In this article, we discuss 10 best window and orphan stocks to buy. If you want to see more stocks in this selection, check out 5 Best Widow and Orphan Stocks To Buy.
A widow and orphan stock refers to an equity investment that pays a steady dividend and is generally considered to be low-risk, defensive, and non-volatile. These are usually large-cap, stable, and old-economy companies in non-cyclical business sectors. Dividends provide investors with a margin of safety despite the challenging environment for the capital markets, and dividend equities have outperformed non-dividend equities and bonds year-to-date.
Investing in dividends, primarily those firms that increase their payouts on a year-over-year basis, can make massive contributions to long-term portfolio returns in an otherwise volatile market. Looking for the highest-yielding dividend stock is usually associated with higher risk. Investors should focus on picking up stocks which have a consistent track record of growing their dividends year after year. Nick Lentini of the Morgan Stanley Equity Strategy team said on November 9:
“The investing backdrop of the past year, driven by macroeconomic conditions and combined with the rising risk of recession, have fueled outperformance for many dividend-paying stocks.”
Sectors which are positioned to grow their dividends consistently include Energy, Packaged Food, Beverages and Household Products, Utilities, and Banks. Some of the best widow and orphan stocks to buy include Walmart Inc. (NYSE:WMT), The Procter & Gamble Company (NYSE:PG), and Exxon Mobil Corporation (NYSE:XOM).
Our Methodology
We selected the following widow and orphan stocks based on positive analyst coverage, strong business fundamentals, and growing dividends over the last 30 years or more. We have assessed the hedge fund sentiment from Insider Monkey’s database of 920 elite hedge funds tracked as of the end of the third quarter of 2022. The list is arranged according to the number of hedge fund holders in each firm.
Walgreens Boots Alliance, Inc. (NASDAQ:WBA) was founded in 1901 and is based in Deerfield, Illinois. The company operates as an integrated healthcare, pharmacy, and retailer in the United States, the United Kingdom, Germany, and internationally. Walgreens Boots Alliance, Inc. (NASDAQ:WBA) has three segments – U.S. Retail Pharmacy, International, and U.S. Healthcare. The company paid a $0.48 per share quarterly dividend to shareholders on December 12 and has 46 years of consecutive annual dividend increases under its belt.
On December 14, Mizuho analyst Ann Hynes raised the price target on Walgreens Boots Alliance, Inc. (NASDAQ:WBA) to $41 from $36 and kept a Neutral rating on the shares. The analyst believes managed care and drug distributors' earnings visibility remains attractive, but she thinks hospitals have the most improved outlook.
According to Insider Monkey’s data, 39 hedge funds were bullish on Walgreens Boots Alliance, Inc. (NASDAQ:WBA) at the end of September 2022, compared to 40 funds in the prior quarter. Peter Rathjens, Bruce Clarke, and John Campbell’s Arrowstreet Capital is the biggest stakeholder of the company, with approximately 6 million shares worth $186.5 million.
In addition to Walmart Inc. (NYSE:WMT), The Procter & Gamble Company (NYSE:PG), and Exxon Mobil Corporation (NYSE:XOM), Walgreens Boots Alliance, Inc. (NASDAQ:WBA) is one of the best widow and orphan stocks to consider for a safe portfolio.
Here is what Aristotle Capital Management Global Equity has to say about Walgreens Boots Alliance, Inc. (NASDAQ:WBA) in its Q1 2022 investor letter:
“We first invested in Walgreens Boots Alliance in early 2013. Over our holding period, Walgreens merged with U.K.-based Boots Alliance, establishing itself as a global leading retail pharmacy chain. CEO Stefano Pessina set the company on a path of pursuing strategic partnerships (as opposed to vertical integration deals) to increase store traffic and to, over time, transform the business into a neighborhood health destination around a more modern pharmacy. Using its strong FREE cash flow generation, the company ramped up its investments in technology, aiming to accelerate the digitalization of health information. Mr. Pessina was not successful, however, at turning around the firm’s U.S. retail segment and had to deal with increasing prescription drug reimbursement pressures. He stepped down as CEO in 2020, and in 2021, Roz Brewer took the reins of the firm. We admire Ms. Brewer’s impressive track record at companies that include Starbucks (NASDAQ:SBUX) and Walmart (Sam’s Club). However, given management’s decision to divest core cash-generative businesses and redeploy capital to embryonic healthcare startups, we prefer to step aside while we follow the company’s progress.”
Sysco Corporation (NYSE:SYY) is a Texas-based company that engages in the marketing and distribution of various food products to the foodservice or food-away-from-home industries in the United States, Canada, the United Kingdom, France, and internationally. Sysco Corporation (NYSE:SYY) operates through the U.S. Foodservice Operations, International Foodservice Operations, SYGMA, and Other segments. It is one of the best widow and orphan stocks to buy.
On November 17, Sysco Corporation (NYSE:SYY) declared a quarterly dividend of $0.49 per share, in line with previous. The dividend is payable on January 27, 2023 to shareholders of record on January 6. Sysco Corporation (NYSE:SYY)’s dividend yield on December 21 came in at 2.52%. The company has a history of consecutively increasing annual dividends for the last 53 years, making it a reliable dividend king.
Argus analyst John Staszak on November 2 raised the price target on Sysco Corporation (NYSE:SYY) to $96 from $92 and kept a Buy rating on the shares. Despite the Q1 earnings miss, the analyst is positive on the company's efforts to offset lower food sales to restaurants and hotels by controlling costs and focusing on sales to grocery stores. The company also has sufficient liquidity and access to credit to survive the current downturn, noted the analyst.
According to Insider Monkey’s Q3 data, 40 hedge funds were long Sysco Corporation (NYSE:SYY), compared to 32 funds in the prior quarter. Nelson Peltz’s Trian Partners held the largest stake in the company, with 7.2 million shares worth $507.5 million.
Emerson Electric Co. (NYSE:EMR) is a technology and engineering company that provides industrial, commercial, and consumer solutions in the Americas, Asia, the Middle East, Africa, and Europe. The company operates through Automation Solutions, AspenTech, and Commercial & Residential Solutions segments. Emerson Electric Co. (NYSE:EMR) has achieved dividend king status given the company’s history of increasing its dividends consistently for the last 65 years.
On November 2, Emerson Electric Co. (NYSE:EMR) declared a $0.52 per share quarterly dividend, a 1% increase from its prior dividend of $0.515. The dividend was distributed on December 9. Emerson Electric Co. (NYSE:EMR)’s dividend yield on December 21 came in at 2.15%.
Citi analyst Andrew Kaplowitz on December 9 raised the price target on Emerson Electric Co. (NYSE:EMR) to $109 from $99 and kept a Buy rating on the shares. The analyst said that megatrends and "still emerging fiscal tailwinds" should help moderate potential downside for industrials in a weak macroeconomic environment.
According to Insider Monkey’s data, 48 hedge funds were bullish on Emerson Electric Co. (NYSE:EMR) at the end of Q3 2022, compared to 47 funds in the prior quarter. D E Shaw is the biggest position holder in the company, with approximately 2 million shares worth $145 million.
Colgate-Palmolive Company (NYSE:CL) is an American multinational manufacturer of consumer products, operating through two segments – Oral, Personal and Home Care, and Pet Nutrition. The company markets and sells its products under the Colgate, Darlie, Palmolive, Protex, Sanex, Softsoap, Speed Stick, EltaMD, Filorga, PCA SKIN, Ajax, Axion, Fabuloso, and Murphy brands, among others. Colgate-Palmolive Company (NYSE:CL) has paid uninterrupted dividends since 1895 and has increased payments to common shareholders annually for 60 years. It is one of the premier widow and orphan stocks to invest in.
On December 6, Deutsche Bank analyst Steve Powers raised the firm's price target on Colgate-Palmolive Company (NYSE:CL) to $87 from $85 and maintained a Buy rating on the shares.
According to Insider Monkey’s data, Colgate-Palmolive Company (NYSE:CL) was part of 57 hedge fund portfolios at the end of September 2022, compared to 55 in the prior quarter. The collective stakes in Q3 2022 increased to $4.13 billion from $2.93 billion in Q2. Dan Loeb’s Third Point is the leading position holder in the company, with 11.55 million shares worth $811.3 million.
Here is what Third Point specifically said about Colgate-Palmolive Company (NYSE:CL) in its Q3 2022 investor letter:
“Third Point recently acquired a significant position in Colgate-Palmolive Company (NYSE:CL). The investment fits several important criteria in the current investment environment. First, the business is defensive and has significant pricing power in inflationary conditions. Second, there is meaningful hidden value in the company’s Hill’s Pet Nutrition business, which we believe would command a premium multiple if separated from Colgate’s consumer assets. Third, there is a favorable industry backdrop in consumer health, with new entrants via spin-offs and potential for consolidation. Finally, the current valuation is attractive both because earnings growth is poised to inflect higher, and because shareholders are paying very little for the optionality around Hill’s or Colgate’s ability to participate in further consolidation in the consumer health sector.
Abbott Laboratories (NYSE:ABT) is an Illinois-based company that discovers, develops, and manufactures healthcare products worldwide. It operates in four segments – Established Pharmaceutical Products, Diagnostic Products, Nutritional Products, and Medical Devices. On December 9, Abbott Laboratories (NYSE:ABT) declared a $0.51 per share quarterly dividend, an 8.5% increase from its prior dividend of $0.47. The dividend is payable on February 15, 2023 to shareholders of record on January 13. 2022 marks the company's 51st consecutive year of dividend growth.
On December 12, Citi analyst Joanne Wuensch raised the price target on Abbott Laboratories (NYSE:ABT) to $125 from $114 and kept a Buy rating on the shares. Looking into 2023, "many headwinds remain" for the North America medical supplies and technology group, but these should ease in the second half of next year, alleviating operating margin pressures, the analyst wrote in a research note
According to Insider Monkey’s third quarter database, 62 hedge funds were long Abbott Laboratories (NYSE:ABT), compared to 61 funds in the prior quarter. Ken Fisher’s Fisher Asset Management is the largest stakeholder of the company, with 9.12 million shares worth $883.2 million.
Like Walmart Inc. (NYSE:WMT), The Procter & Gamble Company (NYSE:PG), and Exxon Mobil Corporation (NYSE:XOM), Abbott Laboratories (NYSE:ABT) is a premier widow and orphan stock to buy.
Here is what Stewart Asset Management has to say about Abbott Laboratories (NYSE:ABT) in its Q3 2022 investor letter:
“We also need to point out one global consequence of the rapid rise in interest rates: an irrepressibly strong dollar. This hurts the reported earnings of U.S. companies who sell their goods and services overseas. Foreign currency earnings translate into fewer dollars and thus lower earnings. Most of the companies in your portfolios gain a notable amount of earnings from their international operations. While the strength or weakness of a currency doesn’t change the quality of a business or its longer-term earnings power, it can change the reported earnings of a company over short periods of time. It is difficult to forecast this effect accurately because many of our companies manufacture where they sell, which to some extent dulls the sharp negative effect of a surging dollar. Abbott (NYSE:ABT), among others, is a good example.”
