5 Best Dividend Stocks According to Howard Marks’ Oaktree Capital Management

In this article, we will discuss the 5 best dividend stocks according to Howard Marks’ Oaktree Capital Management. If you want to read our detailed analysis of the hedge fund and its investment strategy, go directly to read 10 Best Dividend Stocks According to Howard Marks’ Oaktree Capital Management

5. Uniti Group Inc. (NASDAQ:UNIT)

Number of Hedge Fund Holders: 14
Dividend Yield as of February 8: 5.20%
Oaktree Capital Management’s Stake Value: $42,028,000

Uniti Group Inc. (NASDAQ:UNIT) is an American real estate investment trust that mainly invests in the communications industry. In Q3 2021, Oaktree Capital held a stake worth over $42 million in the company, which represented 0.58% of its 13F portfolio. The hedge fund started investing in Uniti Group Inc. (NASDAQ:UNIT) during the third quarter of 2020.

Analysts have been skeptical about Uniti Group Inc. (NASDAQ:UNIT)’s dividend when the company cut its rather stable dividend of $0.60 per share by 91.7% during Q4 of 2019. However, the company’s 5-year dividend growth rate stands at 4.78%, with a safe payout ratio of 35.71%. Currently, Uniti Group Inc. (NASDAQ:UNIT) pays a quarterly dividend of $0.05 per share, which yields 5.20%.

Of the 867 hedge funds tracked by Insider Monkey, 14 hedge funds held stakes in Uniti Group Inc. (NASDAQ:UNIT) in Q3, valued at around $351 million. In the previous quarter, 16 hedge funds held a stake worth $295.6 million in the Arkansas-based company.

4. Oaktree Specialty Lending Corporation (NASDAQ:OCSL)

Number of Hedge Fund Holders: 10
Dividend Yield as of February 8: 8.40%
Oaktree Capital Management’s Stake Value: $31,701,000

Oaktree Specialty Lending Corporation (NASDAQ:OCSL) is an American specialty finance company that provides one-stop credit solutions to different organizations. In Q3 2021, the number of hedge funds tracked by Insider Monkey declined slightly to 10, from 11 in the previous quarter. These stakes hold a consolidated value of roughly $70 million.

Over the four quarters in 2021, Oaktree Specialty Lending Corporation (NASDAQ:OCSL) has increased its quarterly dividend by 32%. Currently, the company pays a quarterly dividend of $0.16 per share, with a yield of 8.40%. In November 2021, JMP Securities raised its price target on Oaktree Specialty Lending Corporation (NASDAQ:OCSL) to $8.50, while maintaining a Market Perform rating on the shares.

In Q3 2021, Oaktree Capital held about 4.5 million shares in Oaktree Specialty Lending Corporation (NASDAQ:OCSL), worth over $31.7 million. The hedge fund increased its position in the company significantly by 1,527%, which made up 0.44% of its portfolio.

3. Petróleo Brasileiro S.A. – Petrobras (NYSE:PBR)

Number of Hedge Fund Holders: 23
Dividend Yield as of February 8: 6.68%
Oaktree Capital Management’s Stake Value: $90,996,000

Petróleo Brasileiro S.A. – Petrobras (NYSE:PBR), a Brazilian petroleum company, pays a quarterly dividend of $0.616 per share. During the third quarter, the company paid over $7.3 billion in dividends to shareholders. Moreover, Petróleo Brasileiro S.A. – Petrobras (NYSE:PBR) expects dividend payments to reach approximately $13 billion per year in over 5 years.

Oaktree Capital started investing in Petróleo Brasileiro S.A. – Petrobras (NYSE:PBR) during the fourth quarter of 2010. In Q3 2021, the hedge fund held shares of the company worth around $91 million, after increasing its stake in the company by 4%. Petróleo Brasileiro S.A. – Petrobras (NYSE:PBR) accounted for 1.27% of the fund’s 13F portfolio.

At the end of Q3 2021, 23 hedge funds tracked by Insider Monkey reported owning a roughly $3 billion worth of stake in Petróleo Brasileiro S.A. – Petrobras (NYSE:PBR). In comparison, 25 hedge funds held stakes in the company in the previous quarter, valued at around $2.8 billion. Among these funds, GQG Partners held a stake worth $1.8 billion in Petróleo Brasileiro S.A. – Petrobras (NYSE:PBR), becoming its largest shareholder in Q3.

2. Vale S.A. (NYSE:VALE)

Number of Hedge Fund Holders: 27
Dividend Yield as of February 8: 15.9%
Oaktree Capital Management’s Stake Value: $83,460,000

Vale S.A. (NYSE:VALE) is a Brazilian mining company and is one of the largest producers of iron ore and nickel in the world. In Q3 2021, 27 hedge funds tracked by Insider Monkey held stakes in the company, the same as in the previous quarter. These stakes hold a value of roughly $2 billion.

Vale S.A. (NYSE:VALE) currently pays a semi-annual dividend of $1.542 per share, with an attractive dividend yield of 15.9%. The company’s policy of paying dividends twice a year resulted in tremendous cash flow performance, where it was able to pay roughly $14 billion in dividends during the first nine months of 2021. In Q3 2021, Oaktree Capital held about 6 million shares in Vale S.A. (NYSE:VALE), worth over $83.4 million. The company represented 1.16% of the hedge fund’s 13F portfolio.

Due to the increasing prices of iron ore, Wall Street analysts provided a positive stance on Vale S.A. (NYSE:VALE). In January, both RBC Capital and Jefferies raised their price targets on the stock to $17 and $16, respectively.

Miller Value Partners mentioned Vale S.A. (NYSE:VALE) in its Q3 2021 investor letter. Here is what the firm has to say:

Vale (VALE) was the top detractor over the quarter, falling 32.6% in sympathy with iron ore’s 48% decline from record highs on China capacity curbs and growing fears of financial issues within the property sector. Vale reported Q2 EBITDA of $11.24Bn, slightly below consensus of $11.47Bn on higher than expected iron ore cash costs. Free cash flow of $6.5Bn (35% annualized yield) came in well ahead of expectations, driving $2.6Bn of stock buybacks and a 1H21 dividend of $7.6Bn, implying year-to-date (YTD) shareholder returns of roughly $13.8Bn (19% of the current market cap). Management maintained FY21 production guidance for iron ore of 315-335 Metric tons (Mt) and lowered year-end 2022 exit capacity to 370Mt (from 400Mt) due to Northern System licensing delays. Additionally, the company hosted their annual Investor Day, outlining new production initiatives aimed at becoming a key supplier to steelmakers in light of decarbonization goals.”

1. Star Bulk Carriers Corp. (NASDAQ:SBLK)

Number of Hedge Fund Holders: 21
Dividend Yield as of February 8: 19.5%
Oaktree Capital Management’s Stake Value: $624,877,000

Star Bulk Carriers Corp. (NASDAQ:SBLK), a Greece-based shipping company, was the second-largest holding of Oaktree Capital in Q3 2021. The hedge fund held a $624.8 million worth of stake in the company, which represented 8.72% of its 13F portfolio.

On November 16, 2021, Star Bulk Carriers Corp. (NASDAQ:SBLK) announced a quarterly dividend of $1.25 per share, up 78.6% from its previous dividend of $0.70 per share.

At the end of Q3 2021, 21 hedge funds in Insider Monkey’s database held stakes in Star Bulk Carriers Corp. (NASDAQ:SBLK), down from 24 in the previous quarter. The total value of these stakes is over $846 million.

Massif Capital mentioned Star Bulk Carriers Corp. (NASDAQ:SBLK) in its Q3 2021 investor letter. Here is what the firm has to say:

“We initiated one long position, one short position and exited one position during the third quarter. Our new long position was in Star Bulk Carriers (SBLK), a pure-play dry bulk operator with roughly 120 controlled vessels and 14 million tons of combined cargo capacity globally.

SBLK has one of the better management teams in the maritime shipping industry and the lowest cost structure among all dry bulk names. After announcing their new dividend policy in May, SBLK now has one of the best payout structures in shipping. The firm has paid out $0.3 and $0.7 per share in dividends for the first and second quarters of 2021. SBLK will most likely announce a dividend for the third quarter somewhere in the $1.15-$1.25 per share range, depending on movement in net working capital.

We believe the best way to look at this business is through cash generation potential and how much is returned to investors. The current equity valuation does not reflect current rates for shipping (earnings), partly because of the velocity of the move in rates and because shipping cycles turn, and it’s not clear whether this is a local top or the early innings of a multi-year cycle. Our belief is the latter. Part of our catalyst is the market re-rating the stock higher once the length of the increased earnings power becomes understood. It is a relatively strong catalyst in the sense that with a strong dividend policy, we can be patient for the market to underwrite this story as the cash is either returned to us via a high dividend yield if the market is either slow or chooses not to join our side of the trade.

Our estimates suggest a time-charter equivalent rate (net profit or loss of operating a vessel daily) of at least $30,000 for SBLK in Q4, with the firm earning a potential annual average of $26,000. Our base case is that this is a strong floor going into next year, with little need to articulate much more upside. If rates hold, which we expect them to do, we could see a 20+% annual dividend year next year for SBLK. If the market priced the equity such that the dividend yield was 8%, that implies a $62 stock. Today our base case target for the firm is $37 per share. This is likely conservative as we know that third-quarter rates are higher than the second quarter, and third-quarter dividends will most likely reflect that. We are cautious about diving too deep into the sensitivities to the upside with this position as we are arriving at some pretty remunerative torque using current contracted values and seemingly conservative forecasts…” (Click here to see the full text)

You can also take a look at 10 Best Bank Stocks To Buy Now and 15 Best Blue Chip Stocks To Buy Now