5 Dividend Monsters Hedge Funds Are Bullish About

In the current economic environment, many hedge funds are looking for returns amongst high dividend yielding stocks. While some funds might be looking for low-to-medium dividends of small and mid-cap companies, we have identified some monster dividends being paid by large stable companies that have attracted the attention of managers such as Jim Simons, Ken Griffin and Howard Marks.

RENAISSANCE TECHNOLOGIES

The five large-cap companies that we have seen hedge funds take an interest in not only trade with a monster dividend yield, but have low multiples with respect to the market and also boast robust free cash flow. Although a large weighting of these five stocks are toward the tobacco industry, we believe there is great value in this segment of the economy.

Lorillard Inc. (NYSE:LO) – dividend yield of 5.2%with its strong discount brands, has managed to continue to perform well. In 2011, the company’s discount brand volume was up 15%, and its premium volume was up 6%. The company also launched a non-menthol brand Newport, the company’s leading brand that is expected to perform well. Although there has been a decline across most of the cigarette industry in volumes, Lorillard increased sales at a CAGR of 7.9% from 2007-2011.

This company has attracted a heavy hitter in Jim Simons of Renaissance Technologies who owns roughly 2 million shares and increased his stake by 20% in the second quarter. Jean-Marie Eveillard over at First Eagle Investment Management also owns a sizable amount of shares at 2.4 million.

Altria Group, Inc. (NYSE:MO)dividend yield of 5.3% – has been a leader in cost cutting in the industry. As well, the company has recognized the increased global social pressures on tobacco and is focused on growing its presence in alternative markets, including smokeless tobacco. The company acquired UST Inc. in 2009, which was a leading brand of smokeless tobacco at the time. The company’s 2Q results showed revenues up 10% from the prior year and EPS up 9.3%.

Duquesne Capital and Wintergreen Advisors – one of the top performing hedge funds of 2Q –have large portions of their 2Q 13F portfolios concentrated in this stock, with Duquesne having 5.6% and Wintergreen having 13.1%. Altria is Duquesne Capital’s top stock holding per their 2Q 13F. Ken Griffin at Citadel Investment Group essentially took a new position in the company, upping his minimal 1Q position by 657,000% to 5.5 million shares.

Reynolds American, Inc. (NYSE:RAI)dividend yield of 5.4% – has a diverse brand mix, with brands such as Camel and American Spirits expected to help keep the company’s performance elevated going forward. The company also has a decent smokeless portfolio with American Snuff. According to IRI/Capstone data, Reynolds owned 27% of the U.S. cigarette retail market in 2011.

Wintergreen Advisors once again shows up, owing more shares of Reynolds than any other hedge fund we track. Wintergreen also has a large concentration of his portfolio invested in Reynolds, 9.0% of their 2Q 13F portfolio. Jim Simons was also upping his stake here, increasing his position by 702%.

Vale SA (NYSE:VALE)dividend yield of 6.0% – is a base metal mining company, competing with the likes of BHP Billton and Rio Tinto. All three together make up about 75% of the seaborne trade in iron ore. The mining for base metals business is highly capital intensive. The company has shown great ability to grow. From 2002-2011, the company increased revenues at a CAGR of 34%, and increased earnings over the same period at a 45% CAGR. Also, over the same period the CAGR of free cash flow was 24%.

Even though Barton Biggs and Traxis Partners made few investments in the quarter prior to Barton’s death, the fund did find a need to get into Vale during the second quarter. As well, Arrowstreet Capital also took a new position in the company. Vale is also one of Jim Cramer’s high dividend stocks and a recent increase by Howard Marks.

Vodafone Group plc (NASDAQ:VOD)dividend yield of 5.2% – is a European mobile communications company. Although the European mobile industry appears to be in decline, the company should be able to mitigate lower demand with lower-priced plans and growth in emerging markets. Vodafone has also begun to sale off non-core assets and has solid prospects with entry into the mobile payments battle.

At the end of 2Q, big name Mason Hawkins of Southeastern management owed 4 million shares, while another big name, Michael Messner of Seminole Capital, increased his stake by 48%. Additionally, Arrowstreet Capital initiated a new position, and Jim Simons increased his position in Vodafone by 58%.

For a complete look at the hedge fund industry’s favorite stock picks, continue reading here.

blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

10 Cities with High Demand for Nurses

6 of the Worst Greeting Card Messages Ever Crafted

6 Ways to Make Money in ArcheAge and Build Your Empire

10 Foods To Eat To Lower Cholesterol Levels

The 10 Most Hated Television Characters of All Time

The 30 Worst Halloween Costume Ideas Ever Brought to Horrible Life

10 Vocational Skills in Demand Today with Jobs Waiting to be Filled

10 Best Places to Visit in Central and South America

The 10 Greatest Empires in History Which Nearly Conquered the World

The 6 Cheapest Boarding Schools In America 2015

5 Clear Reasons LoL is Better than DotA, Continues to Rule MOBAs

The Only 9 Teams with a Chance to Win the Super Bowl

The 15 Most Common Phobias in America that Induce Fits of Panic

Top 6 Least Expensive Tourist Destinations in 2014

Jim Goetz, Peter Fenton, Jim Breyer: Top 6 Venture Investors for 2014

Top 15 Billionaires in 2014

5 Pitfalls To Avoid When Buying a Franchise

Top 20 Medical Schools in the US – 2014 Rankings

4 Business Strategies that Turned Jamie Oliver into the World’s Richest Chef

6 Qualities That Make You A Good Team Player

10 High Paying Seasonal Jobs in America this Holiday Season

The 10 Busiest Shipping Lanes in the World

5 Most Valuable Brands in China

The 10 States with Highest Substance Abuse Rates Crippling Their Populace

The Top 10 Things to Do Before You Die That Will Echo for Eternity

The 10 Best Selling Items on Etsy

Top 10 Things to Do in Tokyo, the Greatest City in the World

10 Mistakes on Social Media that Can Harm You and Will Probably Get You Canned

The 10 Best Cities to Find Jobs in 2014

The 10 Most Controversial Songs Of All Time to Hit (and get Banned from) the Airwaves

The 20 Biggest IPOs in US History

The 10 Best Places to Visit in Mexico that Are Beautiful and Safe

7 Bad Habits that Age You Beyond Your Years

The 40 Best Fortune Cookie Sayings That Will Leave You Bemused, Befuddled, or Beguiled

10 Foods to Eat Before a Workout to Make Every Drop of Sweat Count

The 5 Best Documentaries On Netflix You Must See

The Most Heartwarming and Inspirational Story Of This Halloween Season, It Will Make You Cry and Jump For Joy

10 Best Party Songs of All Time to Bring the House Down With

5 New World Order Conspiracy Theories that Will Strangle the World

The 10 Highest Rated Movies of 2014

The 10 Largest Container Shipping Companies in the World

The 10 Largest Armies in the World: Who Should We Be Afraid Of?

Best Warren Buffett Quotes on Money You Need to Hear

The 10 Highest Suicide Rates by Profession

The 20 Most Underrated Movies of All Time

The 10 Fastest Growing Companies in America

The 10 Biggest Outlet Malls in USA

The 5 Most Popular Rap Songs of All Time

The 10 Countries that Eat the Most Meat

The10 Most Expensive Countries to Fly To

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!