Blackrock's Top 3 Dividend Stocks: Fund Manager

With low rates, volatility and a recent rush for special dividend payouts, dividend-yielding stocks were the big winners in 2012, with some investors seeing these stocks as a safe haven. Bob Shearer, the lead portfolio manager for Blackrock's equity dividend fund told CNBC which stocks are his favorites when it comes to dividends.

In the daily management of over $40 billion in assets, Shearer told CNBC that he focuses mainly on dividend growth, rather than simply sticking to stocks for the level of yield. Yield seeking is a "crowded trade" he said, but he sees upside potential in dividend growth stocks should the economic recovery continue.

When looking for companies most likely to increase their dividend in the future, Shearer's fund focuses on companies "with sound balance sheets that have low debt to capital ratios, that have free cash flow over and above their capital needs and their financing needs."

Shearer said that many companies increasingly align their strategies with dividend growth, as options compensation is being phased out in favor of restricted stock.

Here are Shearer's Top 3 dividend picks:

BHP Billiton: Shearer says he likes the Australian miner for its low cost operations, and expects it to profit from a recovery in demand from China from 2012.

VF Corp: Shearer also likes the owner of brands such as The North Face and Timberland, saying that increasing wealth in emerging markets will boost demand for their products. He also notes a good potential for dividend growth for the stock.

Caterpillar: Although the company stumbled recently after it uncovered fraudulent misconduct at a Chinese subsidiary, Shearer says the growing need for mining equipment around the world and the opening of new mines will be beneficial for the company.