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Updated on September 16th, 2022 by Bob Ciura
Kevin O’Leary is Chairman of O’Shares Investments, but you probably know him as “Mr. Wonderful”.
He can be seen on CNBC as well as the television show Shark Tank. Investors who have seen him on TV have likely heard him discuss his investment philosophy.
Mr. Wonderful looks for stocks that exhibit three main characteristics:
- First, they must be quality companies with strong financial performance and solid balance sheets.
- Second, he believes a portfolio should be diversified across different market sectors.
- Third, and perhaps most important, he demands income—he insists the stocks he invests in pay dividends to shareholders.
Note: 13F filing performance is different than fund performance. See how we calculate 13F filing performance here.
You can download the complete list of all of O’Shares Investment Advisor 13F filing stock holdings, along with quarterly performance, by clicking the link below:
OUSA owns stocks that display a mix of all three qualities. They are market leaders with strong profits, diversified business models, and they pay dividends to shareholders. The list of OUSA portfolio holdings is an interesting source of quality dividend growth stocks.
This article analyzes the fund’s largest holdings in detail.
Table of Contents
The top 10 holdings from the O’Shares FTSE U.S. Quality Dividend ETF are listed in order of their weighting in the fund, from lowest to highest.
No. 10: UnitedHealth Group (UNH)
Dividend Yield: 1.2%
Percentage of OUSA Portfolio: 1.8%
UnitedHealth Group operates as a diversified health care company in the United States. As it is common in this industry, despite UnitedHealth’s massive revenues which exceed $250 billion per year, its net margins remain razor-thin.
UnitedHealth’s quality operations and recurring cash flows have not led to a single unprofitable quarter in over 23 years.
UnitedHealth reported second quarter earnings on July 15th, 2022, and results were outstanding, as was updated guidance. Adjusted earnings-per-share came to $5.57, which was 37 cents ahead of expectations, and was almost 19% better than the year-ago period. Revenue was up almost 13% to $80.3 billion, which was more than $600 million ahead of estimates.
Both operating segments grew revenue by double-digits once more, as has been the case for some time. The company’s medical care ratio was 81.5% in Q2, down from 82.8% in the year-ago period. Operating costs were essentially flat at 14.6% of revenue.
The company boosted guidance to adjusted earnings-per-share of $21.40 to $21.90, so our estimate is the midpoint at $21.65.
Click here to download our most recent Sure Analysis report on UNH (preview of page 1 of 3 shown below):
No. 9: McDonald’s Corporation (MCD)
Dividend Yield: 2.2%
Percentage of OUSA Portfolio: 2.2%
McDonald’s is the world’s leading global foodservice retailer with nearly 40,000 locations in over 100 countries. Approximately 93% of the stores are independently owned and operated. The company has raised its dividend every year since paying its first dividend in 1976, qualifying it as a Dividend Aristocrat.
On July 26th, 2022, McDonald’s reported Q2 2022 results. For the quarter, total revenue came in at $5,718.4M, a (-3%) decrease from $5887.9M compared to Q1 2021 on 4% rise in systemwide sales offset by currency headwinds. Revenue fell (-15%) at company-owned stores, while revenue increased 7% at franchised restaurants. Earnings declined (-46%) to $1.60 per share compared to $2.95 per share in comparable periods because of higher input costs, despite price hikes.
On a geographic basis, sales increased +3.7% in the US, +13.0% in the international markets, and +16.0% in the international developmental licensed markets. Growth was strong in France, Germany, and Japan offset by weakness in China because of COVID-19 restrictions.
McDonald’s is a very recession-resistant company. Its competitive advantage lies in its global scale, immense network of restaurants, well-known brand, and real estate assets. Indeed, the company’s superior track record against numerous competitors has illustrated why these aspects are important to the company’s success.
Click here to download our most recent Sure Analysis report on MCD (preview of page 1 of 3 shown below):
No. 8: Lockheed Martin Corporation (LMT)
Dividend Yield: 2.7%
Percentage of OUSA Portfolio: 2.4%
Lockheed Martin Corporation is the world’s largest defense company. About 60% of the company’s revenues comes from the US Department of Defense, with other US government agencies (10%) and international clients (30%) making up the remainder.
The company consists of four business segments: Aeronautics (~40% sales) – which produces military aircraft like the F-35, F-22, F-16 and C-130; Rotary and Mission Systems (~26% sales) – which houses combat ships, naval electronics, and helicopters; Missiles and Fire Control (~16% sales) – which creates missile defense systems; and Space Systems (~17% sales) – which produces satellites.
Lockheed Martin reported weaker results for Q2 2022 on July 19th, 2022. Company-wide net sales decreased to $15,446M from $17,029M and diluted GAAP earnings per share fell to $1.16 from $6.52 on a year-over-year basis. The quarter was impacted by lower sales in all segments and pension charges, investment losses, deferred compensation, and debt refinancing costs.
Lockheed Martin’s backlog is approximately $134.64B with an increase in Missiles and Fire Controls, Space and Rotary, and Mission Systems and a decline in the Aeronautics.
Lockheed Martin guided lower for ~$65,250B in sales and ~$21.55 diluted earnings per share in 2022.
Click here to download our most recent Sure Analysis report on LMT (preview of page 1 of 3 shown below):
No. 7: Apple (AAPL)
Dividend Yield: 0.6%
Percentage of OUSA Portfolio: 2.5%
Apple revolutionized personal technology with the introduction of the Macintosh in 1984. Today the technology company designs, manufactures and sells products such as iPhones, iPads, Mac, Apple Watch and Apple TV. Apple also has a services business that sells music, apps, and subscriptions.
Apple is the #1 holding of Berkshire Hathaway (BRK.B), making the technology giant one of the top Warren Buffett stocks.
On July 28th, 2022, Apple reported Q3 fiscal year 2022 results for the period ending June 25th, 2022. (Apple’s fiscal year ends the last Saturday in September).
For the quarter, Apple generated revenue of $82.959 billion, a 1.9% increase compared to Q3 2021. Product sales were down -0.9%, as a 2.8% increase in iPhones (49% of total sales), was more than offset by declines in Mac, iPad, and Wearables, Home and Accessories. Service sales increased 12.1% to $19.6 billion and made up 23.6% of all sales in the quarter. Net income equaled $19.4 billion or $1.20 per share compared to $21.7 billion or $1.30 per share in Q3 2021.
Click here to download our most recent Sure Analysis report on AAPL (preview of page 1 of 3 shown below):
No. 6: Pfizer Inc. (PFE)
Dividend Yield: 3.4%
Percentage of OUSA Portfolio: 2.7%
Pfizer Inc. is a global pharmaceutical company that focuses on prescription drugs and vaccines.
Pfizer’s new CEO completed a series of transactions significantly altering the company structure and strategy. Pfizer formed the GSK Consumer Healthcare Joint Venture in 2019 with GlaxoSmithKline plc (GSK), which includes Pfizer’s over-the-counter business. Pfizer owns 32% of the JV. Pfizer spun off its Upjohn segment and merged it with Mylan forming Viatris for its off patent, branded and generic medicines in 2020.
Pfizer’s top products are Eliquis, Ibrance, Prevnar, Enebrel (international), Sutent, Xtandi, Vyndaqel/ Vyndamax, Inlyta, Xeljanz, Plaxlovid, and Comiranty. Pfizer had revenue of $81.3B in 2021.
Pfizer reported excellent Q2 2022 results on July 28th, 2022.
Source: Investor Presentation
Company-wide revenue rose 47% and adjusted diluted earnings per share rose 92% on a year-over-year basis. Pfizer maintained revenue guidance at $98B – $102B and raised adjusted diluted EPS guidance to $6.30 – $6.45 for 2022.
Pfizer is a low beta stock.
Click here to download our most recent Sure Analysis report on Pfizer (preview of page 1 of 3 shown below):
No. 5: Home Depot (HD)
Dividend Yield: 2.5%
Percentage of OUSA Portfolio: 2.8%
Home Depot was founded in 1978, and since that time has grown into the leading home improvement retailer with almost 2,300 stores in the U.S., Canada, and Mexico. In all, Home Depot generates annual revenue of approximately $130 billion.
Home Depot reported second quarter 2022 results on August 16th. The company reported second quarter sales of $43.8 billion, a 6.5% year-over-year increase. Comparable sales in the quarter rose 5.8%, and 5.4% in the U.S. specifically. Net earnings equated to $5.2 billion, or $5.05 per share, compared to $4.8 billion, or $4.53 per share in Q2 2021. The company spent nearly $4.0 billion in common stock repurchases during H1 2022, less than the $6.9 billion spent in H1 2021. Average ticket rose 9.1% compared to last year, from $82.48 to $90.02. Additionally, there was a 5.7% increase in sales per retail square foot, from $663.05 to $700.62.
As of the end of the second quarter, Home Depot has cash and cash equivalents equal to $1.26 billion. Leadership has upgraded guidance. For fiscal 2022, management reaffirmed its previous guidance and expects sales growth and comparable sales growth of roughly 3.0%, with an operating margin of roughly 15.4%. The company will also pay $1.6 billion in net interest expense for 2022. Finally, diluted EPS growth is expected to be mid-single digits.
Click here to download our most recent Sure Analysis report on HD (preview of page 1 of 3 shown below):
No. 4: Verizon Communications (VZ)
Dividend Yield: 7.6%
Percentage of OUSA Portfolio: 3.0%
Verizon is a communication services giant, and is one of the largest wireless carriers in the country. Wireless contributes three-quarters of all revenues, and broadband and cable services account for about a quarter of sales. The company’s network covers ~300 million people and 98% of the U.S.
Verizon has now launched 5G Ultra-Wideband in several cities as it continues its rollout of 5G service. Customers in parts of Atlanta, Dallas, Detroit, Indianapolis, Omaha, and Washington, D.C. could access the company’s 5G network. Verizon is the first of the major carriers to turn on the 5G service.
On July 22, 2022, the company reported the fiscal year’s second-quarter and first six months results. Revenue was flat year over year (YoY) at $33.8 billion for the quarter compared to the second quarter in 2021. Earnings came in at $1.24 per share, a decrease of 11.4% compared to the $1.40 per share the company made in 2Q201.
Source: Investor Presentation
One of Verizon’s key competitive advantages is that it is often considered the excellent wi-fi provider within the U.S. this is evidenced by the agency’s Wi-Fi internet additions and very low churn rate. This reliable service allows Verizon to preserve its consumer base in addition to delivering the organization the possibility to transport clients to higher-priced plans.
Verizon is also rolling out 5G service, which will give it an advantage over other carriers. Another advantage for Verizon is the stock’s ability to withstand a downturn in the market.
Click here to download our most recent Sure Analysis report on VZ (preview of page 1 of 3 shown below):
No. 3: Procter & Gamble (PG)
Dividend Yield: 2.6%
Percentage of Portfolio: 3.7%
Procter & Gamble is a stalwart among dividend stocks. It has increased its dividend for the past 65 years in a row. This makes the company one of only 45 Dividend Kings, a list of stocks with 50+ years of rising dividends.
It has done this by becoming a global consumer staples giant. It sells its products in more than 180 countries around the world with annual sales of more than $70 billion. Some of its core brands include Gillette, Tide, Charmin, Crest, Pampers, Febreze, Head & Shoulders, Bounty, Oral-B, and many more.
These products are in high demand regardless of the state of the economy, making the company rather recession-proof.
On April 12th, 2022, Procter & Gamble raised its dividend by 5.0%, from $0.8698 per quarter to $0.9133.
Source: Investor Presentation
In late July, Procter & Gamble reported (7/29/22) financial results for the fourth quarter of fiscal 2022 (its fiscal year ends June 30th). The company grew its sales and its organic sales 3% and 7%, respectively, over the prior year’s quarter.
Organic sales growth resulted from 8% price hikes, which were partly offset by a -1% decrease in volumes. Despite the strong headwind from high cost inflation, which reduced gross margin by 370 basis points, adjusted earnings-per-share grew 7%. The firm sales amid strong price hikes are a testament to the strength of the brands of Procter & Gamble. The company expects 3%-5% growth of organic sales in fiscal 2023 and 0%-4% growth of earnings-per-share.
Click here to download our most recent Sure Analysis report on PG (preview of page 1 of 3 shown below):
No. 2: Johnson & Johnson (JNJ)
Dividend Yield: 2.7%
Percentage of OUSA Portfolio: 4.0%
Johnson & Johnson is a global healthcare giant. The company currently operates three segments: Consumer, Pharmaceutical, and Medical Devices & Diagnostics. The corporation includes some 250 subsidiary companies with operations in 60 countries and products sold in over 175 countries. Johnson & Johnson had sales of $93.8 billion worldwide during the calendar year 2021.
Johnson & Johnson’s brands include numerous household names of medications and first aid supplies. Its well-known consumer products include the Band-Aid Brand line of bandages, Tylenol medications, Johnson’s Baby products, Neutrogena skin, beauty products, Clean & Clear facial wash, and Acuvue contact lenses. Johnson & Johnson’s pharmaceutical arm is Janssen Pharmaceuticals.
The company’s most recent earnings report was delivered on July 19th 2022, for the second quarter. Results were better than expected on both revenue and profits, but the company lowered guidance for the full year, which it attributed to a much stronger US dollar.
Source: Investor presentation, page 14
For the second quarter, adjusted earnings-per-share came to $2.59, which was four cents ahead of expectations. Revenue was $24 billion, up 3% year-over-year and $180 million ahead of estimates.
Johnson & Johnson has averaged 7% growth in earnings-per-share for the past decade, which is impressive given its massive size. The company has been able to move the needle steadily through a combination of higher sales, better profit margins, and a slight reduction in the float through buybacks.
Johnson & Johnson’s key competitive advantage is the size and scale of its business. The company is a worldwide leader in several healthcare categories. Johnson & Johnson’s diversification allows it to continue to grow even if one of the segments is underperforming.
The company has increased its dividend for 60 consecutive years, making it a Dividend King.
Click here to download our most recent Sure Analysis report on JNJ (preview of page 1 of 3 shown below):
No. 1: Microsoft Corporation (MSFT)
Dividend Yield: 1.0%
Percentage of OUSA Portfolio: 4.5%
Microsoft Corporation, founded in 1975 and headquartered in Redmond, WA, develops, manufactures and sells both software and hardware to businesses and consumers.
Its offerings include operating systems, business software, software development tools, video games and gaming hardware, and cloud services.
In late July, Microsoft reported (7/26/22) financial results for the fourth quarter of fiscal 2022 (Microsoft’s fiscal year ends June 30th). The company grew its revenue 12% over last year’s quarter. The growth was across the board with Productivity and Business Processes, Intelligent Cloud and Personal Computing growing 13%, 20%, and 2% respectively. Azure, Microsoft’s high-growth cloud platform, grew 20% year-over-year. Adjusted earnings-per-share grew 3%, from $2.17 to $2.23.
Microsoft stock is also held by other well-known investors. For example, Microsoft stock is a major holding in the Bill Gates portfolio.
Click here to download our most recent Sure Analysis report on Microsoft (preview of page 1 of 3 shown below):
Final Thoughts
Kevin O’Leary has become a household name due to his appearances on the TV show Shark Tank. But he is also a well-known asset manager, and his investment philosophy largely aligns with Sure Dividend’s. Specifically, Mr. Wonderful typically invests in stocks with large and profitable businesses, with strong balance sheets and consistent dividend growth every year.
Not all of these stocks are currently rated as buys in the Sure Analysis Research Database, which ranks stocks based on expected total return due to a combination of earnings per share growth, dividends, and changes in the price-to-earnings multiple.
However, several of these 10 stocks are valuable holdings for a long-term dividend growth portfolio.
Additional Resources
See the articles below for analysis on other major investment firms/asset managers/gurus:
If you are interested in finding more high-quality dividend growth stocks suitable for long-term investment, the following Sure Dividend databases will be useful:
The major domestic stock market indices are another solid resource for finding investment ideas. Sure Dividend compiles the following stock market databases and updates them monthly:
Thanks for reading this article. Please send any feedback, corrections, or questions to support@suredividend.com.
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