In this article we presented the 10 high yield dividend stocks to buy according to billionaire David Harding. You can skip our detailed discussion on Harding’s investment philosophy and read the 5 High Yield Dividend Stocks to Buy According to Billionaire David Harding.
British billionaire David Harding, co-founder of Man AHL, is popular for using quantitative investment strategies backed by scientific research to make trading decisions. The business has a team of scientists tasked with fostering a research environment heavily dependent on statistical and quantitative research to facilitate informed trading decisions.
Harding is also the founder of Winton Capital Management which has been operating since 1997. The fund has $1.4 billion in managed securities as of the end of 2020. It invests in global markets using mathematical and statistical inference as its compass. Unfortunately, the fund has been down almost 80% within the last 5 years, and the disrupted markets in 2020 due to the coronavirus further reinforced the downward spiral.
Winton Capital was accustomed to double-digit growth before the financial crisis of 2008. It lost roughly $12.5 billion from assets under its management in 2020, equivalent to almost 20.5% of its portfolio. The pandemic made 2020 the worst year for the company considering the huge losses.
Winton Capital lost roughly 16% of its diversified futures holdings in 2020, but some areas showed improvement. For example, the $650 million China investment fund rallied by 25%. Its $300 million Trend fund also remained bullish with a 7.4% gain. Mr. Harding, however, described the fund’s overall performance as disappointing due to the substantial decline in asset value courtesy of the unfavorable economic environment.
Most of the losses that Winton Capital suffered in 2020 were from currencies and equities, which were coincidentally hugely impacted by the coronavirus and the economic decline that ensued. Its data-driven investments were severely exposed to the uncertainties and instabilities that arose due to the affected global economy.
Winton Capital acquired 175 new stocks and increased its stake in 68 stocks. It offloaded 327 stocks and trimmed its holdings in 1052 stocks. The fund’s market value in Q4 2020 was $1.39 billion, which was significantly lower than the $3.08 billion in the previous quarter.
Winton Capital’s Latest Investments
The hedge fund invested in multiple industrial segments in Q4 2020. Finance took up the lion’s share at 22.98%, followed by healthcare at 14.38%. Other segments include information technology at 14.26%, consumer discretionary, which took up 12.81%, industrials at 9.45%, consumer staples which accounted for 5.07%, and communications at 4.17%.
Top stocks and ETFs that had a sizable contribution to Winton portfolio
The hedge fund’s top 10 holdings account for 17.00% of its entire portfolio. Winton Capital has invested in some of the best high yield dividend stocks from different segments, as well as ETFs. Berkshire Hathaway Inc had the biggest contribution out of any single stock at 5.32%, followed by SPDR S&P Financial ETF at 2.30%. The SPDR Consumer Discretionary Select Sector ETF was a close third at 1.70%. The SPDR S&P Technology ETF accounted for 1.57% of the portfolio, SPDR S&P Health Care ETF contributed 1.50%, while Apple missed the top 5, but it did contribute a sizable 1.07%. SPDR S&P Industrial ETF accounted for 1%, Varian Medical Systems Inc. at 0.95%, Dow Inc. at 0.8%, and CME Group Inc. at 0.79%.
David Harding of Winton Capital Management
Let’s start our list of the 10 high yield dividend stocks to buy according to billionaire David Harding.
10. Ellington Financial Inc. (NYSE: EFC)
No. of Hedge Fund Holders: 9
Dividend Yield: 9.3%
Ellington Financial is specialty finance company that deals with acquisition and management of mortgage assets to deliver healthy and risk-adjusted returns for its shareholders. Its portfolio largely consists of agency and non-agency residential securities that are mortgage-backed. It also invests in other areas, including asset-backed securities, mortgage-backed derivatives, and mortgage-backed securities.
Ellington Financial’s net income in Q4 was $63.2 million, or $1.44 per share, while its net income for the full year was $17.2 million, or $0.39 per share. Its core earnings amounted to $16.0 million, equivalent to $0.37 per share. Cash and cash equivalents as of December 31 amounted to $111.6 million.
The company declared a $0.10 per share dividend on February 5, 2021. Ellington’s estimated book value as of March 31, 2021, was $18.16. While its monthly dividend payable on April 26, 2021, was $0.10 per share.
9. Chimera Investment Corporation (NYSE: CIM)
No. of Hedge Fund Holders: 16
Dividend Yield: 9.48%
This is a New York-based international REIT that was launched in 2007. It mainly deals with mortgage-related securities, asset securitization, and residential mortgage loans. The REIT has 16 hedge fund investors owning its stock, led by Omega Advisors, which owns 3.4 million Chimera shares.
The company in March sponsored CIM 2021-NR2, a seasoned non-REMIC eligible residential mortgage loan securitization valued at $240.4 million, and CIM 2021-R2, a seasoned reperforming residential mortgage loans securitization valued at $1.5 billion. Chimera Investment Corp’s board announced a cash dividend of $0.30 per common share in Q1, a healthy dividend payout that is enough to secure a spot in David Harding’s list of the best high yield dividend stocks.
The REIT reported a $0.49 per share GAAP net income in Q4 2020. Its core earnings in Q4 2020 were $0.29 per share and $1.46 for the full year. GAAP net income for the full year was $0.07 per share. Chimera’s book value in Q4 2020 was $12.36 per share.
8. ARMOUR Residential REIT, Inc. (NYSE: ARR)
No. of Hedge Fund Holders: 13
Dividend Yield: 9.86%
This REIT has been around since 2008, and it only deals with mortgage-backed residential securities guaranteed by a U.S government-sponsored entity such as Federal Home Loan Mortgage Corporation (Freddie Mac) or Federal National Mortgage Association (Fannie Mae). Sometimes the REIT invests in money-market instruments, U.S treasury securities, and interest-only securities. 13 hedge funds have ARMOUR Residential Reit in their portfolio. The company’s latest dividend pay-out was $0.10 per share.
Armour reported a core income of $23.3 million in Q4 2020, equivalent to $0.32 per share. The company’s comprehensive income for the same quarterly period was $60.2 million, equivalent to $0.89 per common share. This means that the company’s stockholder’s equity-backed annualized return was 27%. The company’s book value per common share went up from $11.74 by September 30 to $12.32 by December 31.
7. Annaly Capital Management, Inc. (NYSE: NLY)
No. of Hedge Fund Holders: 21
Dividend Yield: 9.93%
This self-managed and self-advised REIT controls a real estate portfolio that includes collateralized mortgage obligations, mortgage pass-through certificates, and agency callable debentures, among other mortgage-backed obligations. 24 hedge funds own the company’s stock.
Anally signed a definitive agreement with Slate Asset Management L.P. to sell its commercial real estate unit for $2.33 billion. The company announced its Q1 2021 dividend at $0.22 per common share, making it one of the best high yield dividend stocks in David Harding’s portfolio. The company appointed Eric A. Reeves as its Agnico-Eagle Mines, Ltd director. Anally stock posted a whopping 49.91% return over the past one year.
6. OneMain Holdings Inc (NYSE: OMF)
No. of Hedge Fund Holders: 30
Dividend Yield: 3.9%
This is an Indiana-based financial services holding company whose subsidiaries provide service loans, personal loans, as well as credit and non-credit insurance. The company has 30 hedge funds that own its stock as of the end of the fourth quarter.
OneMain Holdings’ pretax income in Q4 2020 was $476 million, while its net income during the same period was 359 million. It performed significantly better considering its pretax and net income figures were $344 million and $261 million respectively in Q4 2019. Its Q4 2020 EPS per diluted share was $2.67, which represents a notable improvement from the $1.91 earnings per diluted share reported in Q4 2019.
Here is what Miller Value Partners has to say about OneMain Holdings, Inc. in their Q4 2020 investor letter:
“OneMain Holdings (OMF) was the top contributor over the quarter, advancing 56.0% after reporting Q3 Earnings Per Share (EPS) of $2.19, well above consensus of $1.26 and the quarterly dividend, which was increased 36% to $0.45/share (3.5% annualized yield and 11.5% Trailing Twelve Month (TTM) yield). Net interest income of $836M beat estimates of $778M, implying a 24.3% asset yield and 18.7% net interest margin. Origination volumes increased 41% sequentially to $2.9Bn on continued strength in digital while end-of-period net receivables were flat at $17.8Bn. Credit quality remains excellent with net charge-offs of 5.2%, the lowest level since 3Q 2015. Management guided to year-end receivables of $18.1Bn, net charge-offs of 5.6% (from 5.8%-6.0%), and net leverage of 4.3x-4.5x.”
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Disclosure: None. 10 Best High Yield Dividend Stocks to Buy According to Billionaire David Harding is originally published on Insider Monkey.
