Billionaire Ray Dalio’s Top Dividend Picks

Shweta is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.

Markets have seen quite a good amount of volatility of late. This volatility is expected to continue given the upcoming election and uncertainty in Europe. A good place to hide during these times is dividend stocks.  I scanned the top 25 stocks in the portfolio of billionaire Ray Dalio’s Bridgewater Associates for dividend ideas. The following are three stocks which looks attractive.  

Company Name

Shares Held

Dividend Yield

Payout ratio

Walgreen Company (NYSE: WAG)

801,246

 3.20%

 39.00%

Johnson & Johnson (NYSE: JNJ)

329,793

 3.90%

 62.00%

Eaton Corporation (NYSE: ETN)

393,142

 3.10%

 36.00%

Here’s a look at these stocks in detail.

Walgreen Company

The October 12 announcement of Walgreen as a preferred pharmacy chain in 2013 for Medicare Part D (top 3 healthcare institutions of five) came in as positive development. The acquisition of Alliance Boots will further provide a boost to Walgreen's earnings in the upcoming quarters. Its estimated EPS of $0.72 for the November quarter looks achievable given its strong global presence following the Express Scripts deal and low cost benefits.

Furthermore, the introduction of the new health care program ‘Well Transitions’ to bring hospitals and health institutions in line Walgreen will increase its served market resulting in additional revenues. There are few more catalysts (the new loyalty card launch, expected early flu season and some of Express Scripts returning) which should give a higher revenue outlook.  Given the new businesses opportunities and continuing growth, I would recommend this stock a buy.

Johnson & Johnson

JNJ reported phenomenal 3Q12 results; with 5.7% organic growth and EPS of $1.25 which exceeded Wall Street estimates by 4 cents. Its pharma division was the best performer in Q3, with strong sales of newly launched products like Zytiga, Stelara, and Xarelto. These products are well protected from generic threat for the next 4-5 years, which will continue to provide higher revenue.

Its strong pipeline of drugs is an added positive for the company. The company is likely to get FDA approval for Zytiga in December. With the gradual reintroduction of McNeil products all quality issues will be sorted out by 2013. This will have a positive impact on revenues. On the other hand, the synergies generated from the Synthes acquisition will help it strengthen the MD&D division.

JNJ’s strong cash flow may be utilized for further acquisition in the MD&D division, providing further growth drivers. Adding to this, the dividend yield of 3.5% makes it a good defensive stock. I would recommend this as a long term buy.

Eaton Corporation

Eaton’s strategy of expanding its reach from North America to global emerging markets with the help of acquisitions (Jeil Hydraulics & Rolec) will keep it on a high growth track. North American contribution to its trucking portfolio is now reduced to around 55%, resulting from expansion in Brazil, India and China. Keeping in mind that the current demand for construction in developing markets like China is below normal, we should see demand growing in 2013 as the normalization occurs. Eaton’s acquisition of Cooper is expected to be completed by 2012. With this, its electrical equipment division will contribute more than half of its total revenue. This will provide an additional growth catalyst going forward. Eaton’s strong free cash flow and its record of paying regular dividends makes it a very good addition to a retirement portfolio. At a forward PE of ~9x, I believe the stock makes a good buy.


ShwetaDubey has no positions in the stocks mentioned above. The Motley Fool owns shares of Johnson & Johnson. Motley Fool newsletter services recommend Johnson & Johnson. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.If you have questions about this post or the Fool’s blog network, click here for information.

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