Billionaire Carl Icahn’s Favorite Dividend Stocks: Xerox Corp (XRX), American International Group Inc (AIG) & More

Investors looking for yield have had a hard time generating solid returns, with the interest rates having been kept so low for such a long time. An obvious alternative are dividend stocks. Telecommunications and utilities sectors, which are known for high concentration of dividend stocks, have registered the largest growth recentlz, as investors flocked to these stocks, pushing prices higher. Billionaire Carl Icahn also likes to invest in dividend paying stocks, as we found a number of high-dividend paying stocks among his top equity positions. Let’s have a look at five stocks that rank among Icahn’s largest positions and also sport a solid dividend yield.

While there are many metrics that investors can assess in the investment process, hedge fund sentiment is something that is often overlooked. However, hedge funds and other institutional investors allocate significant resources while making their bets and their long-term focus makes them the perfect investors to emulate. This is supported by our research, which determined that following the small-cap stocks that hedge funds are collectively bullish on can help a smaller investor beat the S&P 500 by around 95 basis points per month (see more details here).

#5 American Railcar Industries, Inc. (NASDAQ:ARII)

– Annual Dividend: $1.60

– Dividend Yield: 4.16%

First up is the US manufacturer of hopper and tank railcars. Having made no changes to the positions, Carl Ican’s fund continues to hold 11.9 million shares valued at $468 million according to its latest 13F filing. American Railcar Industries, Inc. (NASDAQ:ARII) has a market cap of $742 million and is currently trading at an earnings multiple of 7.0 compared to the industry average of 16. Since the start of 2016, the stock has been trading in a range and is currently down by 16% for the year, having ended Monday’s trading session at $38.28 per share. Although American Railcar Industries, Inc. (NASDAQ:ARII) is not very popular among hedge funds, with only 11 of the funds we follow currently invested in the stock, roughly 63% of its common stock was held by these 11 funds at the end of the quarter. Chuck Royce is also keeping an eye on this stock, as his fund, Royce & Associates, held 189,100 shares, unchanged over the quarter.

#4 Xerox Corp (NYSE:XRX)

– Annual Dividend: $0.31

– Dividend Yield: 3.23%

During the second quarter, Icahn and his team have boosted their investment in Xerox by 8%, taking it to a little over 99 million shares worth approximately $939 million at the end of June. Hedge fund interest in Xerox Corp (NYSE:XRX) picked up during the most recent quarter, with the number of funds invested having increased to 31 at the end of June, from 29 a quarter before. Anand Parekh‘s Alyeska Investment Group established a fresh position during the quarter, having amassed 5.26 million shares valued at $49.9 million. As its revenue stream has slumped in recent years, falling 75% since 2011, Xerox Corp (NYSE:XRX) is set to split its document business from the struggling service business, hoping it would reinvigorate their performance. The company’s management is adamant the split would result in a cost reduction of $2.4 billion over the next three fiscal years, with $700 million expected to accrue by the end of the current year.

#3 CVR Energy, Inc. (NYSE:CVI)

– Annual Dividend: $2.00

– Dividend Yield: 12.94%

CVR Energy is one of Carl Icahn’s largest bets in the energy sector, with Icahn Capital having indicated ownership of 71.2 million shares at the end of the second quarter, unchanged from the previous quarter. According to the fund’s latest 13F filing, this position’s value was estimated at $1.1 billion. CVR Energy, Inc. (NYSE:CVI) stock has been hit hard by the slump in commodities markets, having fallen 68% since the $48.37 high in November 2015. The company’s revenue stream is composed of payments from its two refining and natural gas subsidiary partnerships. Both ventures have had to deal with falling prices, reduced demand and higher costs due to increased regulation. At the end of June, roughly 84% of CVR Energy, Inc. (NYSE:CVI)’s common stock was held by 16 of the funds followed by Insider Monkey, down from 18 funds that held shares at the end of March. Billionaire Ken Griffin made a big bullish play on this stock, having increased his fund’s position by 173% to 223,163 shares worth $3.46 million at the end of the quarter.

#2 American International Group Inc (NYSE:AIG)

– Annual Dividend: $1.28

– Dividend Yield: 2.18%

Carl Icahn is still bullish on AIG, as the company is putting the finishing touches on its turnaround. During the second quarter, Icahn Capital’s stake in the insurance giant has been increased by 3% to 45.6 million shares worth close to $2.41 billion. One of the most popular stocks among the funds in our database, American International Group Inc (NYSE:AIG) could be found in the portfolios of 85 hedge funds at the end of June, down from 94 registered a quarter before. Harris Associates, run by Natixis Global Asset Management, also held a sizable position at the end of June, having reported ownership of 32.1 million shares, down 10% from the previous quarter. So far this year, American International Group Inc (NYSE:AIG) stock’s performance has been disappointing, as it failed to regain the ground lost during the market selloff at the beginning of the year. Shares have ended Monday’s trading session at $58.99 apiece, down 2.7% for the year. At a recent conference, AIG Commercial CEO Rob Schimek said his division is considering a takeover in the region of “low billions or hundreds of millions” to generate growth. This claim is in stark contrast with Carl Icahn’s demands to split the company into three separate entities in order to unlock shareholder value.

#1 Icahn Enterprises LP (NASDAQ:IEP)

– Annual Dividend: $6.00

– Dividend Yield: 11.96%

Carl Icahn’s number one dividend stock, and also his fund’s top equity positions, is his own holding company. According to the latest regulatory filing, Icahn Capital holds 123 million shares of Icahn Enterprises LP (NASDAQ:IEP), up by 5% during the quarter, valued at $6.67 billion. Hedge fund sentiment towards Icahn Enterprises was unchanged during the quarter, with the same 6 funds having reported a stake in the company in their latest 13F filings. Jim Simons‘ Renaissance Technologies was among the funds invested in Icahn Enterprises, having indicated ownership of 25,842 shares at the end of June, down 57% for the quarter. Carl Icahn has recently reached a deal to acquire the remaining 18% stake in auto-parts maker Federal-Mogul Holdings Corp (NASDAQ:FDML) and make it a division of Icahn Enterprises LP (NASDAQ:IEP). Icahn had initially offered $7 per share but upped his offer to $8 per unit and finally to $9.25 apiece. This deal is part of a broader strategy in the auto-part industry, with Icahn Enterprises having completed the $340 million takeover of Auto Plus, the U.S. division of Canadian parts distributor Uni Select Inc in June 2015 and the $1 billion acquisition of Pep Boys – Manny Moe & Jack earlier this year.

Disclosure: none.