Dividend stocks
O’Leary is a believer in investing in dividend stocks.
“When I started to do some research I found out one interesting fact that changed my investment philosophy forever,” he said in a Forbes interview. “Over the last 40 years, 71% of the market returns came from dividends, not capital appreciation.”
“So rule one for me is I’ll never own stuff that doesn’t pay a dividend. Ever.”
If you share the same view, here’s a look at the top two holdings at O’Leary’s flagship ETF — ALPS O’Shares U.S. Quality Dividend ETF (OUSA).
Microsoft
Tech stocks aren’t known for their dividends, but software gorilla Microsoft (MSFT) is an exception.
The company announced a 10% increase to its quarterly dividend to 68 cents per share in September 2022. Over the past five years, its quarterly payout has grown by 62%.
At the current share price, Microsoft provides an annual dividend yield of just over 1%.
The yield may not seem like much, but Microsoft is the currently largest holding in O’Leary’s OUSA with a weighting of 5.26%.
2022 wasn’t nice to tech stocks, and Microsoft was caught in the sell-off as well. Over the past 12 months, shares have fallen by 9.8%.
But business is on the right track. In the December quarter, revenue increased 2% from a year ago to $52.7 billion. On a constant currency basis, revenue growth was a more impressive 7%.
Given the pullback in its share price, Microsoft could give contrarian investors something to think about.
Home Depot
Home Depot (HD) is the second-largest holding at OUSA, accounting for 4.82% of the fund’s weight.
The home improvement retail giant has around 2,300 stores, with each one averaging approximately 105,000 square feet of indoor retail space, dwarfing many competitors.
While many brick-and-mortar retailers floundered during the pandemic, Home Depot grew its sales nearly 20% in fiscal 2020 to $132.1 billion.
And the company continued its momentum as the economy reopened.
In Home Depot’s fiscal 2022, sales increased 4.1% year over year while earnings per share improved by 7.5%.
Last month, the company raised its quarterly dividend by 10% to $2.09 per share. At the current share price, it yields 2.9%.
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