We track 13F filings from hedge funds and other notable investors as part of our work researching investment strategies (we have found, for example, that the most popular small cap stocks among hedge funds outperform the S&P 500 by an average of 18 percentage points per year). 13F filings from individual fund managers can also be a source of initial investment ideas in a number of areas, including stocks with relatively high dividend yields. Read on for our thoughts on five stocks which billionaire Richard Chilton’s Chilton Investment Company owned at the end of December which currently pay dividend yields of 3% or higher going by recent dividend policy (or see the full list of stocks Chilton reported owning).
The fund increased its holdings of McDonald’s Corporation (NYSE:MCD) by 17% to a total of about 770,000 shares. McDonald’s Corporation (NYSE:MCD) had been the most popular restaurant stock among hedge funds in the fourth quarter of 2012 (find more restaurant stocks hedge funds loved). Not only does the company pay a dividend yield of 3% at current prices, but the low beta of 0.3 means that it is a good defensive stock as well. However, growth has been very low- some analysts argue that McDonald’s Corporation (NYSE:MCD) is losing out to more premium quick service restaurants- and yet the earnings multiples assume moderate growth over the next several years.
Another restaurant company, DineEquity Inc (NYSE:DIN), which owns the Applebee’s and International House of Pancakes brands, was another of Chilton’s top picks. The company is transitioning towards more of a franchise model, which has affected its financials but which in theory will allow for more stable cash flow. As a result DineEquity recently increased its dividend payments and now its yield is above 4%. Richard McGuire’s Marcato Capital Management also had DineEquity as one of its top picks after increasing its stake by 32% between October and December (check out Marcato’s favorite stocks).