Cathie Wood has become an investing sensation in recent years. As the founder of the ARK Invest family of exchange-traded funds, incredible returns in 2020 have earned her a reputation for finding high growth companies that are under-followed early in their existence and pulling them towards big long-term gains. . Investors in it ARK Innovation ETF (NYSEMKT: ARKK) and other funds have reaped the rewards.
Given Wood’s focus on high-growth areas of the market, you might be surprised to learn that some of his choices for fund holdings actually offer impressive dividend yields. For most growing businesses, returning capital to shareholders through dividend payments takes a back seat to reinvesting available money into the business to develop it further. Nonetheless, below we’ll take a closer look at some of ARK Invest’s high dividend holdings to see why they appeal to both growth and income investors.
AbbVie (NYSE: ABBV) is perhaps the most well-known dividend stock among Cathie Wood’s ETF holdings. The drug company is called the dividend aristocrat because it has steadily increased its annual payouts to shareholders since its split from Abbott Laboratories (NYSE: ABT) in the early 2010s. Abbott itself has maintained a long history stretching back about half a century.
AbbVie isn’t a huge stake for Wood, but his ETF ARK Genomic Revolution (NYSEMKT: ARKG) has about $ 60 million invested in the pharmaceutical company. This represents approximately 0.66% of the total assets of the fund.
With a market capitalization of $ 200 billion, AbbVie is large enough to make strategic acquisitions of significant companies in key areas that Wood sees as having high growth prospects. These include long read genomic sequencing, multi-cancer screening, and cell and gene therapies. AbbVie has already done considerable research and development on experimental cancer drugs using genomic analysis, and promising results suggest the company will make even more effort to move in this direction. At the same time, investors benefit from a dividend yield of over 4.5%.
Novartis (NYSE: NVS) is also attractive to growth and income investors. The stock is currently paying a 3.5% dividend, but like AbbVie, the drug company is studying promising therapies it hopes to use to deliver generations of future treatments to keep sales up for the long haul.
Novartis is also a more compelling choice for Wood. You’ll find its shares in both the Genomics ETF and the Innovation Flagship ETF, with total holdings combining with an investment of almost $ 380 million in the Swiss drug maker. It is one of the top 10 holdings of the Genomics ETF, accounting for over 3% of total assets.
Novartis has done a tremendous amount of work in the field of drug discovery, striving to use technology to create a digital data science platform. This makes the company a shovel-and-shovel game for Wood, as innovations developed by Novartis could end up proving useful to other genomics-focused companies in which its ETFs invest.
Recently, Takeda Pharmaceuticals (NYSE: TAK) plays an important role in positions related to Wood’s genomics. It has invested more than $ 250 million in the Japanese company, which gives it a position of almost 3% in the ETF Genomics. It also has a dividend yield of almost 5%, which puts it in the next rung, even among investor-friendly drug companies.
Takeda is not a household name to many US investors, but the company has focused its efforts lately on strategic acquisitions to strengthen its R&D and drug pipeline capabilities. The Asian pharmaceutical giant has worked with major manufacturers of COVID-19 vaccines such as Moderna (NASDAQ: mRNA) and Novavax (NASDAQ: NVAX) on the manufacturing and marketing front, and it has also built a stable of candidate treatments for cancer, liver disease and other diseases.
Of particular significance to Wood is Takeda’s leukemia drug Iclusig, as it fits well with his general themes in space. Takeda stock has lost significant value in recent years, making Wood look a bit out of character as a buyer on attractive valuations as well as growth prospects.
Get paid with growth stocks
Most of the stocks you’ll find in Cathie Wood’s ARK Invest funds reinvest every penny of cash they get back into their respective companies. However, even dividend investors can find some interesting picks among Wood’s favorites. Those looking for an income would do well to take a closer look at Takeda, Novartis, and AbbVie.
This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are motley! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.