In this article, we will take a detailed look at the 10 Best Dividend Stocks to Buy According to Billionaire Leon Cooperman.
Billionaire Leon Cooperman made headlines in April when he predicted during an interview with CNBC that the US is headed for a financial crisis. Cooperman, who calls himself a “capitalist with a heart,” said that the Federal Reserve kept interest rates near zero, but raised them dramatically in a period of 12 months. Still, the 81-year-old billionaire sees no signs that the economy is “restrictive,” as he pointed to stock market highs and speculation. The Omega Family Office chairman and CEO expects “one or two” rate cuts this year. He emphasized that the market remains overvalued.
Were Billionaire Cooperman’s Recession Predictions Correct?
This isn’t the first time Cooperman warned the market about recession. In February last year, the billionaire said that the market was headed for a recession, and noted that the S&P 500 high of about 4,800 recorded in 2022 could “stand for some time.” In July 2022, while talking to Bloomberg, Cooperman said that he was “shocked” that interest rates were so low.
“I am of the view that equities are the best house in the financial asset in the neighborhood, but I don’t like the neighborhood, for a lot of reasons.”
Cooperman in the Bloomberg interview in 2022 had categorically said that sooner or later the strong dollar, prices of oil and the Fed would “lead us into a recession.” He went on to add that recession would be a “2023 event” and predicted that the market would bottom somewhere near 35% to 45% below its peak of 4800.
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The billionaire had said that he would be “very surprised” if we were to see another bull market anytime soon, given his view that we’ve had one of the biggest bull runs driven by FAANG, SPACs and speculation. The AI revolution that started in 2023 was indeed a shocker for Cooperman as his recession predictions were proven wrong.
For this article we scanned billionaire Cooperman’s Q1’2024 portfolio and chose his top 10 dividend stock picks. Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
10. Ellington Financial Inc (NYSE:EFC)
Number of Hedge Fund Investors: 6
Billionaire Leon Cooperman’s Stake: $1,771,500
Mortgage REIT Ellington Financial Inc (NYSE:EFC) is one of the best dividend stocks to buy according to billionaire Leon Cooperman. Ellington Financial Inc (NYSE:EFC) buys and manages mortgage-related, consumer-related, corporate-related, and other financial assets in the United States. Ellington Financial Inc (NYSE:EFC) is a monthly dividend stock with a high yield. The stock is down about 7% over the past one year amid volatility in the mortgage market. However, Ellington bulls believe the company can rebound amid a recovery in home sales. According to the National Associate of Realtors, existing home sales are expected to rise by 13.5% in 2024 while new home sales could increase by 19% by the end of this year.
Last month, Ellington Financial Inc (NYSE:EFC) reported Q1 results. Adjusted EPS in the quarter came in at $0.28, missing estimates by $0.08. Ellington Financial Inc’s (NYSE:EFC) price to book value as of May 31 is 0.8, while its historical median price to book value is 0.9. This metric, which is often used for valuating mortgage REITs, is also lower than P/Book Value of competitors like Chicago Atlantic Real Estate Finance Inc and Strawberry Fields REIT Inc.
9. Crescent Capital BDC Inc (NASDAQ:CCAP)
Number of Hedge Fund Investors: 8
Billionaire Leon Cooperman’s Stake: $6,910,507
Crescent Capital BDC Inc (NASDAQ:CCAP) is another high-yield dividend stock pick of billionaire Leon Cooperman in 2024. As of the end of the first quarter of 2024, Omega Advisors reported owning a $6.9 million stake in Crescent Capital BDC Inc (NASDAQ:CCAP).
Last month, Crescent Capital BDC Inc (NASDAQ:CCAP) posted Q1 results and increased its dividend by 2.4%. GAAP EPS in the quarter came in at $0.63, beating estimates by $0.05. Investment income in the period jumped 28.2% year over year to $50.4 million, surpassing estimates by $2.7 million. The company said its net asset value per share increased to $20.28, compared to $20.04 as of the end of 2023. Being a business development company, Crescent Capital BDC Inc (NASDAQ:CCAP) is in a strong position to benefit from rising interest rates, since the company provides debt and equity financing to companies across various industries.
The company talked about its strong portfolio performance during Q1 earnings call
” Overall, our investment portfolio continues to perform well with strong year-over-year weighted average revenue and EBITDA growth. That being said, we have continued to closely monitor the impact of rising borrowing costs on our portfolio companies. The weighted average interest coverage of the companies in our investment portfolio at quarter end improved from 1.7x at year-end to 1.8x as of quarter end. As a reminder, this calculation is based on the latest annualized base rate as of each respective quarter. We also continue to closely monitor how our portfolio companies are managing fixed charges. Our analysis demonstrates that our portfolio companies in the aggregate are well positioned to address fixed charges with operating cash flows and available balance sheet liquidity.” [read the full earnings call transcript here]
Crescent Capital BDC Inc (NASDAQ:CCAP) bulls believe the company’s highly diversified portfolio further protects it from industry headwinds. Its portfolio includes over 180 companies across high-growth industries like software, healthcare, financials and insurance. Analysts also like the company’s consistent de-leveraging of balance sheet. Its debt to equity ratio stands at 1.1, down from 1.23x in Q1. The company has no debts due until 2026.
8. Enterprise Products Partners LP (NYSE:EPD)
Number of Hedge Fund Investors: 23
Billionaire Leon Cooperman’s Stake: $26,744,491
Texas-based oil and gas pipeline company, Enterprise Products Partners LP (NYSE:EPD) is one of the best dividend stock picks of billionaire Leon Cooperman in 2024. The stock has a dividend yield of more than 7% as of June 2. With more than 50,000 miles of pipeline, Enterprise Products Partners LP (NYSE:EPD) boasts a whopping 300 million barrels worth of liquids storage capacity. Enterprise Products Partners LP’s (NYSE:EPD) revenue in the first quarter of 2024 jumped about 18.4% on a YoY basis. The company’s gross operating margin increased by about 7% in the first quarter on a YoY basis.
Enterprise Products Partners LP (NYSE:EPD) bulls believe the stock is undervalued when compared to peers. The stock’s EV-to-EBITDA ratio is 9.92, lower than its competitors like Kinder Morgan, TC Energy, Enbridge and The Williams Companies. For 2024 and 2025, the company expects its growth capital investments within the range of $3.25 billion to $3.75 billion. The stock has a forward P/E ratio of 10.54, compared with an industry average of 12.13. Wall Street expects the company’s earnings to grow 5.90% next year and at 8.15% over the next five years on a per-annum basis.
7. Arbor Realty Trust Inc (NYSE:ABR)
Number of Hedge Fund Investors: 24
Billionaire Leon Cooperman’s Stake: $31,550,821
With an over 12% dividend yield and P/E ratio under 10, Arbor Realty Trust Inc (NYSE:ABR) is one of the best dividend stock picks of billionaire Leon Cooperman in 2024. Arbor Realty Trust Inc’s (NYSE:ABR) liquidity and strong position in the mortgage REIT industry makes it an attractive play. Its book value over the past five years has jumped 36% when compared to peers in the industry who have seen their book value decline by 18% on average in the same period.
The stock’s Price to Book value is 1.04, lower than its 5-year average of 1.252. Arbor Realty Trust Inc (NYSE:ABR) is undergoing difficult times amid rising rates and headwinds in the mortgage market, but the management expects improvements down the road. Here is what Arbor Realty Trust Inc’s (NYSE:ABR) management said during the latest earnings call:
“We had a tremendous amount of success in the first quarter, working through a substantial amount of our delinquencies and modifying these loans by getting bars to bring a significant amount of fresh equity to the table and recapitalizing their deals. As a result in the first quarter, we successfully modified 40 loans, total of $1.9 billion, which fresh capital being brought to the table in every one of these deals.
This includes cash to purchase the low interest rate caps, fund interest rate, renovation reserves, bring any past due loans current and pay down balances where appropriate. In fact bars objected approximately $45 million of new capital into these deals with $1.65 billion of these loans purchasing new interest rate caps. We have also been highly effective in refinancing deals for our agency business as well as leveraging our long-term standing relationships, many quality sponsors to step in and take over assets that are underperforming and assumed debt. This is a difficult and complicated work in an extremely challenging environment. And I can’t say enough about the efforts put forth by our entire organization successfully managing through this dislocation.
We’re very pleased with the success we have had to-date and expect to remain extremely busy over the next few months and steadfast now approach as we continue to manage through the back balance of this downturn. Clearly in this environment having adequate liquidity is paramount to our success. As a result, we have focused heavily on maintaining a very strong liquidity position. Currently we have approximately $1 billion of cash between $800 million of corporate cash and $600 million of cash in our CLOs that result in additional cash equivalent of approximately $150 million.”
Of the 919 hedge funds tracked by Insider Monkey, 24 hedge funds reported owning stakes in Arbor Realty Trust Inc (NYSE:ABR), up from 17 funds in the previous quarter.
6. DT Midstream Inc (NYSE:DTM)
Number of Hedge Fund Investors: 25
Billionaire Leon Cooperman’s Stake: $38,784,447
With a dividend yield of over 4%, DT Midstream Inc (NYSE:DTM) is one of the best dividend stock picks of billionaire Leon Cooperman in 2024. The stock is up about 41% over the past one year. In April, DT Midstream Inc (NYSE:DTM) reported Q1 results. Adjusted EPS in the quarter came in at $0.99, surpassing estimates by $0.05.
DT Midstream Inc (NYSE:DTM) is involved with natural gas transportation and pipelines. DT Midstream Inc (NYSE:DTM) bulls believe the stock is poised to benefit from the broader transition to cheap natural gas, as it owns two of the largest natural gas basins in the United States: the Marcellus basin and the Haynesville basin. The company spent heavily last year, with over $700M in Capex reported for the period. However, the company is eyeing fiscal discipline in 2024. The management highlighted these plans during Q1 earnings call:
“We are confident in our full year outlook and reaffirming our 2024 adjusted EBITDA guidance range and our 2025 adjusted EBITDA early outlook, reflecting the strong positioning of our assets. We’ve increased our committed capital in 2024 and 2025 to reflect new organic projects reaching FID, with $265 million to $295 million committed in 2024 and approximately $140 million committed in 2025. This increase is reflective of projects from our prior backlog that were already contemplated in our guidance, and we will continue to expect to spend within free cash flow in 2024 and 2025.
Our short cycle growth investments continue to track on budget and on schedule, with some projects running ahead of schedule, resulting in meaningful growth contributions in 2024 and 2025. Our approach to capital allocation remains thoughtful and disciplined, with our focus on spending within cash flow over the balance of our five-year plan and achieving an investment grade credit rating.”
Analysts believe DT Midstream Inc (NYSE:DTM)’s basins are among the largest sources of wet and dry gas and their location makes them attractive for supply to main hubs in the country at attractive rates. However, the company’s lack of geographical diversification and the stock’s high valuation have been concerning. DT Midstream’s forward P/E is 17.48, much higher than the industry average of 10.92. Wall Street expects the company’s earnings to grow 11% next year but moderate to just 1.50% over the next five years on a per-annum basis. For value conscious investors, there could be many other undervalued opportunities in the mid-stream energy sector.
5. Energy Transfer LP Unit (NYSE:ET)
Number of Hedge Fund Investors: 32
Billionaire Leon Cooperman’s Stake: $189,708,519
Billionaire Leon Cooperman bought a stake in Energy Transfer LP Unit (NYSE:ET) back in the second quarter of 2017. Since then the billionaire has added to his position in Energy Transfer LP Unit (NYSE:ET), ending the March 2024 quarter with a $190 million stake. Energy Transfer LP Unit (NYSE:ET) accounts for about 7% of Omega Advisors’ Q2 portfolio.
Last month, Bank of America published a list of stocks poised to benefit from the electrification theme of future technology, driven by AI, data centers and push for electrification. BofA picked Energy Transfer LP Unit (NYSE:ET) for this theme under the oil and gas category.
Energy Transfer LP Unit (NYSE:ET) remains one of the most notable players in the industry. During the March quarter, all segments of Energy Transfer grew, with net income and adjusted EBITDA increasing by 11% and 13% on a YoY basis, respectively. The company saw record volumes in its crude pipeline segment.
Energy Transfer LP Unit (NYSE:ET) bulls also argue that just 10% of the company’s business is exposed to the volatile commodities sector. The company has also raised its full-year 2024 adjusted EBITDA guidance. The company expects the metric to total in the range of $15.0 billion and $15.3 billion, compared to the previous range of between $14.5 billion and $14.8 billion.
Energy Transfer’s earnings are expected to grow 13% next year and 15% over the next five years on a per-annum basis. The stock’s forward P/E of 9.42 is still lower than the industry median 11.88, which makes the stock undervalued given ET’s growth projections.
Silver Beech Capital made the following regarding Energy Transfer LP (NYSE:ET) in its fourth quarter 2023 investor letter:
Energy Transfer LP (NYSE:ET) owns and operates the largest and most balanced collection of energy infrastructure assets in the United States. ET’s assets include 125,000 miles of oil and natural gas pipelines, export facilities on both the Gulf Coast and East Coast, and more than 1 million barrels per day of natural gas liquid fractionation capacity. ET accounts for 20% of worldwide natural gas liquid exports. Further, ET is uniquely connected to every major hydrocarbon basin in the United States.
By assembling energy infrastructure to gather, process, transport, and store hydrocarbons, ET connects exploration and production companies (“E&Ps”) with downstream end users such as gas stations, utilities, and export facilities. As an end-to-end midstream solution, ET enables its customers to focus on their portion of the value chain without the burden of significant but essential midstream logistics. ET’s services thus add tremendous value to all constituents of the energy marketplace.
Though natural gas is a relatively clean source of fuel, restrictive federal and state regulations and other permissions severely restrict the building of natural gas pipelines and other infrastructure in North America that would help facilitate abundant hydrocarbon production. Pipelines are by far the cheapest and greenest method of transporting hydrocarbons; pipelines reduce emissions from truck transport and reduce congestion on highways, rail, and shipping routes…” (Click here to read the full text)