In this article, we will be taking a look at 10 high beta dividend stocks to buy. To skip our detailed analysis of dividend investing, you can go directly to see the 5 High Beta Dividend Stocks To Buy.
The volatility of the stock market and individual stocks are increasingly important to keep track of if one wishes to benefit or protect oneself from financial losses. As such, volatility is something that has a huge impact on any stock portfolio's risk management relative to the market. This is why a stock's Beta value is essential.
What is a Beta value?
Simply put, a beta value is the volatility of any security or portfolio in relation to a benchmark. Essentially, the beta is calculated through a formula that calculates a security or portfolio's price risk relative to a benchmark - often the S&P 500 Index. A beta value of 1 signifies that the stock moves in line with the benchmark, while a beta value of -1 signifies that the stock moves opposite the benchmark. Additionally, a beta value of 2 signifies that the stock moves twice as much as the benchmark, while a 0 beta value means that the stock's moves have no correlation with the benchmark. Finally, to determine if a stock has a high beta value, we just need to see if it is above 1.
One may wonder why beta values are important, which is a valid question. The answer to the same would be that in rising markets, stocks with higher beta values tend to outperform. However, this reality must be taken in with a grain of salt since the same high-beta stocks tend to underperform during weak market periods.
While the above may make investing in high-beta stocks seem like a daunting experience, research has suggested that it is possible and profitable to invest in these stocks, provided one has an active investing strategy. Instead of buying and holding these stocks in the long term, it would be better to stay on your toes when trading. Terry Marsh, a professor of Finance at the University of California, Berkeley, and the Chief Executive of Quantal International, alongside Kam Fong, a professor of Finance at the University of Western Australia, have offered pointers in their research about the best way to invest in high-beta stocks. First off, the two have mentioned that high-beta stocks can be expected to outperform the market one week per quarter, hence traders should look to bet on these stocks during only those weeks, which are typically the busiest of the earning season.
By analyzing the Capital Asset Pricing Model (CAPM) beta-return relation on days named "leading earnings announcement days", or LEADs, Marsh and Fong conclude that market beta exposure and average excess returns have a strong and positive cross-section relation. Essentially, their study sample yielded results that on LEADs, a higher market risk premium exists. Finally, despite the fact that LEADs only make up 5% of all trading days in the sample selected by Marsh and Fong, it is enough for the two to propose a hybrid trading strategy that employs betting on beta on LEADs and betting against beta on other days.
Investing has become difficult by the day, even for the smart money. The entire hedge fund industry is feeling the reverberations of the changing financial landscape. Its reputation has been tarnished in the last decade, during which its hedged returns couldn’t keep up with the unhedged returns of the market indices. On the other hand, Insider Monkey’s research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 86 percentage points since March 2017. Between March 2017 and July 2021 our monthly newsletter’s stock picks returned 186.1%, vs. 100.1% for the SPY. Our stock picks outperformed the market by more than 86 percentage points (see the details here). That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to. You can subscribe to our free newsletter on our homepage to receive our stories in your inbox.
Without further ado, let's take a look at the 10 high beta dividend stocks to buy.
We have selected dividend stocks with beta values of over 1 in our list below. The stocks have been ranked on the basis of their beta values, from lowest to highest. Additionally, Insider Monkey tracks the data of 873 hedge funds, which we have used to determine each stock's popularity among hedge funds today as well. Finally, we have also taken into consideration analyst ratings, taking care to pick stocks with mostly positive ratings.
High Beta Dividend Stocks to Buy
10. Boston Properties, Inc. (NYSE:BXP)
Number of Hedge Fund Holders: 19
Dividend Yield: 3.3%
Beta Value: 1.04
Boston Properties, Inc. (NYSE:BXP), a publicly-held developer of Class A office properties in the US, ranks 10th on our list of high beta dividend stocks to buy. The company operates as a real estate investment trust (REIT). Its diverse portfolio of office properties totals 51.2 million square feet and 196 properties.
This September, Barclays analyst Anthony Powell began covering shares of Boston Properties, Inc. (NYSE:BXP) with an Overweight rating. The analyst also placed a $134 price target on the stock.
Out of the 873 hedge funds tracked by Insider Monkey, 19 held stakes in Boston Properties, Inc. (NYSE:BXP) in the second quarter. The total value of their stakes was $1.4 billion. In the previous quarter, 27 hedge funds held stakes in the company, worth $1.1 billion.
Like The Coca-Cola Company (NYSE:KO), AT&T Inc. (NYSE:T), Target Corporation (NYSE:TGT), and McDonald's Corporation (NYSE:MCD), Boston Properties, Inc. (NYSE:BXP) is a noteworthy investment option.
9. Welltower Inc. (NYSE:WELL)
Number of Hedge Fund Holders: 19
Dividend Yield: 2.9%
Beta Value: 1.07
Welltower Inc. (NYSE:WELL) is another real estate investment trust on our list of high beta dividend stocks to buy. The company ranks 9th on our list and invests in healthcare infrastructure. Its enterprise value as of the start of 2021 was reportedly $50 billion, and it is the world's largest healthcare REIT.
This September, Deutsche Bank analyst Derek Johnston reiterated a Buy rating on shares of Welltower Inc. (NYSE:WELL), while raising the price target on the stock to $102.
By the end of the second quarter of 2021, 19 hedge funds held stakes in Welltower Inc. (NYSE:WELL) worth $427 million. This is compared to 21 hedge funds in the previous quarter, with stakes worth $326 million.
Like The Coca-Cola Company (NYSE:KO), AT&T Inc. (NYSE:T), Target Corporation (NYSE:TGT), and McDonald's Corporation (NYSE:MCD), Welltower Inc. (NYSE:WELL) is a good investment pick for income investors.
8. Regency Centers Corp (NYSE:REG)
Number of Hedge Fund Holders: 25
Dividend Yield: 3.4%
Beta Value: 1.11
Regency Centers Corp (NYSE:REG), a real estate investment trust, is next on our list of high beta dividend stocks to buy, ranking 8th. The company is based in Jacksonville, Florida, and is among the largest operators of shopping centers and grocery stores in the US.
This October, Deutsche Bank analyst Derek Johnston raised his price target on shares of Eastman Chemical Company (NYSE:EMN) from $68 to $70. The analyst also reiterated a Hold rating on the stock.
7. Chevron Corporation (NYSE:CVX)
Number of Hedge Fund Holders: 50
Dividend Yield: 4.7%
Beta Value: 1.12
Chevron Corporation (NYSE:CVX) is a company operating in the energy industry.
This October, Truist raised its price target on shares of Chevron Corporation (NYSE:CVX) to $150, while reiterating a Buy rating on the stock.
In the second quarter of 2021, 50 hedge funds out of Insider Monkey's tracked 873 hedge funds held stakes in Chevron Corporation (NYSE:CVX) worth $4.3 billion. In comparison, 41 hedge funds held stakes in the company in the previous quarter with a total stake value of approximately $4.9 billion.
6. Eastman Chemical Company (NYSE:EMN)
Number of Hedge Fund Holders: 27
Dividend Yield: 2.6%
Beta Value: 1.15
Eastman Chemical Company (NYSE:EMN) is a chemical industry company operating in the US. The company was once a subsidiary of Kodak, but currently functions independently as a specialty materials company producing a broad range of advanced materials for everyday purposes. It ranks 6th on our list of high beta dividend stocks to buy.
This August, BofA analyst Matthew DeYoe upgraded shares of Eastman Chemical Company (NYSE:EMN) from Neutral to Buy. The analyst also holds a $140 price target on the stock.
As recorded at the end of the second quarter of 2021, 27 hedge funds out of 873 tracked by Insider Monkey held stakes in Eastman Chemical Company (NYSE:EMN). The total value of their stakes was $156 million, compared to the $162 million figure recorded at the end of the first quarter, when the number of hedge funds holding stakes in the company was also 27.
Like The Coca-Cola Company (NYSE:KO), AT&T Inc. (NYSE:T), Target Corporation (NYSE:TGT), and McDonald's Corporation (NYSE:MCD), Eastman Chemical Company (NYSE:EMN) is a notable stock pick today.
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Disclosure: None. 10 High Beta Dividend Stocks to Buy is originally published on Insider Monkey.