Investors in financial stocks are on the edge of their seats, as Janet Yellen, the Federal Reserve chairwoman, has recently hinted that there’s a greater probability of an interest rate increase at the FOMC’s next meeting. Higher interest rates mean higher income for banks, as they can charge a higher rate on the loans they give out, whgile insurers get higher returns from their investment portfolios.
As investors’ confidence in financial stocks picks up steam, let’s have a look at the most popular financial stocks among the hedge funds in our database which also make large dividend payments to shareholders.
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 Invesco Ltd. (NYSE:IVZ)
– Annual Dividend: $1.12
– Dividend Yield: 3.56%
Hedge fund interest in Invesco Ltd. (NYSE:IVZ) picked up during the second quarter, as 34 of the funds followed by Insider Monkey reported a stake in the company as of June 30, up from 30 a quarter earlier. Billionaire Ken Griffin is very bullish on this stock, as his fund Citadel Investment Group, boosted its Invesco stake by 822% to 2.34 million shares worth $59.7 million at the end of June. Richard S. Pzena’s Pzena Investment Management is also betting big on Invesco, holding 2.89 million shares valued at $73.8 million. Invesco Ltd. (NYSE:IVZ) has a market cap of $13 billion and is currently trading at a trailing price-to-earnings (P/E) ratio of 16, which is pretty much in-line with the industry average. A recent trend shows investors pulling money out of actively-managed funds and putting it into passive funds like ETF’s instead, and Invesco is well placed to benefit from that. The company has 17% of its assets invested in passive funds and has reported $4.5 billion of inflows into these funds during the second quarter, compared to zero net inflows into actively-managed funds.
#4 Prudential Financial Inc (NYSE:PRU)
– Annual Dividend: $2.80
– Dividend Yield: 3.52%
Hedge fund sentiment towards Prudential Financial Inc (NYSE:PRU) improved slightly during the second quarter, as the number of hedge funds that we track with long positions in it rose to 35 at the end of June from 33 registered three months earlier. Peter Rathjens, Bruce Clarke and John Campbell, the managers of Arrowstreet Capital, decided to step up their interest in the company during the quarter, having boosted their position by 53% to 2.23 million shares valued at $159 million. Prudential Financial Inc (NYSE:PRU)’s stock took a hit in January and early-February before rebounding in March and April. Shares ended Friday’s trading session at $79.49, just below the break-even point for the year. For the second quarter, Prudential posted adjusted earnings of $1.84 per share on the back of $11.81 billion in revenue, while investors were looking for $11.75 billion in revenue and $2.50 in earnings per share. Prudential also said that it would increase its share buyback program by $500 million to a total of $1.25 billion.
We’ll check out the three high-dividend finance stocks most favored by smart money on the next page.