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Investing in Dividend Stocks: Where Shark Tank’s Kevin O’Leary Puts His Money

The recent failures of Silicon Valley Bank and Signature Bank have caused concern among depositors and investors. While regulators have taken steps to assure depositors that their funds are safe, Shark Tank star Kevin O’Leary remains unconvinced.

In an interview with CNN, O’Leary stated that U.S. President Joe Biden has effectively nationalized the American banking system. That move makes it no longer private or risky, as the government and, ultimately the taxpayer now backstop it. 

O’Leary believes this should change how investors view the sector and that banks becoming more regulated as they become more concentrated would make them far less profitable. 

That does not bode well for shareholders, and O’Leary recommends investing in dividend stocks.

According to O’Leary, over the last 40 years, 71% of market returns have come from dividends, not capital appreciation. His flagship ETF, ALPS O’Shares U.S. Quality Dividend ETF (OUSA), holds the top two holdings in Microsoft and Home Depot.

Microsoft is an exception to tech stocks not known for their dividends, as it announced a 10% increase to its quarterly dividend in September 2022, growing its quarterly payout by 62% over the past five years. 

With a weighting of 5.08% in O’Leary’s OUSA, Microsoft provides an annual dividend yield of just over 1%. Despite the past year’s sell-off, Microsoft’s business is on the right track, with a revenue increase of 2% from a year ago to $52.7 billion in the December quarter.

Home Depot is the second-largest holding in OUSA, accounting for 4.81% 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. 

Home Depot grew its sales by nearly 20% in fiscal 2020 to $132.1 billion. In fiscal 2022, sales increased 4.1% year over year while earnings per share improved by 7.5%. 

The company raised its quarterly dividend by 10% to $2.09 per share last month, yielding 2.9% at the current share price.

While O’Leary is skeptical about the banking sector’s future, he believes investing in dividend stocks is smart. 

Microsoft and Home Depot are solid options with consistent dividend payouts, making them good choices for investors seeking stability and long-term growth.