ConocoPhillips (NYSE:COP) is next on our list, and it is the only S&P 500-listed company operating in the major integrated oil & gas industry to pay a dividend yield of at least 4%. ConocoPhillips spun off Phillips 66 [s:PSX], its downstream segment, last spring, and COP shares have returned 1.9% since this split hit the markets. Phillips 66 has nearly doubled over this same time period. Still, Wall Street analysts’ average price target predicts a 6% upside on ConocoPhillips from current levels, and it’s difficult to ignore the company’s massive 4.6% dividend yield.
Last but certainly not least, Lockheed Martin Corporation (NYSE:LMT) and Altria Group, Inc. (NYSE:MO) sit at a two-way tie for fifth among hedgies’ favorite mega-dividend stocks. Both companies pay dividends that yield greater than 5%, though Lockheed Martin has underperformed Altria by a whopping 15.7% in 2013 thus far.
On the whole, shares of the defense contractor are down more than 5% under the weight of Mr. Market’s fears concerning U.S. defense cuts over the foreseeable future. Lockheed Martin’s latest fourth quarter financials indicated that declines in the IT space and fewer F-22 orders were partially counterbalanced by bullish demand for F-35 and F-16 fighters, but the company still missed the Street’s EPS forecast by 5%. Income-seeking investors interested in Lockheed Martin should continue to monitor the defense industry’s uncertain macroeconomic outlook.
Altria, meanwhile, has performed very well year-to-date, and reported a generally strong fourth quarter in which cigarette volume grew by 0.4% in the face of an industry wide decline of close to 3%. The tobacco company has now beaten analysts’ bottom line estimates in three of the past five quarters, and at 13.5 times forward earnings, shares are a steal compared to the likes of Philip Morris, Reynolds American and British American Tobacco.
While there are many dividend-paying stocks in the marketplace today, the six described above shed light on how the best hedge funds are investing in this space. With results like this, retail investors should always consider the smart money’s sentiment before making an investment decision.
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