‘I would never put my money into a bank stock ever again’: Kevin O’Leary says the US government has ‘nationalized’ the American banking system. Here’s what he likes instead

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%.