Several weeks after the end of each quarter, hedge funds and other major investors are required to file 13Fs with the SEC, disclosing many of their long equity positions. We track these filings as part of our work developing investing strategies; we have found, for example, that the most popular small cap stocks among hedge funds earn an average excess return of 18 percentage points per year (learn more about our small cap strategy). We can also use our database to see which stocks fund managers like in a number of areas, including stocks with high dividend yields. Here are five stocks which billionaire Israel Englander’s Millennium Management owned at the end of December which pay dividend yield of 3.5% or higher according to current prices and recent dividend policy (or see the full list of stocks from the fund’s 13F):
The fund reported a position of 2.2 million shares in PPL Corporation (NYSE:PPL), a $19 billion market cap electric and natural gas utility operating in Kentucky, Pennsylvania, and the U.K. The dividend yield is quite high, even for a utility, at 4.7%; however, this looks to be at least in part due to weaker financials as revenue and net income both decreased by about 20% in PPL’s most recent quarter compared to the same period in the previous year. Fellow billionaire Glenn Dubin’s Highbridge Capital Management initiated a position of about 440,000 shares in the fourth quarter (check out Dubin’s stock picks).
Englander and his team were heavy buyers of Ameren Corp (NYSE:AEE), a utility serving customers in Missouri and Illinois, and closed December with 1.8 million shares of the stock in their portfolio. Winton Capital Management, managed by David Harding, had about 990,000 shares according to that fund’s own 13F (research more stocks Winton likes). Ameren Corp (NYSE:AEE)’s yield is quite strong at 4.6%, and as with most utilities its beta is low at 0.2. So it too could be considered as an income or defensive stock pick, though like PPL the company experienced a decline in revenue during Q4 from its levels a year ago.
Michigan-based electric and gas utility CMS Energy Corporation (NYSE:CMS) was another high-yielding stock in Millennium’s portfolio (the dividend yield is 3.6%) although the fund was selling shares between October and December. The trailing earnings multiple of 20 is high, although CMS Energy Corporation (NYSE:CMS)’s net income did increase considerably in percentage terms in its last quarterly report compared to the fourth quarter of 2011 and we suppose it’s possible that trend will continue in the short term. Adage Capital Management, managed by Phil Gross and Robert Atchinson, increased its holdings by 24% to a total of over 2 million shares.
According to the 13F, Englander increased its stake in Duke Energy Corp (NYSE:DUK) to about 750,000 shares over the course of Q4 2012. At a market capitalization of $51 billion, Duke Energy Corp (NYSE:DUK) is one of the largest publicly traded U.S. utilities- potentially giving it more stability as a company- and like many other companies in the industry its beta is low and its yield is high (4.2% in this case). Duke Energy Corp (NYSE:DUK) operates in a number of geographies in the southeastern United States with an international segment as well. First Eagle Investment Management was another major shareholder in Duke Energy Corp (NYSE:DUK) at the end of 2012 (find First Eagle’s favorite stocks).
Millennium disclosed ownership of 1.1 million shares of American Electric Power Company, Inc. (NYSE:AEP) in its filing. American Electric Power pays a dividend yield of a little under 4%. Its earnings plunged in the fourth quarter of 2012 versus a year earlier, bringing the stock’s valuation to 19 times the company’s trailing earnings, but the sell-side expects business to recover and so the forward P/E is only 15. Cliff Asness’s AQR Capital Management increased the size of its position in American Electric Power Company, Inc. (NYSE:AEP) by 19% to 1.2 million shares (see more stocks Asness was buying).
Disclosure: I own no shares of any stocks mentioned in this article.