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One of the fastest ways to discover quality investment opportunities is by analyzing the latest moves of super investors—professionals managing over $100 million in assets who are legally required to disclose their trades quarterly. Recently, I compiled a list of the top 10 dividend stocks most frequently purchased by these investors in the last quarter. In this article, we’ll dive into 5 stock from that list and explore some key takeaways from the broader dataset.

Before reviewing the top 10 stocks, let’s examine some interesting trends from the data. For instance, Financial Services was the most popular sector among super investors last quarter, with 13 stocks on the list. Healthcare followed with 9, and Technology came in third with 6. Clearly, these sectors have been focal points for major investors.

From the top 10 list, only one stocks offered a dividend yield of 4% or higher, while two stocks yielded 2% or more. Meanwhile, 3 had a yield below 1% or higher. The average payout ratio sat at 35%, and the average total dividend growth from 2018 to 2023 was an impressive 58%.

These insights suggest that super investors favor high-quality dividend growth stocks. Most of the companies they invest in allocate a modest portion of their free cash flow to dividends while maintaining strong dividend growth rates. Furthermore, the average return on invested capital (ROIC) for these stocks was 18.2%, far exceeding the 10% baseline typically considered healthy, indicating that these businesses invest profitably in their growth initiatives.

Number 10: Nike

Nike has been a hot topic lately, experiencing significant stock volatility. Over the past year, the stock has dropped nearly 30%, mainly due to conservative forward guidance and a management shake-up, including the departure of its CEO. Despite this, Nike remains a compelling investment for some super investors.

Historically, Nike has been valued as a premium company with a five-year average price-to-earnings (P/E) ratio of 31.6. Currently, it trades at a P/E of 22.1—30% below its historical average. This lower valuation presents a potential opportunity, especially considering Nike’s track record as a strong dividend growth stock.

One prominent super investor, Bill Ackman, increased his position in Nike by 435% last quarter, making it a significant 11% of his portfolio. Nike’s current dividend yield of 2.11% is the highest in over a decade, and the company has maintained a robust 10-year dividend CAGR of 10.7%. With a free cash flow payout ratio of just 32.8%, Nike retains ample financial flexibility to fund growth initiatives or buy back shares.

Number 9: Google (Alphabet)

Google has also been making headlines, with its stock up 40% over the past year. However, it faced a notable dip earlier due to concerns about the Department of Justice’s antitrust case, which included a proposal to divest Google Chrome. Despite these challenges, investor sentiment has shifted positively, driven in part by Google’s advancements in quantum computing, such as its "Willow" chip capable of solving complex calculations in minutes—an unprecedented technological achievement.

Google’s recently introduced dividend, with a payout ratio of just 5%, signals substantial growth potential. The company boasts impressive revenue, earnings, and free cash flow growth. For example, its revenue per share has risen from $4.49 in 2013 to $24.35 in 2023. With a debt-to-assets ratio of only 0.06 and over $430 billion in assets, Google’s financial position is exceptionally strong.

Looking ahead, analysts project double-digit earnings growth for Google through 2030, further supporting its position as a promising investment with room for continued dividend growth.

Number 8: CVS Health Corporation

Next on our list is an intriguing choice: CVS Health Corporation. This stock stands out as one of the higher-yielding options, with a starting dividend yield of nearly 6%. However, the past year has been challenging for CVS, with its share price dropping over 43%. Despite this steep decline, some super investors see potential.

Looking at CVS's dividend history, the company grew its dividend at a solid rate from 2013 to 2017 before a prolonged period of stagnation. Recently, it resumed increasing its dividend, and its free cash flow easily covers those payouts. In 2023, the free cash flow payout ratio was around 30%, demonstrating a healthy cushion.

Examining earnings, CVS reported $6.49 per share in 2023, but earnings are expected to drop significantly to $5.32 per share in the coming year. While analysts project a return to growth afterward, it will take some time for earnings to recover to 2023 levels. This projected earnings dip, combined with a notable miss on the most recent earnings report, where expectations were $1.44 per share but came in at just $1.19, has likely contributed to the stock's decline.

Number 7: Google (Alphabet) — Class A and Class C Shares

Interestingly, Google appears on the list twice, reflecting its two share classes: GOOG (Class C) and GOOGL (Class A). The key difference between these classes lies in voting rights—GOOGL shareholders have one vote per share, allowing them to participate in corporate decisions, while GOOG shareholders have no voting rights. Financially, there’s no significant difference between the two, though GOOGL may occasionally trade at a premium due to its voting rights.

Number 6: Apple

Another familiar name on our list is Apple, a tech giant and Warren Buffett's largest holding. Apple has performed exceptionally well over the past year, gaining about 30% and reaching its all-time high.

One of Apple’s standout features is its extraordinary profitability. Over the past four years, the company has consistently achieved a return on invested capital (ROIC) exceeding 50%, demonstrating that its reinvestments yield incredible returns. Even before this period, Apple frequently achieved ROIC above 20%, underscoring its efficiency and profitability.

However, there’s a concern with Apple’s earnings growth. Over the past three years, earnings per share (EPS) have remained relatively flat: $5.67 in 2021, $6.15 in 2022, and $6.11 in 2023. Despite this stagnation, Apple’s share price has soared from around $174 in late 2021 to approximately $250 today.

This price increase has led to elevated valuation metrics. The current trailing 12-month price-to-earnings (P/E) ratio is 37.7, significantly above Apple’s five-year average of 29.4. While the company’s profitability and market dominance are undeniable, investors should be mindful of its high valuation relative to historical levels.

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