In this article we will take a look at the 10 best high-yield dividend stocks according to billionaire Mario Gabelli.
Mario Joseph Gabelli is a highly respected financial analyst, investment advisor, and stock investor. He is also the founder, CEO, and chairman of an investment company called Gabelli Asset Management Company. His extensive knowledge of the markets has earned him billionaire status, and he is also known for his philanthropic activities.
Gabelli’s fund GAMCO Investors has beaten the S&P 500 by a little over 2% per year since its inception in 1986, and his small-cap picks have done even better. No wonder the firm now invests over $30 billion in broader markets. Mario Gabelli, who was named Morningstar’s Fund Manager of the Year in 1997 and The Institutional Investor’s Money Manager of the Year in 2010, is one of several investors who started with value investing based on the golden rules of Graham and Dodd. Mario Gabelli believes that investor can approach a public company from the perspective of an acquirer; some businesses may be worth more in the private market than as publicly traded companies, and so a valuation that looks fair in the markets may be very attractive from a buyer’s perspective. This generally results in a focus on cash flow as opposed to earnings. In the 1980s- the height of the leveraged buyout craze- this was a particularly lucrative investment strategy. Still, the recent awards demonstrate, Gabelli and GAMCO have continued to be good investors. With time, Gabelli’s fund increased its focus on other financial engineering techniques that can unlock shareholder value, including spinouts. Some investors like to invest in spinouts because management of the independent companies can focus more on the core business; in addition, the market may place a high multiple on a new company that had formerly been an overlooked asset. Other techniques might include taking note of movements by activist investors and attempting to determine if they can drive management into increased shareholder value.
GAMCO has investments in multiple segments, including communications industry which accounts for 11.55% of its portfolio, 31.55% in industrials, 9.5% in finance, 12.66% in consumer discretionary, 4.66% in information technology, 6.96% in materials, 5.15% in healthcare, 7.62% in consumer staples, 5.78% in utilities and telecommunications.
The investment company achieved 11.76% gains in Q4 2020 but its overall performance in the last four quarters was down 7.09%. It earned a 95.69% return on investment in 2020. GAMCO’s strategy also involves investing in high-yield dividend stocks. Individual investors can emulate the company’s trading style to hopefully achieve success.
Gabelli’s Notable Holdings
Gabelli likes to diversify his portfolio. His hedge fund has stakes in small and large companies that have both strong fundamentals and future growth potential. Some of these companies include Paypal Holdings Inc (NASDAQ: PYPL), Apple Inc (NASDAQ: AAPL), Bank of America Corp (NYSE: BAC) and Microsoft Corporation (NASDAQ: MSFT).
Mario Gabelli reported owning a stake in Paypal Holdings Inc at the end of 2020. Investors are closely watching PayPal amid its increasing foray into Bitcoin. PayPal is expected to report Q1 earnings on May 5. BofA Securities analyst Jason Kupferberg believes that PayPal would post blowout earnings, thanks to the US government’s stimulus package that is set to increase the usage of Paypal Holdings Inc’s Cash app.
Paypal Holdings Inc is also in the limelight since it allowed its users to checkout with Bitcoin.
Another stock in Gabelli’s portfolio that is set to rise with the economic recovery is Bank of America Corp . Bank of America’s first quarter results show a $2.7 billion credit reserve release amid economic recovery. Bank of America Corp (BAC) also enjoyed an increase in deposits, a decline in loans and a thriving international markets business.
As of the end of the fourth quarter, GAMCO has a $32.8 million stake in Microsoft Corporation. The firm cut its stake in the company by 8% in the period. The company recently gave a strong guidance for Q4. Citi recently said that even though MSFT’s earnings were strong, they were seen as lukewarm given the Wall Street’s high expectations. The firm noted that Microsoft Corporation Azure platform will see better comp sales in fiscal fourth quarter. The firm also likes the reacceleration of Office 365 Commercial bookings.
Citi reiterated a Buy rating for Microsoft Corporation (MSFT) and gave a $302 price target.
BMO Capital on the other hand said that Microsoft Corporation (MSFT) earnings were “good, but not great”. BMO is also expecting a strong performance in Azure metrics in the coming quarter. It increased its price target for the stock to $290 from $280.
GAMCO also has a stake in Apple Inc, even though the hedge fund slashed its hold in the company by 3% in the fourth quarter. It still owns 215,165 shares of the company, worth $28.6 million. Apple Inc is getting the attention of the Wall Street after it smashed earnings estimates. Goldman Sachs upgraded Apple stock to Neutral from Sell, admitting that its initial assumption that Apple’s iPhone cycle would disappoint was “clearly wrong.”
The firm noted that the demand for iPhone, Macs and other devices are so strong that Apple Inc (AAPL) said during its earnings that it would leave up to $4 billion on the table in fiscal third quarter through June.
Other notable firms increasing their ratings on Apple Inc (AAPL) include Raymond James and Morgan Stanley.
Some other companies owned by Gabelli include Enterprise Products Partners L.P. (NYSE: EPD). The company announced that its adjusted earnings per limited partner unit in Q4 2020 was 51 cents which was lower than the 54 cents that the company reported in Q4 2019. Its Q4 2020 revenue was $7,044 million which was notably lower than its $8,005 million Q4 2019 revenue. However, Enterprise Products Partners L.P. (NYSE: EPD) latest revenue figure managed to outperform the $6,697 million consensus estimate.
Investing in dividend stocks has become extremely important in the current age of financial volatility, which isn’t sparing even the smart money. The entire hedge fund industry is feeling the reverberations of the changing financial landscape. Its reputation has been tarnished in the last decade, during which its hedged returns couldn’t keep up with the unhedged returns of the market indices. On the other hand, Insider Monkey’s research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 124 percentage points since March 2017. Between March 2017 and February 26th 2021 our monthly newsletter’s stock picks returned 197.2%, vs. 72.4% for the SPY. Our stock picks outperformed the market by more than 124 percentage points (see the details here). We were also able to identify in advance a select group of hedge fund holdings that significantly underperformed the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 16th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to. You can subscribe to our free newsletter on our homepage to receive our stories in your inbox.
Let’s start our list of the 10 best high-yield dividend stocks according to billionaire Mario Gabelli.
Best High-Yield Dividend Stocks Based on Billionaire Mario Gabelli’s Q4 Portfolio
10. Exxon Mobil Corporation (NYSE: XOM)
Number of Hedge Fund Holders: 63
Dividend Yield: 5.99%
Exxon Mobil Corporation (NYSE: XOM) is a U.S-based oil and gas giant company. It recently announced the discovery of major oil deposits off the shores of Guyana which is estimated to hold roughly 9 billion barrels of oil.
The oil and gas giant plans to kickstart at least 6 Stabroek projects as soon as 2027, with potential for up to 10 production, offloading and storage vessels in its portfolio. New reports suggest that Chevron will not purchase Exxon’s 32.7% stake in West Qurna-1 oilfield located in Iraq. However, a Chinese company called PetroChina might be an interested buyer.
Exxon Mobil Corporation plans to pursue a $280 million compensation as part of a lawsuit against two Cuban companies for illegally seizing Exxon’s assets in 1959 during Fidel Castrol’s reign. Exxon is also one of the major oil and gas companies joining the climate change movement, with aggressive plans for renewable energy. Its renewable energy efforts might help it maintain its position as one of the best high-dividend stocks in the future.
First Eagle Investment Management, in their Q1 2021 investor letter, mentioned Exxon Mobil Corporation (NYSE: XOM). Here is what First Eagle Investment Management has to say about Exxon Mobil Corporation in their Q1 2021 investor letter:
“Leading contributors in the First Eagle Global Fund this quarter included Exxon Mobil Corporation. Recovering oil prices on improvements in demand for crude and other distillates helped fuel strong performance across the energy complex, including shares of Exxon Mobil. The company’s financial results have improved markedly from the Covid-related demand shocks in 2020, helping ease concerns about the sustainability of Exxon’s dividend, which is among the largest in the S&P 500 Index. In addition, Exxon has reiterated its commitment to reducing capital expenditures, which we believe should further bolster the resilience of its cash flows against future demand slowdowns.”
9. AT&T Inc. (NYSE: T)
Number of Hedge Fund Holders: 58
Dividend Yield: 6.62%
AT&T Inc. is one of the best high-yield dividend stocks according to billionaire Mario Gabelli. It of the major telecommunications companies in the U.S. delivered a positive performance in Q1, and its revenue of $44 billion managed to outperform analyst estimates by 3.0%. Its latest report released in April revealed that the company managed to add 595,000 subscribers to its postpaid network while the net post-paid adds amounted to 823,000.
Its revenue on the year grew by 3% to $43.9 billion and its EPS managed to surpass analyst estimates by $0.08. New subscriber figures came in at 595,000 which was higher than the estimated 270,000. The total subscriber count in the U.S reached 44.2 million after adding 2.7 million new subscribers in the U.S. Its total global subscriber count reached 64 million.
AT&T Inc. targets $17 billion capex on the year, 1% range for its revenue growth and a $26 billion range for its FCF. The company remains one of the best high yield dividend stocks courtesy of its impressive performance.
8. CTO Realty Growth, Inc. (NYSE: CTO)
Number of Hedge Fund Holders: 13
Dividend Yield: 7.58%
CTO Realty Growth, Inc. (NYSE: CTO) is a publicly traded REIT that boasts of a diversified portfolio in income properties in the U.S. The REIT owns 2.8 million square feet of properties in the U.S and intends to continue expanding. It recently announced that it secured a deal to purchase a Henderson retail property called Eastern Commons. The latter is a multi-tenant property offering 147,000 square foot worth of retail property at $126 per square foot, which means that CTO Realty will acquire it for roughly $18.5 million.
The company’s dividend yield is currently at about 7.5%, making it one of the best high-yield dividend stocks according to billionaire Mario Gabelli. CTO realty recently made some amendments to its unsecured credit agreement, paving the way for a new unsecured term loan of $50 million. The amendment also raised the ceiling for its unsecured revolving credit line from $200 million to $210 million.
CTO Realty Growth, Inc. earned $15.96 million revenue in Q4 2020, which represents a 33.4% YOY gain. Its FFO for the same quarterly period was $2.11. The company signed a deal to sell two of its net lease properties to Alpine Income Property Trust, Inc. (NYSE: PINE) for $56 million. The company reported $336 million worth of transaction activities in 2020, including $3.4 million from the sale of a property in Austin Texas.
The company also bought 4 properties for $185 million in 2020 and sold $86.5 million worth of properties in the same year.
7. Lumen Technologies, Inc. (NYSE: LUMN)
Number of Hedge Fund Holders: 29
Dividend Yield: 7.74%
Lumen Technologies, Inc. (NYSE: LUMN) is a U.S-based telecommunications company that offers cloud services, network solutions, security, voice and other managed offerings. It is also part of the Fortune 500 and the S&P 500.
The company recently released its Q1 2021 forecast revealing that it expects $5.06 billion in revenue, a slight drop from the previous quarter revenue at $5.12 billion. It anticipates a $2.158 billion EBITDA which is slightly lower than the previously estimated $2.165 billion. Lumen expects its Q1 performance to deliver a $0.43 EPS.
Lumen Technologies, Inc. announced a dividend per share of $0.25 in February, which was in line with the previously announced dividend, highlighting its position as one of the best high-yield dividend stocks. Some of the company’s latest key developments include hiring Jason Lish as its new Chief Security Officer. Lumen also announced the integration of its edge platform with IBM’s cloud satellite to deliver hybrid cloud services.
In their Q1 2021 investor letter, Longleaf Partners Fund highlighted a few stocks and Lumen Technologies Inc. (NYSE:LUMN) is one of them. Here is what the fund said:
“Lumen (40%, 3.33%), the global fiber company, was the top contributor. While COVID fallout still weighed on fourth quarter results, the company benefitted from positive business mix improvements. Early in the quarter, Lumen appreciated 38% in a few short days amidst the “Game Stop / Reddit” short cover phenomenon. After this short-term bounce, Lumen’s stock price appreciated more steadily over the last six weeks of the quarter with improved results. Many of last year’s worst-case fears have not materialized and the outlook is improving for the core business. We continue to believe that the company has multiple ways within its control to both grow and realize value per share, and we have a 13D filed to allow us to discuss these options with the company. Lumen’s board, which includes Southeastern-nominated Chairman Mike Glenn from FedEx and Director Hal Jones from Graham Holdings, is doing good work to realize Lumen’s hidden value and return the business to FCF/share growth. Despite its appreciation, the stock trades at less than half of our appraisal.”
6. A.H. Belo Corporation (NYSE: AHC)
Number of Hedge Fund Holders: 5
Dividend Yield: 7.80%
A.H. Belo Corporation (NYSE: AHC) is a newspaper company that is based in Dallas and distributes News. Although it has a strong presence in print, the company has also been expanding its presence in digital marketing and emerging media. Its GAAP EPS in Q1 2021 was -$0.13 while its revenue for the same period was $36.82 million, representing an 8.7% YOY increase. Its net loss in Q1 was $2.8 million, or $(0.13) per share.
A.H. Belo Corporation had 5 hedge fund investors in Q4 2020, led by Renaissance Technologies which owned 1.1 million shares of the print media company.
5. Energy Transfer LP (NYSE: ET)
Number of Hedge Fund Holders: 25
Dividend Yield: 7.09%
Energy Transfer LP (NYSE: ET) is one of the key players in the propane and natural gas pipeline. Its valuation, deleveraging and cash flow are healthy enough to attract more investment.
Energy Transfer LP is well diversified and operates at a scale that is large enough to withstand volatility in commodity prices, as was the case in 2020. The company remains focused on sustainability and growth, which might result in cost, capex and dividend cuts. ET also plans to file a petition for the reversal of a court ruling for the termination of its permit to the Dakota Access Pipeline.
Energy Transfer LP claims that the permit denial pending investigation will lead to huge losses between $3.44 million and $4.28 million daily, potentially even more. Shutting down the pipeline means 400K bbl per day will be removed from the pipeline.
4. Enterprise Products Partners L.P. (NYSE: EPD)
Number of Hedge Fund Holders: 30
Dividend Yield: 7.61%
Enterprise Products Partners L.P. is an energy sector company that provides midstream energy services to companies that produce crude oil and natural gas, and other petrochemicals. The company also provides midstream services to consumers. The company announced a dividend of $0.45 per share on April 8, which was consistent with the previously declared dividend.
Enterprise Products Partners recently sued CPS Energy, a municipal power utility in San Antonio, for failing to make a $100 million payment for natural gas deliveries made during the Texas winter storm in February.
Enterprise Products Partners L.P. is one of the best high yield dividend stocks. Its dividend performance has been positive with progressive gains for the last 22 years. Its strong fundamentals have provided $38.8 billion worth of value to shareholders since 1998.
3. TOTAL SE (NYSE: TOT)
Number of Hedge Fund Holders: 14
Dividend Yield: 6.80%
TOTAL SE (NYSE: TOT) is a French company that has operations in the oil and gas industry. The company recently announced that its Lake Albert project which has been experiencing delays will start exporting crude in 2025. The announcement was made after the finalization of important agreements necessary to facilitate the development of two Ugandan oil fields, as well as the development of a pipeline in Tanzania.
The pipeline will transport oil from Uganda to the Tanga port in Tanzania. Its construction will cost $3.5 billion and Total will build it in partnership with CNOOC Limited (CEO). The entire operation will cost roughly $5.1 billion and current estimates suggest that it produce more than 1 billion barrels of oil. Total intends to resume refinery activities at its Gonfreville refinery based in France in May this year.
TOTAL SE’s refining activities as the Texas Gulf Coast-based Port Arthur refinery were disrupted due to unplanned maintenance activities which may have been necessitated by the winter storm in February this year. Total recently signed a major deal with Iraq to build four large-scale energy projects, including a 1,000-megawatt solar energy project. The investment for the four projects is estimated to cost over $7 billion. The company’s portfolio of projects under development, as well as its ongoing operations, highlight its ability to remain one of the best high yield dividend stocks.
2. Vodafone Group Plc (NASDAQ: VOD)
Number of Hedge Fund Holders: 17
Dividend Yield: 8.28%
Vodafone Group Plc (NASDAQ: VOD) is a British telecommunications company that has operations across the world. It announced earlier this year that the price range for the planned IPO of Vantage Towers would range from €22.50 to €29.00. The company also revealed that IPO was expected to raise at least €950 million from investors.
Vodafone Group Plc recently signed a deal with RingCentral for a co-branded venture to offer contact center-as-a-service and cloud services. Vodafone also secured a long-term agreement with Discovery, Inc. (DISCA). The agreement will allow Vodafone customers across 12 markets to access content from Discovery’s portfolio. The deal will also enable European customers to access Discovery+.
Discovery will access around 100 million customers subscribed to Vodafone’s mobile, broadband and TV services. The deal should provide more opportunities for Vodafone to continue on its high yield dividend streak.
1. AllianceBernstein Holding L.P. (NYSE: AB)
Number of Hedge Fund Holders: 9
Dividend Yield: 8.98%
AllianceBernstein Holding L.P. (NYSE: AB) is an asset management company that offers research and investment management services across the globe. Although it is one of the best high yield dividend stocks, it received a downgrade to “neutral” by William Katz, an analyst at Citi Bank.
AllianceBernstein Holding L.P. has gained 20% year-to-date, but Katz believes there is limited upside. It rallied by 161% in 2020, outperforming the S&P 500 by more than 62% and the Dow Jones by more than 81%, reinforcing its high yield dividend stock status. The investment firm released its preliminary figures earlier this year, revealing that it had $688 billion worth of assets under management in February 2021. It was slightly higher than its $683 billion AUM figure in the previous month. The investment company had $14.9 billion in active net inflows in 2020.
You can also take a peek at Top 10 Dividend Stocks that Pay Monthly and 10 Best Healthcare Dividend Stocks.
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This article is originally published at Insider Monkey.
