Lorillard Inc. (LO), American Capital Agency Corp. (AGNC), Annaly Capital Management, Inc. (NLY): 5 Dividend Monsters Hedge Funds Love The Most

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Similarly, REIT Annaly Capital Management, Inc. (NYSE:NLY) has gotten a good deal of attention from hedge funds due to its dividend yield of 12%. It too is focused on investing in mortgage-backed securities, explaining why investors aren’t bidding up the stock by enough to reduce its yield. We’d note that Annaly Capital Management, Inc. (NYSE:NLY) has been reducing its quarterly dividend payments, and they are currently about two-thirds of what they were three years ago. Still, it’s possible that this monster-yielding REITs could be good complements to a dividend portfolio rooted in high quality blue chip stocks.

Our database showed 23 hedge funds and other notable investors with positions in CenturyLink, Inc. (NYSE:CTL), a telecommunications company. The quarterly dividend was recently cut to 54 cents per share, but this still leaves CenturyLink, Inc. (NYSE:CTL) paying a yield of just under 6% (though of course it’s possible that the dividend will decline further in the future). Earnings have been up, though revenue fell 25 last quarter compared to Q1 2012. Bridgewater Associates, a large hedge fund managed by billionaire Ray Dalio, initiated a position of about 470,000 shares during the first quarter of 2013; find Bridgewater’s favorite stocks.

Electric utility FirstEnergy Corp. (NYSE:FE) rounds out our list of hedge funds’ favorite stocks in this dividend category. The current dividend yield here is 5%, and like many other utilities FirstEnergy Corp. (NYSE:FE) has little exposure to the broader economy as shown by the beta of 0.3. We’d note that the stock price has fallen 8% in the last year, so investors who bought in a year ago are currently underwater even with the high yield. However, payments have been generally consistent at 55 cents per share each quarter since being increased to that level in February 2008.

Final thoughts

Dividend stocks are written about incessantly in the financial blogosphere. One way to parse down the gigantic collection of income-generating stocks out there, however, is to parse them by hedge fund interest. As discussed in this article, Lorillard Inc. (NYSE:LO), American Capital Agency Corp. (NASDAQ:AGNC), Annaly Capital Management, Inc. (NYSE:NLY), CenturyLink, Inc. (NYSE:CTL) and FirstEnergy Corp. (NYSE:FE) offer yields in excess of 5%, and investors don’t have to worry about liquidity, as each of these stocks sport market caps larger than $5 billion. This is inherently an exclusive club, but it’s absolutely essential to know which are most loved by the world’s biggest money managers and hedge funds; continue learning why here.

Disclosure: I own no shares of any stocks mentioned in this article.

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