Several weeks after the end of each quarter, hedge funds and other major investors are required to file 13Fs with the SEC; we collect these filings in our database, which we use to develop investing strategies (we have found that the most popular small cap stocks among hedge funds earn an average excess return of 18 percentage points per year, and think that more techniques are possible as well). We can also look for individual managers’ top picks in a number of areas, including dividend stocks, so that investors can research any names which sound interesting. Here are five stocks which John Levin’s Levin Capital Strategies reported owning at the beginning of January which feature dividend yields of 3.5% or higher according to current prices and recent dividend policy (or see the full list of stocks Levin reported owning):
The fund reported a position of 3.1 million shares in Verizon Communications Inc. (NYSE:VZ) at the end of the fourth quarter of 2012. Verizon Communications Inc. (NYSE:VZ) not only pays a high dividend yield- close to 4%- it also has little sensitivity to the broader economy as shown by the beta of 0.3. Investors should be aware that the company has been trying to buy the remainder of Verizon Communications Inc. (NYSE:VZ) Wireless from Vodafone (NYSE:VOD) and there has been some speculation that it would pay with stock. Renaissance Technologies, founded by billionaire Jim Simons, increased its stake in Verizon Communications Inc. (NYSE:VZ) during Q4 to 2.3 million shares (check out Renaissance’s stock picks).
Levin and his team cut their stake in Merck & Co., Inc. (NYSE:MRK) by 16% but still owned 3.1 million shares of the drug manufacturer according to the filing. Large healthcare companies such as Merck & Co., Inc. (NYSE:MRK) also tend to be insulated from macro factors, and so the beta here is 0.4; income or defensive investors might therefore consider it as well as Verizon Communications Inc. (NYSE:VZ), though we would advise looking into the cause of the company’s recent decline in net income. Merck & Co., Inc. (NYSE:MRK) had made our list of the most popular healthcare stocks among hedge funds in Q4 (here are more healthcare stocks hedge funds loved).
Levin Capital Strategies was buying PG&E Corporation (NYSE:PGC) between October and December, building a relatively small position up to 2.8 million shares. Also known as Pacific Gas & Electric, the California-based utility has a dividend yield close to 4% and a beta in the same range as Verizon and Merck. We would, note, however, that the market capitalization of $21 billion places the current price at 25 times trailing earnings- high for a company in a normally low-growth sector. Billionaire David Shaw’s D.E. Shaw had 1.7 million shares of PG&E Corporation (NYSE:PGC) in its portfolio (find D.E. Shaw’s favorite stocks).
According to the 13F, the fund increased its holdings of General Electric Company (NYSE:GE) during the quarter to a total of 3.6 million shares. General Electric Company (NYSE:GE)’s current yield is 3.5%. In the first quarter of 2013, net income grew 16% versus a year earlier although the company’s revenue was actually about flat. Wall Street analysts expect EPS to increase over the next couple years- the forward P/E is 12, as a result- but we aren’t that certain General Electric Company (NYSE:GE) is a good value. Fisher Asset Management, managed by billionaire Ken Fisher, had GE as one of its ten largest holdings by market value (research more stocks Fisher owned).
E I Du Pont De Nemours And Co (NYSE:DD) rounds out our list of Levin’s high yield stocks with the filing disclosing ownership of 1.2 million shares. The chemicals company recently reported its results for the first quarter of 2013; net income increased substantially, but this was due to earnings from discontinued operations. In fact, both income from continuing operations and revenue showed little change, and so when making any projections for the next couple years we would be careful of being optimistic based on this quarter alone. Still, the company did beat earnings and the stock was up nicely on the news.
Disclosure: I own no shares of any stocks mentioned in this article.