We recently published a list of The 10 best dividend-paying stocks to buy according to quant hedge fund AQRIn this article, we’ll look at how Chubb Limited (NYSE:CB) compares to the other dividend-paying stocks to buy, according to quant hedge fund AQR.
Only a handful of hedge funds pursue unique investment strategies, and Cliff Asness’ Applied Quantitative Research, or AQR Capital, stands out among them. Known for his quantitative value strategies, Asness co-founded AQR in 1998 after working at Goldman Sachs. He and his partners developed the firm’s investment approach while in the University of Chicago’s Ph.D. program, emphasizing value and momentum strategies. These different approaches have delivered strong results for the fund over the years. In fact, AQR’s longest-running multi-strategy fund returned 18.5% after fees last year and had its best year in 2022, gaining 43.5%. In January 2023, Asness predicted that buying undervalued companies in certain sectors and shorting overvalued companies would be particularly beneficial this year.
With the growing focus on generative AI and machine learning, Asness mentioned that he has a natural tendency to swim against the grain. However, he admits that he has to overcome this instinct as he sees significant opportunities in machine learning. During a recent Bloomberg Invest conference, Asness emphasized that AQR is increasingly relying on automated decision-making and expressed the belief that the machine could give a small edge to human judgment. The company’s improved performance in recent years can be attributed in part to market cycles, but it has also made some changes.
Although Asness now focuses on artificial intelligence, diversification has always been a fundamental aspect of his investment strategy. He believes that concentrating investments in a single asset does not adequately account for the inherent risks of financial markets. According to Asness, the reason for favoring a diversified portfolio is that it can provide a higher return for the risk taken, rather than simply offering a higher expected return.
When it comes to diversification, different investment strategies can have different advantages. Dividend investments are particularly popular among investors. In his Magazine for financial analystsfor which he twice received the Graham and Dodd Award for best paper of the year, Asness emphasized the value of dividends. He explained that companies that pay higher dividends generally experience stronger earnings growth over the following decade than those that pay lower dividends. Asness argued that high dividend payouts often indicate a company’s confidence in its future prospects, as companies are reluctant to cut dividends and would typically not pay them if they expected poor performance. In addition, companies that pay high dividends must be more selective in their investment projects, potentially leading to wiser investment decisions. On the other hand, companies that pay minimal dividends may either be struggling (as demonstrated by the inflated earnings in 1999) or in the process of “empire building,” where managers with plenty of cash may imprudently invest in less profitable ventures.
Asness’s penchant for dividend stocks is also evident in his Q2 2024 portfolio, which includes a significant number of dividend-paying stocks. With that in mind, we’ll look at some of the best dividend-paying stocks according to AQR Capital.
Why do we care about the stocks hedge funds invest in? The reason is simple: Our research has shown that we can outperform the market by mimicking the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks each quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points. (Further details can be found here).
A close-up of an insurance agent’s hand pointing to a marine insurance policy, highlighting the company’s expertise in marine insurance.
Chubb Limited (NYSE:CB)
AQR Capital share value: USD 296,412,873
Dividend yield as of August 22: 1.34%
Chubb Limited (NYSE:CB) is an American-Swiss insurance company based in Zurich, Switzerland. The company offers a wide range of related products and services to its customers. In the second quarter of 2024, AQR Capital increased its position in the company by 31%. The hedge fund owned over one million CB shares worth over $296 million at the end of the quarter. The company represented 0.45% of the company’s 13F portfolio.
Similar to dividend stocks, insurance companies don’t typically offer quick, big returns. However, they are reliable companies that grow steadily over time due to their role in risk management. Chubb Limited’s (NYSE:CB) approach focuses on developing personal customer relationships through a network of independent agents, offering insurance options that are often not as readily available from other insurers. The stock has gained over 19% since the start of 2024, and its 12-month return has been over 36%.
Chubb Limited (NYSE:CB) is a strong dividend payer with stable cash generation. In the second quarter of 2024, the company reported operating cash flow of $4.08 billion and its free cash flow was $3.57 billion. This cash was enough to pay shareholders $369 million worth of dividends during the quarter. The company’s total revenue was $11.78 billion, representing a growth of 10.29% over the same period last year.
Chubb Limited (NYSE:CB), one of the highest dividend-paying stocks, offers a quarterly dividend of $0.91 per share. In May of this year, the company posted its 31st consecutive year of dividend growth. As of August 22, the stock had a dividend yield of 1.34%.
At the end of the second quarter of 2024, 46 hedge funds tracked by Insider Monkey held shares in Chubb Limited (NYSE:CB), compared to 53 in the previous quarter. The total value of these shares is more than $8 billion. With over 27 million shares, Warren Buffett’s Berkshire Hathaway was the company’s largest shareholder in the second quarter.
Overall, CB ranks 10th on our list of the best dividend-paying stocks to buy according to quant hedge fund AQR. While we recognize CB’s potential as an investment, we believe some highly undervalued dividend stocks promise higher returns and do so in a shorter time frame. If you’re looking for a highly undervalued dividend stock that has more promise than CB but trades at less than 7 times earnings and yields nearly 10%, read our report on the dirt cheap dividend stock.
READ MORE: $30 trillion opportunity: The 15 best humanoid robot stocks to buy, according to Morgan Stanley And According to Jim Cramer, NVIDIA has “become a wasteland”.
Disclosure: None. This article was originally published on Insider Monkey.
