Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member.

How The Biggest Hedge Fund in the World Finds Dividends

Biggest hedge fund in the world: The entire hedge fund industry manages a little under $2 trillion in assets, and the largest of the bunch is Bridgewater Associates, which oversees more than $140 billion. Ray Dalio, a balanced investor who is famous for his principle-based top down approach to stock picking, is Bridgewater’s overlord. With a personal net worth near $13 billion, Dalio has become one of the biggest hedge fund billionaires out there, and the market-beating performance of these investors’ best stock picks is the primary reason why retail investors should pay attention.


Now, within Dalio and Bridgewater’s $11.4 billion equity portfolio, there are a variety of investment decisions at play. While many analyses on the blogosphere have endlessly analyzed how the firm is playing different macro trends, one simple question has not been answered until now: how does the biggest hedge fund in the world find dividends?

Among Dalio’s top 30 stock picks, just three offer dividend yields of at least 3%. Let’s run through this elite group.


Intel Corporation (NASDAQ:INTC) is the largest bet of this group, representing the 25th largest stake in Bridgewater’s equity portfolio. The chipset giant is held by a number of Dalio’s big-time peers like Ken Fisher and Jim Simons, and it offers a dividend yield of 3.9% at a moderate payout of about half its earnings. Since 2010, Intel’s dividend has grown by 40% and its payout ratio has fallen by close to 30 percentage points.

Positive long-term cash flow and earnings growth, in addition to a multiple of under 12 times forward EPS indicates that investors can snatch up Dalio’s favorite high-yield dividend stock on the cheap. More importantly, though, dividends appear sustainable over the next few years and actually offer the potential to grow.


CenturyLink, Inc. (NYSE:CTL), meanwhile, is next on this group, and it also sits in the tech sector. Shares of the communications company have largely underperformed its peers in recent years, but they do offer a dividend yield in excess of 6%. Unlike Intel, CenturyLink gives a very different picture of income health; a payout ratio above 100% is a major red flag, as is the fact that dividends were cut by one-fourth in early 2013.

Dalio bought this stock in the first quarter of this year, potentially after it announced a $2 billion share buyback program, so it appears that he and Bridgewater are betting on a recovery in shareholder value relatively soon. Earnings have beaten Wall Street estimates in two consecutive quarters, so we’ll be watching CenturyLink’s next conference call in early November very closely. If you’re looking to mimic Dalio here on the basis of yield only, be wary that this stock’s current dividend payout is unsustainable over the long run, and will likely face another cut.

Microchip Technology

And the tech companies keep on coming. We’re beginning to notice a trend here. Microchip Technology Inc. (NASDAQ:MCHP) is Dalio’s third largest high-yield dividend holding, and he upped his stake by 200% in his last 13F filing. Like CenturyLink, this position was built in the first quarter, but unlike the aforementioned pick, shares have had a good 2013.

DOWNLOAD FREE REPORT: Warren Buffett's Best Stock Picks

Let Warren Buffett, George Soros, Steve Cohen, and Daniel Loeb WORK FOR YOU.

If you want to beat the low cost index funds by 19 percentage points per year, look no further than our monthly newsletter.In this free report you can find an in-depth analysis of the performance of Warren Buffett's entire historical stock picks. We uncovered Warren Buffett's Best Stock Picks and a way to for Buffett to improve his returns by more than 4 percentage points per year.

Bonus Biotech Stock Pick: You can also find a detailed bonus biotech stock pick that we expect to return more than 50% within 12 months.
Subscribe me to Insider Monkey's Free Daily Newsletter
This is a FREE report from Insider Monkey. Credit Card is NOT required.