FTE, ENL, TI, AGNC, CIM: Billionaire Activist Investor’s New Dividend Picks

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ELLIOTT MANAGEMENTBillionaire Paul Singer founded Elliott Associates in 1977 and manages over $15 billion in assets. Singer has a JD from Harvard and spent time at various corporate law firms and the investment bank DLJ before founding Elliott. Singer employs an activist approach to investing, establishing large positions to turn around distressed and underperforming companies. The hedge fund manager has made some key moves as of late (see all of Singer’s newest picks).

From Singer’s 3Q 13F we have identified five high dividend-paying stocks that Elliott Associates owned at the end of 3Q. Dividends play a big role in total stock market returns, and hence why we follow dividend-paying stocks and have a special appreciation for those stocks that have solid dividend yields, especially in the current ultra-low rate environment. In a span that covers the last 30 years prior to 2012, the Wall Street Journal notes that dividend-paying stocks have returned an average of 8.9% annually, compared to 1.8% for non-dividend paying stocks.

France Telecom SA (NYSE:FTE) was one of Singer’s new picks last quarter, and now takes the 8th spot in his 13F portfolio; the stock has an astronomical dividend yield of 16.3%. In general, European telecoms have been pressured due to widespread economic weakness, with France Telecom down almost 30% year to date. Although continued difficulties are expected to remain in the interim, France Telecom’s long-term prospects can be bolstered quite heavily from international operations growth. The telecom company has managed to amass over $6 billion in cash on hand and trades at a mere 6x earnings.

Reed Elsevier NV (NYSE:ENL) is another new pick for Singer that made up the 10th largest holding in his firm’s 13F portfolio; the stock pays a dividend that yields 4%. This professional services firm trades at 15x earnings, while the industry average is near 30x. What’s more is that Reed trades at 11x forward earnings, making it quite the value play. With recent upward EPS revisions—30% for 2013 and 40% for 2014—we see Reed as a solid investment opportunity.

Another one of Singer’s new picks was Telecom Italia SPA (NYSE:TI), which pays a dividend yield of 5.9%. Telecom has also seen appreciative pressure due to a struggling Eurozone, but strength in Telecom’s Brazilian and Argentinian operations should help prop the telecommunications company up in the interim. In the meantime, its non-European operations are expected to help drive organic revenue growth of 3% by the end of this year. Telecom trades at the low end of its industry at only 5x forward earnings.

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