In this article, we will take a detailed look at the 10 Best Dividend Stocks to Buy According to Billionaire Leon Cooperman.
Billionaire Leon Cooperman made headlines in April when he predicted during an interview with CNBC that the US is headed for a financial crisis. Cooperman, who calls himself a “capitalist with a heart,” said that the Federal Reserve kept interest rates near zero, but raised them dramatically in a period of 12 months. Still, the 81-year-old billionaire sees no signs that the economy is “restrictive,” as he pointed to stock market highs and speculation. The Omega Family Office chairman and CEO expects “one or two” rate cuts this year. He emphasized that the market remains overvalued.
Were Billionaire Cooperman’s Recession Predictions Correct?
This isn’t the first time Cooperman warned the market about recession. In February last year, the billionaire said that the market was headed for a recession, and noted that the S&P 500 high of about 4,800 recorded in 2022 could “stand for some time.” In July 2022, while talking to Bloomberg, Cooperman said that he was “shocked” that interest rates were so low.
“I am of the view that equities are the best house in the financial asset in the neighborhood, but I don’t like the neighborhood, for a lot of reasons.”
Cooperman in the Bloomberg interview in 2022 had categorically said that sooner or later the strong dollar, prices of oil and the Fed would “lead us into a recession.” He went on to add that recession would be a “2023 event” and predicted that the market would bottom somewhere near 35% to 45% below its peak of 4800.
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The billionaire had said that he would be “very surprised” if we were to see another bull market anytime soon, given his view that we’ve had one of the biggest bull runs driven by FAANG, SPACs and speculation. The AI revolution that started in 2023 was indeed a shocker for Cooperman as his recession predictions were proven wrong.
For this article we scanned billionaire Cooperman’s Q1’2024 portfolio and chose his top 10 dividend stock picks. Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
10. Ellington Financial Inc (NYSE:EFC)
Number of Hedge Fund Investors: 6
Billionaire Leon Cooperman’s Stake: $1,771,500
Mortgage REIT Ellington Financial Inc (NYSE:EFC) is one of the best dividend stocks to buy according to billionaire Leon Cooperman. Ellington Financial Inc (NYSE:EFC) buys and manages mortgage-related, consumer-related, corporate-related, and other financial assets in the United States. Ellington Financial Inc (NYSE:EFC) is a monthly dividend stock with a high yield. The stock is down about 7% over the past one year amid volatility in the mortgage market. However, Ellington bulls believe the company can rebound amid a recovery in home sales. According to the National Associate of Realtors, existing home sales are expected to rise by 13.5% in 2024 while new home sales could increase by 19% by the end of this year.
Last month, Ellington Financial Inc (NYSE:EFC) reported Q1 results. Adjusted EPS in the quarter came in at $0.28, missing estimates by $0.08. Ellington Financial Inc’s (NYSE:EFC) price to book value as of May 31 is 0.8, while its historical median price to book value is 0.9. This metric, which is often used for valuating mortgage REITs, is also lower than P/Book Value of competitors like Chicago Atlantic Real Estate Finance Inc and Strawberry Fields REIT Inc.
9. Crescent Capital BDC Inc (NASDAQ:CCAP)
Number of Hedge Fund Investors: 8
Billionaire Leon Cooperman’s Stake: $6,910,507
Crescent Capital BDC Inc (NASDAQ:CCAP) is another high-yield dividend stock pick of billionaire Leon Cooperman in 2024. As of the end of the first quarter of 2024, Omega Advisors reported owning a $6.9 million stake in Crescent Capital BDC Inc (NASDAQ:CCAP).
Last month, Crescent Capital BDC Inc (NASDAQ:CCAP) posted Q1 results and increased its dividend by 2.4%. GAAP EPS in the quarter came in at $0.63, beating estimates by $0.05. Investment income in the period jumped 28.2% year over year to $50.4 million, surpassing estimates by $2.7 million. The company said its net asset value per share increased to $20.28, compared to $20.04 as of the end of 2023. Being a business development company, Crescent Capital BDC Inc (NASDAQ:CCAP) is in a strong position to benefit from rising interest rates, since the company provides debt and equity financing to companies across various industries.
The company talked about its strong portfolio performance during Q1 earnings call
” Overall, our investment portfolio continues to perform well with strong year-over-year weighted average revenue and EBITDA growth. That being said, we have continued to closely monitor the impact of rising borrowing costs on our portfolio companies. The weighted average interest coverage of the companies in our investment portfolio at quarter end improved from 1.7x at year-end to 1.8x as of quarter end. As a reminder, this calculation is based on the latest annualized base rate as of each respective quarter. We also continue to closely monitor how our portfolio companies are managing fixed charges. Our analysis demonstrates that our portfolio companies in the aggregate are well positioned to address fixed charges with operating cash flows and available balance sheet liquidity.” [read the full earnings call transcript here]
Crescent Capital BDC Inc (NASDAQ:CCAP) bulls believe the company’s highly diversified portfolio further protects it from industry headwinds. Its portfolio includes over 180 companies across high-growth industries like software, healthcare, financials and insurance. Analysts also like the company’s consistent de-leveraging of balance sheet. Its debt to equity ratio stands at 1.1, down from 1.23x in Q1. The company has no debts due until 2026.
8. Enterprise Products Partners LP (NYSE:EPD)
Number of Hedge Fund Investors: 23
Billionaire Leon Cooperman’s Stake: $26,744,491
Texas-based oil and gas pipeline company, Enterprise Products Partners LP (NYSE:EPD) is one of the best dividend stock picks of billionaire Leon Cooperman in 2024. The stock has a dividend yield of more than 7% as of June 2. With more than 50,000 miles of pipeline, Enterprise Products Partners LP (NYSE:EPD) boasts a whopping 300 million barrels worth of liquids storage capacity. Enterprise Products Partners LP’s (NYSE:EPD) revenue in the first quarter of 2024 jumped about 18.4% on a YoY basis. The company’s gross operating margin increased by about 7% in the first quarter on a YoY basis.
Enterprise Products Partners LP (NYSE:EPD) bulls believe the stock is undervalued when compared to peers. The stock’s EV-to-EBITDA ratio is 9.92, lower than its competitors like Kinder Morgan, TC Energy, Enbridge and The Williams Companies. For 2024 and 2025, the company expects its growth capital investments within the range of $3.25 billion to $3.75 billion. The stock has a forward P/E ratio of 10.54, compared with an industry average of 12.13. Wall Street expects the company’s earnings to grow 5.90% next year and at 8.15% over the next five years on a per-annum basis.
7. Arbor Realty Trust Inc (NYSE:ABR)
Number of Hedge Fund Investors: 24
Billionaire Leon Cooperman’s Stake: $31,550,821
With an over 12% dividend yield and P/E ratio under 10, Arbor Realty Trust Inc (NYSE:ABR) is one of the best dividend stock picks of billionaire Leon Cooperman in 2024. Arbor Realty Trust Inc’s (NYSE:ABR) liquidity and strong position in the mortgage REIT industry makes it an attractive play. Its book value over the past five years has jumped 36% when compared to peers in the industry who have seen their book value decline by 18% on average in the same period.
The stock’s Price to Book value is 1.04, lower than its 5-year average of 1.252. Arbor Realty Trust Inc (NYSE:ABR) is undergoing difficult times amid rising rates and headwinds in the mortgage market, but the management expects improvements down the road. Here is what Arbor Realty Trust Inc’s (NYSE:ABR) management said during the latest earnings call:
“We had a tremendous amount of success in the first quarter, working through a substantial amount of our delinquencies and modifying these loans by getting bars to bring a significant amount of fresh equity to the table and recapitalizing their deals. As a result in the first quarter, we successfully modified 40 loans, total of $1.9 billion, which fresh capital being brought to the table in every one of these deals.
This includes cash to purchase the low interest rate caps, fund interest rate, renovation reserves, bring any past due loans current and pay down balances where appropriate. In fact bars objected approximately $45 million of new capital into these deals with $1.65 billion of these loans purchasing new interest rate caps. We have also been highly effective in refinancing deals for our agency business as well as leveraging our long-term standing relationships, many quality sponsors to step in and take over assets that are underperforming and assumed debt. This is a difficult and complicated work in an extremely challenging environment. And I can’t say enough about the efforts put forth by our entire organization successfully managing through this dislocation.
We’re very pleased with the success we have had to-date and expect to remain extremely busy over the next few months and steadfast now approach as we continue to manage through the back balance of this downturn. Clearly in this environment having adequate liquidity is paramount to our success. As a result, we have focused heavily on maintaining a very strong liquidity position. Currently we have approximately $1 billion of cash between $800 million of corporate cash and $600 million of cash in our CLOs that result in additional cash equivalent of approximately $150 million.”
Of the 919 hedge funds tracked by Insider Monkey, 24 hedge funds reported owning stakes in Arbor Realty Trust Inc (NYSE:ABR), up from 17 funds in the previous quarter.
6. DT Midstream Inc (NYSE:DTM)
Number of Hedge Fund Investors: 25
Billionaire Leon Cooperman’s Stake: $38,784,447
With a dividend yield of over 4%, DT Midstream Inc (NYSE:DTM) is one of the best dividend stock picks of billionaire Leon Cooperman in 2024. The stock is up about 41% over the past one year. In April, DT Midstream Inc (NYSE:DTM) reported Q1 results. Adjusted EPS in the quarter came in at $0.99, surpassing estimates by $0.05.
DT Midstream Inc (NYSE:DTM) is involved with natural gas transportation and pipelines. DT Midstream Inc (NYSE:DTM) bulls believe the stock is poised to benefit from the broader transition to cheap natural gas, as it owns two of the largest natural gas basins in the United States: the Marcellus basin and the Haynesville basin. The company spent heavily last year, with over $700M in Capex reported for the period. However, the company is eyeing fiscal discipline in 2024. The management highlighted these plans during Q1 earnings call:
“We are confident in our full year outlook and reaffirming our 2024 adjusted EBITDA guidance range and our 2025 adjusted EBITDA early outlook, reflecting the strong positioning of our assets. We’ve increased our committed capital in 2024 and 2025 to reflect new organic projects reaching FID, with $265 million to $295 million committed in 2024 and approximately $140 million committed in 2025. This increase is reflective of projects from our prior backlog that were already contemplated in our guidance, and we will continue to expect to spend within free cash flow in 2024 and 2025.
Our short cycle growth investments continue to track on budget and on schedule, with some projects running ahead of schedule, resulting in meaningful growth contributions in 2024 and 2025. Our approach to capital allocation remains thoughtful and disciplined, with our focus on spending within cash flow over the balance of our five-year plan and achieving an investment grade credit rating.”
Analysts believe DT Midstream Inc (NYSE:DTM)’s basins are among the largest sources of wet and dry gas and their location makes them attractive for supply to main hubs in the country at attractive rates. However, the company’s lack of geographical diversification and the stock’s high valuation have been concerning. DT Midstream’s forward P/E is 17.48, much higher than the industry average of 10.92. Wall Street expects the company’s earnings to grow 11% next year but moderate to just 1.50% over the next five years on a per-annum basis. For value conscious investors, there could be many other undervalued opportunities in the mid-stream energy sector.
5. Energy Transfer LP Unit (NYSE:ET)
Number of Hedge Fund Investors: 32
Billionaire Leon Cooperman’s Stake: $189,708,519
Billionaire Leon Cooperman bought a stake in Energy Transfer LP Unit (NYSE:ET) back in the second quarter of 2017. Since then the billionaire has added to his position in Energy Transfer LP Unit (NYSE:ET), ending the March 2024 quarter with a $190 million stake. Energy Transfer LP Unit (NYSE:ET) accounts for about 7% of Omega Advisors’ Q2 portfolio.
Last month, Bank of America published a list of stocks poised to benefit from the electrification theme of future technology, driven by AI, data centers and push for electrification. BofA picked Energy Transfer LP Unit (NYSE:ET) for this theme under the oil and gas category.
Energy Transfer LP Unit (NYSE:ET) remains one of the most notable players in the industry. During the March quarter, all segments of Energy Transfer grew, with net income and adjusted EBITDA increasing by 11% and 13% on a YoY basis, respectively. The company saw record volumes in its crude pipeline segment.
Energy Transfer LP Unit (NYSE:ET) bulls also argue that just 10% of the company’s business is exposed to the volatile commodities sector. The company has also raised its full-year 2024 adjusted EBITDA guidance. The company expects the metric to total in the range of $15.0 billion and $15.3 billion, compared to the previous range of between $14.5 billion and $14.8 billion.
Energy Transfer’s earnings are expected to grow 13% next year and 15% over the next five years on a per-annum basis. The stock’s forward P/E of 9.42 is still lower than the industry median 11.88, which makes the stock undervalued given ET’s growth projections.
Silver Beech Capital made the following regarding Energy Transfer LP (NYSE:ET) in its fourth quarter 2023 investor letter:
Energy Transfer LP (NYSE:ET) owns and operates the largest and most balanced collection of energy infrastructure assets in the United States. ET’s assets include 125,000 miles of oil and natural gas pipelines, export facilities on both the Gulf Coast and East Coast, and more than 1 million barrels per day of natural gas liquid fractionation capacity. ET accounts for 20% of worldwide natural gas liquid exports. Further, ET is uniquely connected to every major hydrocarbon basin in the United States.
By assembling energy infrastructure to gather, process, transport, and store hydrocarbons, ET connects exploration and production companies (“E&Ps”) with downstream end users such as gas stations, utilities, and export facilities. As an end-to-end midstream solution, ET enables its customers to focus on their portion of the value chain without the burden of significant but essential midstream logistics. ET’s services thus add tremendous value to all constituents of the energy marketplace.
Though natural gas is a relatively clean source of fuel, restrictive federal and state regulations and other permissions severely restrict the building of natural gas pipelines and other infrastructure in North America that would help facilitate abundant hydrocarbon production. Pipelines are by far the cheapest and greenest method of transporting hydrocarbons; pipelines reduce emissions from truck transport and reduce congestion on highways, rail, and shipping routes…” (Click here to read the full text)
4. OneMain Holdings Inc. (NYSE:OMF)
Number of Hedge Fund Investors: 33
Billionaire Leon Cooperman’s Stake: $3,209,678
Baltimore, Maryland-based financial services company OneMain Holdings Inc. (NYSE:OMF) is one of the best dividend stocks to buy in 2024 according to billionaire Leon Cooperman. In April OneMain Holdings Inc. (NYSE:OMF) hiked its dividend by 4% and posted upbeat Q1 results. While the EPS of $1.29 missed estimates, OneMain Holdings Inc. (NYSE:OMF) bulls were quick to highlight the $0.27 restructuring charge. OneMain Holdings Inc. (NYSE:OMF) is looking to slash its operating expenses and optimize its cost structure. Interest income in the first quarter rose by $80 million while interest expense saw an increase of $38 million. In the March quarter OneMain Holdings Inc. (NYSE:OMF) cut its long-term debt by $300 million to $19.52 billion. Despite rising interest rates and an uncertain market environment, OneMain Holdings Inc. (NYSE:OMF) has $8.3 billion in unencumbered receivables and $8 billion in untapped credit capacity.
As of the end of the first quarter of 2024, 33 hedge funds tracked by Insider Monkey reported owning stakes in OneMain Holdings Inc. (NYSE:OMF). The biggest stake in OneMain Holdings Inc. (NYSE:OMF) is owned by Glenn Greenberg’s Brave Warrior Capital which owns a $341 million stake in OneMain Holdings Inc. (NYSE:OMF).
Patient Capital Management stated the following regarding OneMain Holdings, Inc. (NYSE:OMF) in its fourth quarter 2023 investor letter:
“OneMain Holdings, Inc. (NYSE:OMF) is a name we have owned for years. It’s a high return, well-managed franchise that has successfully navigated credit cycles for nearly a hundred years. The stock has continued to climb higher with prudent risk management and an 8% dividend yield.”
3. Devon Energy Corp (NYSE:DVN)
Number of Hedge Fund Investors: 44
Billionaire Leon Cooperman’s Stake: $110,396,000
Upstream energy giant Devon Energy Corp (NYSE:DVN) is a notable dividend stock popular among hedge funds. During the first quarter, the company’s production beat its guidance by 4%, driven by strong activity in the Delaware Basin. Devon’s FCF hit $844 million, representing its 15th consecutive quarter of strong FCF generation. Devon Energy Corp (NYSE:DVN) also increased its 2024 production guidance to about 665 thousand barrels / day. Devon Energy Corp (NYSE:DVN) is allocating a whopping 30% of the FCF for shareholder returns, with $3 billion share buyback authorization in place. Analysts believe Devon Energy Corp (NYSE:DVN)’s low net debt-to-EBITDAX of 0.7x and high growth estimates make it an undervalued play.
Devon Energy Corp (NYSE:DVN) is currently trading at a P/E multiple of 8.9, lower than Devon Energy Corp’s (NYSE:DVN) five-year average P/E of 10.84 as well as the industry mean of 10.73. Wall Street analysts have an average price target of $58.45 for Devon Energy Corp (NYSE:DVN), about 20% higher than the stock’s current levels. Devon Energy Corp (NYSE:DVN) has a $3 billion share buyback authorization in place, which is about 10% of its outstanding shares. In the first quarter alone Devon Energy Corp (NYSE:DVN) returned $430 million to shareholders through dividends and buybacks.
As of the end of the first quarter of 2024, 44 hedge funds tracked by Insider Monkey reported owning stakes in Devon Energy Corp (NYSE:DVN).
2. Cigna Group (NYSE:CI)
Number of Hedge Fund Investors: 61
Billionaire Leon Cooperman’s Stake: $98,299,189
According to data from Yahoo Finance, Cigna Group’s (NYSE:CI) estimate EPS for 2025 is $32.08. Assuming the insurance sector’s P/E ratio is 19 and using Cigna Group’s (NYSE:CI) current stock price of around $338, the stock is looks undervalued. This assumption is also backed by data compiled by Yahoo Finance, which says the average analyst price target set by the Wall Street for Cigna Group (NYSE:CI) is $391. Cigna Group (NYSE:CI) is a giant in the insurance industry, with 200 million total customer relationships. Over the past 20 years, Cigna Group (NYSE:CI) managed to grow its earnings in 18 years. Wall Street estimates expect Cigna Group (NYSE:CI) to grow 11.97% per annum over the next five years, while its growth this year is expected to hit 13.7%. The stock’s forward P/E ratio is 12.11, much lower than the sector median multiple of 19.70.
Here is what Davis New York Venture Fund has to say about The Cigna Group (NYSE:CI) in its Q3 2023 investor letter:
“In the attractive healthcare sector, we look beyond the obvious to identify businesses that simultaneously have exposure to this growth industry and also trade at low prices. We’re especially drawn to companies like Cigna Group, whose products or services play a part in helping to mitigate healthcare’s constantly rising costs. The healthcare industry has been a growing part of the U.S. economy for decades. As a result, many companies in this sector trade at high valuations reflecting their robust but well-known reputation for growth. For value-conscious investors like us, investing in healthcare requires looking beyond the obvious to identify businesses that have exposure to this growth industry but which trade at low prices. Furthermore, recognizing that the constantly rising cost of healthcare cannot go on forever, we have been particularly drawn to companies whose products or services play some role in managing or reducing the cost of care. As a result, we have positions in Cigna Group, a well-regarded provider of managed care.
1. Citigroup Inc (NYSE:C)
Number of Hedge Fund Investors: 94
Billionaire Leon Cooperman’s Stake: $18,972,000
Warren Buffett, Leon Cooperman, Ken Fisher, Cliff Asness, Israel Englander – the list of billionaires having stakes in Citigroup Inc (NYSE:C) is long, thanks to Citigroup Inc’s (NYSE:C) strong fundamentals and dividend history. Citigroup Inc (NYSE:C) has upped its dividend every year since 2011. Citigroup Inc (NYSE:C) expects annual revenue growth of about 4%-5% by 2026, and it’s targeting an 11-12% return on tangible common equity in the same period.
Analysts at BofA expect Citi to clock in EPS growth of 8% this year. According to Yahoo Finance data, Citigroup Inc’s (NYSE:C) EPS estimate for the next year (2025) is around $7.21. Assuming the banking sector’s average multiple of 10.32, the stock is currently undervalued. Wall Street’s average analyst estimate for Citigroup Inc (NYSE:C) is $66, while the stock was trading at around $62 as of June 1.
Silver Beech Capital stated the following regarding Citigroup Inc. (NYSE:C) in its first quarter 2024 investor letter:
“Since the beginning of 2023, Citigroup Inc. (NYSE:C) has been one of the Fund’s largest holdings. In our Q3 2023 investor letter, we laid out our core investment thesis for Citi: although the bank was an underperformer (weak returns on equity), Citi was (1) less risky than it had ever been and (2) cheaper than it had ever been. The Fund’s investment thesis for Citi featured in a November 2023 Euromoney article Citi 2.0: If she builds it, will they come?
The market narrative has started to converge on our investment thesis. During the first quarter, Citi was the best-performing bank stock in the S&P 500 index. However, improvements in Citi’s operating performance have come more slowly than its share price gains. Due to this converging market perception with our own thesis, the Fund exited its position in Citi. The Fund’s stake in Citi generated a 34% gross IRR over our 14-month investment period.”
While we acknowledge the potential of Citigroup Inc (NYSE:C) as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than Citigroup but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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