5 Dividend Picks from Value Investing Legend

Page 2 of 2

Manning and Napier Inc (NYSE:MN) is a fast-growing and well-respected boutique asset manager. MN has gained 4.0% over the past year. Its dividend yields 4.8% on a payout ratio of 54% of forward earnings. The company started paying dividend in the second quarter of 2012. Given that almost all company’s assets under management are equity and asset allocation investment instruments, they may see stronger inflows this year as the threat of inflation drives money out of fixed-income assets and into equities.  MN’s annualized EPS CAGR is forecasted at 8.0%. This debt free company is trading at 11.6x trailing and 11.1x forward earnings. On a forward P/E basis, the stock is trading at a 23% discount to its industry. Only a few fund managers have minor stakes in this stock, and one of them is Dmitry Balyasny.

AllianceBernstein Holding LP (NYSE:AB) is one of the largest institutional money managers with $419 billion in assets under management. AB’s stock has risen 32% over the past year. This MLP pays a high yield of 7.8%, compared to an average of 2.2% for its peer group. AB distributes almost all its annual income to unitholders. Its distributions in 2012 totaled $0.95 per unit, down 34% from 2011, but are expected to rebound to $1.49 per unit in 2013. The partnership’s earnings per unit (EPU) are forecasted to jump 17.4% this year, driven by accelerating organic growth, lower costs, and margin expansion. The stock offers a favorable risk/reward tradeoff relative to its peers. By investing in AB, investors get a double benefit from capital appreciation, driven by the bullish momentum in asset management stocks, and high income streams. Notwithstanding its trading at a new 52-week high, AB’s stock still has a forward P/E of 13.2%, representing a near-10% discount to its peer group. It is also trading at a below-industry price-to-book of 1.2. Fund manager John A. Levin (Levin Capital Strategies) holds a small position in AB.

Bank of Hawaii Corporation (NYSE:BOH) is a bank holding company with operations in Hawaii, Guam, and Pacific Islands. BOH is up more than 3% over the past year. Its dividend is yielding 3.9% on a payout ratio of 50%. Its dividends grew, on average, 3.4% per year over the past half-decade. The bank has a high ROE of 16.2%, which is 70% higher than the average rate for its industry. BOH is valued on a price-to-book of 2.0, double its industry’s ratio, but below the bank’s historical averages. The bank’s long-term annual EPS CAGR is 7.6%. BOH is well capitalized and adhering to prudent risk management. Improvements in non-interest income, loans and deposit growth, and credit quality have been driving earnings growth in recent quarters, despite net interest margin compression. The stock is priced below industry based on its trailing P/E of 12.3x. Value investor David Dreman also has a stake in BOH.

Page 2 of 2