In this article, we will discuss the 10 best dividend stocks according to Howard Marks’ Oaktree Capital Management.
Howard Marks co-founded Oaktree Capital Management in 1995. The hedge fund is mainly known for investing in distressed securities globally. Howard Marks’ investment career began in 1969 when he started working at Citicorp. He ultimately became the firm’s Director of Research in 1978. Currently, he is serving as the co-chairman and co-organizer at Oaktree Capital Management.
In 2019, Brookfield Asset Management Inc. (NYSE:BAM), a Toronto-based investment management company, acquired a 61% interest in Oaktree Capital. However, the hedge fund still operates as an independent business within the larger system of Brookfield Asset Management. As of December 2021, the fund manages $166 billion in assets, up from $114 billion in 2015. The hedge fund’s investment philosophy revolves around preventing losses and controlling risks associated with investing. Instead of predicting the markets, the fund focuses on meticulously studying the companies and their securities, while using portfolio structuring. This strategy makes Oaktree Capital invest in assets that are often overlooked by other investors and are available at attractive prices.
As of Q3 2021, Oaktree Capital holds a 13F portfolio value of over $7.1 billion. The hedge fund invests heavily in services, basic material, finance, technology, and the utility sector.
Howard Marks of Oaktree Capital Management
Our Methodology:
In this article, we will focus on the dividend stocks in Howard Marks’ portfolio. For this list, we took into account Oaktree Capital Management’s 13F portfolio as of Q3.
10 Best Dividend Stocks According to Howard Marks’ Oaktree Capital Management
10. Chesapeake Energy Corporation (NASDAQ:CHK)
Number of Hedge Fund Holders: 44
Dividend Yield as of February 8: 2.62%
Oaktree Capital Management’s Stake Value: $735,330,000
Chesapeake Energy Corporation (NASDAQ:CHK) is an American energy company that specializes in hydrocarbon exploration. In Q3 2021, the company was the largest holding of Oaktree Capital, accounting for 10.26% of its 13F portfolio. The fund held over $735.3 million worth of stake in the company.
On November 22, 2021, Chesapeake Energy Corporation (NASDAQ:CHK) announced a quarterly dividend of $0.4375 per share, up 27.3% from its previous dividend. The stock’s current dividend yield stands at 2.62%. Appreciating the company’s production growth in 2021, in January, MKM Partners raised its price target on Chesapeake Energy Corporation (NASDAQ:CHK) to $98, with a Buy rating on the shares. In the same month, BofA also initiated its coverage on the stock with a Buy rating.
The number of hedge funds tracked by Insider Monkey having stakes in Chesapeake Energy Corporation (NASDAQ:CHK) stood at 44 in Q3, up from 43 in the previous quarter. These stakes hold a consolidated value of roughly $2.2 billion.
9. Vistra Corp. (NYSE:VST)
Number of Hedge Fund Holders: 38
Dividend Yield as of February 8: 2.72%
Oaktree Capital Management’s Stake Value: $511,997,000
The third-quarter data of Insider Monkey shows that the hedge fund interest spiked in Vistra Corp. (NYSE:VST), a Texas-based electricity and power generation company. 38 hedge funds tracked by Insider Monkey held positions in the company in Q3, up from 32 in the previous quarter. The total value of these stakes is over $1.22 billion.
In Q3 2021, Oaktree Capital held a stake worth roughly $512 million in Vistra Corp. (NYSE:VST), after increasing its position by 1%. The company represented 7.14% of the hedge fund’s 13F portfolio. In 2021, Vistra Corp. (NYSE:VST) increased its quarterly dividend by 11% to $0.15 per share. The stock’s dividend yield is 2.72%.
Vistra Corp. (NYSE:VST) announced a $2 billion common share repurchase program, which signals the management’s responsibility to shareholder value. In light of this, recently, BMO Capital lifted its price target on the stock to $27, while maintaining an Outperform rating on the shares. Citadel Investment Group was one of the largest shareholders of Vistra Corp. (NYSE:VST) in Q3, owning a stake worth over $156.5 million.
8. AngloGold Ashanti Limited (NYSE:AU)
Number of Hedge Fund Holders: 10
Dividend Yield as of February 8: 2.75%
Oaktree Capital Management’s Stake Value: $66,029,000
AngloGold Ashanti Limited (NYSE:AU) is a South African gold mining company with operations in four continents. The company currently pays a quarterly dividend of $0.059 per share, with a dividend yield of 2.75%.
In Q3 2021, Oaktree Capital increased its stake in AngloGold Ashanti Limited (NYSE:AU) by 25% and held a stake worth over $66 million. The company made up 0.92% of the fund’s 13F portfolio. In the past six months, AngloGold Ashanti Limited (NYSE:AU) delivered a 21.2% return to shareholders, as of the market close of February 7.
At the end of Q3 2021, 10 hedge funds tracked by Insider Monkey held stakes in AngloGold Ashanti Limited (NYSE:AU), valued at roughly $328 million. In comparison, in the previous quarter, 12 hedge funds held a consolidated stake worth $372.8 million in the Johannesburg-based company.
7. Kilroy Realty Corporation (NYSE:KRC)
Number of Hedge Fund Holders: 24
Dividend Yield as of February 8: 3.13%
Oaktree Capital Management’s Stake Value: $101,633,000
An American real estate investment trust, Kilroy Realty Corporation (NYSE:KRC) increased its quarterly dividend by 4% in 2021 to $0.52 per share. The stock’s dividend yield stands at 3.13%. According to analysts, the yield is considered safe, when coupled with its payout ratio of 55%. Kilroy Realty Corporation (NYSE:KRC) has increased its dividend at a CAGR of 6.7% in the past five years.
As of Q3 2021, 24 hedge funds tracked by Insider Monkey held stakes in Kilroy Realty Corporation (NYSE:KRC), down from 26 in the preceding quarter. The total value of these stakes is over $422.8 million, showing significant growth from $241 million worth of stakes held by hedge funds in Q2.
Oaktree Capital started building its position in Kilroy Realty Corporation (NYSE:KRC) during the first quarter of 2021 and increased its stake in the company ever since. In Q3 2021, the hedge fund held $101.6 million worth of shares in the company, after increasing its position by 89% during the quarter. The company accounted for 1.41% of the fund’s portfolio.
6. Eagle Bulk Shipping Inc. (NASDAQ:EGLE)
Number of Hedge Fund Holders: 13
Dividend Yield as of February 8: 4.05%
Oaktree Capital Management’s Stake Value: $190,666,000
Eagle Bulk Shipping Inc. (NASDAQ:EGLE) is an American owner and operator of dry bulk vessels, having a fleet of 53 ships. The company announced a dividend policy in November 2021, paying a quarterly dividend of $0.50 per share, with a dividend yield of 4.05%. According to its policy, Eagle Bulk Shipping Inc. (NASDAQ:EGLE) will be paying 30% of its net income to shareholders in dividends every quarter.
In Q3 2021, Oaktree Capital did not change its position in Eagle Bulk Shipping Inc. (NASDAQ:EGLE), which represented 2.66% of the hedge fund’s portfolio. The fund held a stake worth over $190.6 million in the company in Q3. In November 2021, BTIG Research boosted its price target on Eagle Bulk Shipping Inc. (NASDAQ:EGLE) to $64, with a Buy rating on the shares, appreciating the company’s reduced costs and improving balance sheet.
As per Insider Monkey’s Q3 data, 13 hedge funds held positions in Eagle Bulk Shipping Inc. (NASDAQ:EGLE), down significantly from 25 in the previous quarter. These stakes hold a consolidated value of roughly $284 million. Along with Oaktree Capital, Two Sigma Advisors was also one of the company’s major shareholders in Q3, owning shares worth $10.5 million.
5. Uniti Group Inc. (NASDAQ:UNIT)
Number of Hedge Fund Holders: 14
Dividend Yield as of February 8: 5.20%
Oaktree Capital Management’s Stake Value: $42,028,000
Uniti Group Inc. (NASDAQ:UNIT) is an American real estate investment trust that mainly invests in the communications industry. In Q3 2021, Oaktree Capital held a stake worth over $42 million in the company, which represented 0.58% of its 13F portfolio. The hedge fund started investing in Uniti Group Inc. (NASDAQ:UNIT) during the third quarter of 2020.
Analysts have been skeptical about Uniti Group Inc. (NASDAQ:UNIT)’s dividend when the company cut its rather stable dividend of $0.60 per share by 91.7% during Q4 of 2019. However, the company’s 5-year dividend growth rate stands at 4.78%, with a safe payout ratio of 35.71%. Currently, Uniti Group Inc. (NASDAQ:UNIT) pays a quarterly dividend of $0.05 per share, which yields 5.20%.
Of the 867 hedge funds tracked by Insider Monkey, 14 hedge funds held stakes in Uniti Group Inc. (NASDAQ:UNIT) in Q3, valued at around $351 million. In the previous quarter, 16 hedge funds held a stake worth $295.6 million in the Arkansas-based company.
4. Oaktree Specialty Lending Corporation (NASDAQ:OCSL)
Number of Hedge Fund Holders: 10
Dividend Yield as of February 8: 8.40%
Oaktree Capital Management’s Stake Value: $31,701,000
Oaktree Specialty Lending Corporation (NASDAQ:OCSL) is an American specialty finance company that provides one-stop credit solutions to different organizations. In Q3 2021, the number of hedge funds tracked by Insider Monkey declined slightly to 10, from 11 in the previous quarter. These stakes hold a consolidated value of roughly $70 million.
Over the four quarters in 2021, Oaktree Specialty Lending Corporation (NASDAQ:OCSL) has increased its quarterly dividend by 32%. Currently, the company pays a quarterly dividend of $0.16 per share, with a yield of 8.40%. In November 2021, JMP Securities raised its price target on Oaktree Specialty Lending Corporation (NASDAQ:OCSL) to $8.50, while maintaining a Market Perform rating on the shares.
In Q3 2021, Oaktree Capital held about 4.5 million shares in Oaktree Specialty Lending Corporation (NASDAQ:OCSL), worth over $31.7 million. The hedge fund increased its position in the company significantly by 1,527%, which made up 0.44% of its portfolio.
3. Petróleo Brasileiro S.A. – Petrobras (NYSE:PBR)
Number of Hedge Fund Holders: 23
Dividend Yield as of February 8: 6.68%
Oaktree Capital Management’s Stake Value: $90,996,000
Petróleo Brasileiro S.A. – Petrobras (NYSE:PBR), a Brazilian petroleum company, pays a quarterly dividend of $0.616 per share. During the third quarter, the company paid over $7.3 billion in dividends to shareholders. Moreover, Petróleo Brasileiro S.A. – Petrobras (NYSE:PBR) expects dividend payments to reach approximately $13 billion per year in over 5 years.
Oaktree Capital started investing in Petróleo Brasileiro S.A. – Petrobras (NYSE:PBR) during the fourth quarter of 2010. In Q3 2021, the hedge fund held shares of the company worth around $91 million, after increasing its stake in the company by 4%. Petróleo Brasileiro S.A. – Petrobras (NYSE:PBR) accounted for 1.27% of the fund’s 13F portfolio.
At the end of Q3 2021, 23 hedge funds tracked by Insider Monkey reported owning a roughly $3 billion worth of stake in Petróleo Brasileiro S.A. – Petrobras (NYSE:PBR). In comparison, 25 hedge funds held stakes in the company in the previous quarter, valued at around $2.8 billion. Among these funds, GQG Partners held a stake worth $1.8 billion in Petróleo Brasileiro S.A. – Petrobras (NYSE:PBR), becoming its largest shareholder in Q3.
2. Vale S.A. (NYSE:VALE)
Number of Hedge Fund Holders: 27
Dividend Yield as of February 8: 15.9%
Oaktree Capital Management’s Stake Value: $83,460,000
Vale S.A. (NYSE:VALE) is a Brazilian mining company and is one of the largest producers of iron ore and nickel in the world. In Q3 2021, 27 hedge funds tracked by Insider Monkey held stakes in the company, the same as in the previous quarter. These stakes hold a value of roughly $2 billion.
Vale S.A. (NYSE:VALE) currently pays a semi-annual dividend of $1.542 per share, with an attractive dividend yield of 15.9%. The company’s policy of paying dividends twice a year resulted in tremendous cash flow performance, where it was able to pay roughly $14 billion in dividends during the first nine months of 2021. In Q3 2021, Oaktree Capital held about 6 million shares in Vale S.A. (NYSE:VALE), worth over $83.4 million. The company represented 1.16% of the hedge fund’s 13F portfolio.
Due to the increasing prices of iron ore, Wall Street analysts provided a positive stance on Vale S.A. (NYSE:VALE). In January, both RBC Capital and Jefferies raised their price targets on the stock to $17 and $16, respectively.
Miller Value Partners mentioned Vale S.A. (NYSE:VALE) in its Q3 2021 investor letter. Here is what the firm has to say:
“Vale (VALE) was the top detractor over the quarter, falling 32.6% in sympathy with iron ore’s 48% decline from record highs on China capacity curbs and growing fears of financial issues within the property sector. Vale reported Q2 EBITDA of $11.24Bn, slightly below consensus of $11.47Bn on higher than expected iron ore cash costs. Free cash flow of $6.5Bn (35% annualized yield) came in well ahead of expectations, driving $2.6Bn of stock buybacks and a 1H21 dividend of $7.6Bn, implying year-to-date (YTD) shareholder returns of roughly $13.8Bn (19% of the current market cap). Management maintained FY21 production guidance for iron ore of 315-335 Metric tons (Mt) and lowered year-end 2022 exit capacity to 370Mt (from 400Mt) due to Northern System licensing delays. Additionally, the company hosted their annual Investor Day, outlining new production initiatives aimed at becoming a key supplier to steelmakers in light of decarbonization goals.”
1. Star Bulk Carriers Corp. (NASDAQ:SBLK)
Number of Hedge Fund Holders: 21
Dividend Yield as of February 8: 19.5%
Oaktree Capital Management’s Stake Value: $624,877,000
Star Bulk Carriers Corp. (NASDAQ:SBLK), a Greece-based shipping company, was the second-largest holding of Oaktree Capital in Q3 2021. The hedge fund held a $624.8 million worth of stake in the company, which represented 8.72% of its 13F portfolio.
On November 16, 2021, Star Bulk Carriers Corp. (NASDAQ:SBLK) announced a quarterly dividend of $1.25 per share, up 78.6% from its previous dividend of $0.70 per share.
At the end of Q3 2021, 21 hedge funds in Insider Monkey’s database held stakes in Star Bulk Carriers Corp. (NASDAQ:SBLK), down from 24 in the previous quarter. The total value of these stakes is over $846 million.
Massif Capital mentioned Star Bulk Carriers Corp. (NASDAQ:SBLK) in its Q3 2021 investor letter. Here is what the firm has to say:
“We initiated one long position, one short position and exited one position during the third quarter. Our new long position was in Star Bulk Carriers (SBLK), a pure-play dry bulk operator with roughly 120 controlled vessels and 14 million tons of combined cargo capacity globally.
SBLK has one of the better management teams in the maritime shipping industry and the lowest cost structure among all dry bulk names. After announcing their new dividend policy in May, SBLK now has one of the best payout structures in shipping. The firm has paid out $0.3 and $0.7 per share in dividends for the first and second quarters of 2021. SBLK will most likely announce a dividend for the third quarter somewhere in the $1.15-$1.25 per share range, depending on movement in net working capital.
We believe the best way to look at this business is through cash generation potential and how much is returned to investors. The current equity valuation does not reflect current rates for shipping (earnings), partly because of the velocity of the move in rates and because shipping cycles turn, and it’s not clear whether this is a local top or the early innings of a multi-year cycle. Our belief is the latter. Part of our catalyst is the market re-rating the stock higher once the length of the increased earnings power becomes understood. It is a relatively strong catalyst in the sense that with a strong dividend policy, we can be patient for the market to underwrite this story as the cash is either returned to us via a high dividend yield if the market is either slow or chooses not to join our side of the trade.
Our estimates suggest a time-charter equivalent rate (net profit or loss of operating a vessel daily) of at least $30,000 for SBLK in Q4, with the firm earning a potential annual average of $26,000. Our base case is that this is a strong floor going into next year, with little need to articulate much more upside. If rates hold, which we expect them to do, we could see a 20+% annual dividend year next year for SBLK. If the market priced the equity such that the dividend yield was 8%, that implies a $62 stock. Today our base case target for the firm is $37 per share. This is likely conservative as we know that third-quarter rates are higher than the second quarter, and third-quarter dividends will most likely reflect that. We are cautious about diving too deep into the sensitivities to the upside with this position as we are arriving at some pretty remunerative torque using current contracted values and seemingly conservative forecasts…” (Click here to see the full text)
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Disclosure. None. 10 Best Dividend Stocks According to Howard Marks’ Oaktree Capital Management is originally published on Insider Monkey.
