. The expansion was throughout the board with Productiveness and Enterprise Processes, Clever Cloud and Private Computing rising 17%, 26%, and 11% respectively.
Azure, Microsoft’s high-growth cloud platform, grew by 46% year-over-year. Adjusted web revenue equaled $14.8 billion or $1.95 per share in comparison with $15.5 billion or $2.03 per share in Q3 2021.
Click on right here to obtain our most up-to-date Certain Evaluation report on Microsoft (preview of web page 1 of three proven under):
No. 2: Procter & Gamble (PG)
Dividend Yield: 2.28%
Share of Portfolio: 4.97%
Procter & Gamble is a stalwart amongst dividend shares. It has elevated its dividend for the previous 65 years in a row. This makes the corporate certainly one of solely 45 Dividend Kings, a listing of shares with 50+ years of rising dividends.
It has finished this by changing into a worldwide client staples large. It sells its merchandise in additional than 180 nations around the globe with annual gross sales of greater than $70 billion. A few of its core manufacturers embrace Gillette, Tide, Charmin, Crest, Pampers, Febreze, Head & Shoulders, Bounty, Oral-B, and plenty of extra.
These merchandise are in excessive demand whatever the state of the economic system, making the corporate relatively recession-proof.
On April twelfth, 2022, Procter & Gamble raised its dividend by 5.0%, from $0.8698 per quarter to $0.9133.
Supply: Investor Presentation
In mid-April, Procter & Gamble reported (4/20/22) monetary outcomes for the third quarter of fiscal 2022 (Procter & Gamble’s fiscal yr ends June thirtieth). The corporate grew its gross sales and its natural gross sales 7% and 10%, respectively, over the prior yr’s quarter. Natural gross sales development resulted from 3% quantity development, 5% worth hikes and a pair of% profit from product combine.
Regardless of the robust headwind from excessive value inflation, adjusted earnings-per-share grew 6%. Procter & Gamble raised its fiscal 2022 steerage for a second quarter in a row, anticipating 4%-5% gross sales development (from 3%-4%). Alternatively, as a result of excessive value inflation, it expects earnings-per-share development on the low finish of its 3%-6% steerage.
Click on right here to obtain our most up-to-date Certain Evaluation report on PG (preview of web page 1 of three proven under):
No. 1: Johnson & Johnson (JNJ)
Dividend Yield: 2.5%
Share of OUSA Portfolio: 5.51%
Johnson & Johnson is a worldwide healthcare large. The corporate at the moment operates in three segments: Client, Pharmaceutical, and Medical Units & Diagnostics. The company consists of some 250 subsidiary firms with operations in 60 nations and merchandise offered in over 175 nations. Johnson & Johnson had gross sales of $93.8 billion worldwide throughout the calendar yr 2021.
Johnson & Johnson’s manufacturers embrace quite a few family names of medicines and first help provides. Its well-known client merchandise embrace the Band-Help Model line of bandages, Tylenol medicines, Johnson’s Child merchandise, Neutrogena pores and skin, magnificence merchandise, Clear & Clear facial wash, and Acuvue contact lenses. Johnson & Johnson’s pharmaceutical arm is Janssen Prescription drugs.
On April 19, 2022, the corporate reported first-quarter outcomes for the 2022 Fiscal Yr. Income elevated 5% to $23.4 billion however missed estimates by $210 million. Adjusted earnings-per-share of $2.67 in comparison with $2.59 within the prior yr was $0.10 higher than anticipated.
Adjusted web earnings have been 3% greater than the primary quarter of final yr. This quarter, web earnings have been $7,129 million in comparison with $6,924 million within the first quarter of 2021.
Supply: Investor Presentation
Johnson & Johnson’s key aggressive benefit is the scale and scale of its enterprise. The corporate is a worldwide chief in a number of healthcare classes. Johnson & Johnson’s diversification permits it to proceed to develop even when one of many segments is underperforming.
The corporate has elevated its dividend for 60 consecutive years, making it a Dividend King.
Click on right here to obtain our most up-to-date Certain Evaluation report on JNJ (preview of web page 1 of three proven under):
Ultimate Ideas
Kevin O’Leary has turn into a family title as a result of his appearances on the TV present Shark Tank. However he’s additionally a widely known asset supervisor, and his funding philosophy largely aligns with Certain Dividend’s. Particularly, Mr. Fantastic sometimes invests in shares with massive and worthwhile companies, with robust stability sheets and constant dividend development yearly.
Not all of those shares are at the moment rated as buys within the Certain Evaluation Analysis Database, which ranks shares based mostly on anticipated complete return as a result of a mix of earnings per share development, dividends, and modifications within the price-to-earnings a number of.
Nonetheless, a number of of those 10 shares are useful holdings for a long-term dividend development portfolio.
Extra Assets
See the articles under for evaluation on different main funding companies/asset managers/gurus:
In case you are enthusiastic about discovering extra high-quality dividend development shares appropriate for long-term funding, the next Certain Dividend databases will probably be helpful:
The key home inventory market indices are one other strong useful resource for locating funding concepts. Certain Dividend compiles the next inventory market databases and updates them month-to-month:
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