5 High-Paying Dividend Stocks That Hedge Funds Gobbled Up in Q2

Given that hedge funds have more resources and experience than the average investor, we at Insider Monkey make a collection of lists each quarter detailing the favorite holdings of the world’s top hedge funds in a variety of categories.

In this article, we’ll check out five of the highest-dividend stocks that hedge funds were buying in the second quarter. Those stocks are HSBC Holdings plc (ADR) (NYSE:HSBC), Communications Sales & Leasing Inc (NASDAQ:CSAL), BP plc (ADR) (NYSE:BP), Senior Housing Properties Trust (NASDAQ:SNH), and Mobil’nye Telesistemy PAO (ADR) (NYSE:MBT). Without further ado, let’s see how the hedge funds in our database were trading these stocks last quarter.

At Insider Monkey, we track around 750 hedge funds and institutional investors. Through extensive backtests, we have determined that imitating some of the stocks that these investors are collectively bullish on, can help retail investors generate double digits of alpha per year. The key is to focus on the small-cap picks of these funds, which are usually less followed by the broader market and allow for larger price inefficiencies (see the details here).

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#5 Senior Housing Properties Trust (NASDAQ:SNH)

– Number of Hedge Fund Shareholders (as of June 30): 16
– Total Value of Hedge Funds’ Holdings (as of June 30): $54.37 million
– Hedge Funds’ Holdings as Percent of Float (as of June 30): 1.10%

Senior Housing Properties Trust (NASDAQ:SNH) has had a terrific year, with its stock rising by 52.5% year-to-date as investors become more confident on the company’s cash flows. Given the stock’s strong performance, it isn’t surprising that an increasing number of the hedge funds in our database own the stock. Of the 749 funds in our system that filed 13F’s for the June 30 reporting period, 16 of them owned shares of Senior Housing Properties Trust at the end of the second quarter, up by five funds from the end of the first quarter. Although analysts are concerned about potential oversupply in the senior living sector, the company’s management has executed very well and Senior Housing Properties isn’t very leveraged versus its NOI. Senior Housing Properties currently pays a quarterly dividend of $0.39, which provides investors with an annual yield of 7.23%.

#4 Mobil’nye Telesistemy PAO (ADR) (NYSE:MBT)

– Number of Hedge Fund Shareholders (as of June 30): 17
– Total Value of Hedge Funds’ Holdings (as of June 30): $167.84 million
– Hedge Funds’ Holdings as Percent of Float (as of June 30): 2.00%

Although Russian stocks have generally not been favored among the smart money set due to the uncertain Ruble and the fluctuating political situation between Russian and the U.S., Mobil’nye Telesistemy PAO (ADR) (NYSE:MBT) is an exception. 17 hedge funds that we track had a bullish position in Mobil’nye Telesistemy at the end of June, up by six funds from the end of March. Despite the weak Russian economy and the volatile Ruble, Mobil’nye Telesistemy PAO shares have rallied by almost 40% year-to-date as some investors buy the telecom for its predictable cash flows (in ruble terms) and its dividend yield. In terms of its dividend, the company’s Board recently recommended shareholders approve semi-annual dividends of RUB23.98 per ADR, which under current dollar terms would be $0.37, good for a 9% annual dividend yield. If oil prices go up and the Ruble follows, the stock could have further upside.

We’ll check out three more high-dividend stocks that hedge funds were buying last quarter on the next page.

#3 HSBC Holdings plc (ADR) (NYSE:HSBC)

– Number of Hedge Fund Shareholders (as of June 30): 18
– Total Value of Hedge Funds’ Holdings (as of June 30): $1.06 billion
– Hedge Funds’ Holdings as Percent of Float (as of June 30): 0.90%

Although HSBC Holdings plc (ADR) (NYSE:HSBC) shares haven’t outperformed the index this year due to the uncertain global economy, the bank’s shares have been on an upward trend since early-July, as investors anticipate higher interest rates. Given that Federal Reserve Chair Janet Yellen recently said at Jackson Hole that the case for “[…] an increase in the federal funds rate has strengthened in recent months,” higher interest rates could be a reality sooner rather than later, and HSBC could begin generating more interest income. The added interest income will make HSBC’s annual dividend of $2 per share for an 8.50% annual yield, safer. 18 hedge funds in our system owned HSBC shares on June 30, up by four quarter-over-quarter.

#2 Communications Sales & Leasing Inc (NASDAQ:CSAL)

– Number of Hedge Fund Shareholders (as of June 30): 24
– Total Value of Hedge Funds’ Holdings (as of June 30): $489.58 million
– Hedge Funds’ Holdings as Percent of Float (as of June 30): 11.20%

The number of hedge funds that we track with holdings in Communications Sales & Leasing Inc (NASDAQ:CSAL) rose by nine quarter-over-quarter to 24 as of the end of June, making Communications Sales & Leasing one of the most popular high-dividend stocks during the quarter. Communications Sales & Leasing currently pays a quarterly dividend of $0.60 per share, good for an 8.14% annual yield. Communication Sales and Leasing reported mixed earnings for its second quarter, with FFO of $0.66 on sales of $188.6 million. The results beat FFO estimates by $0.01 per share but missed revenue expectations by $0.44 million.

#1 BP plc (ADR) (NYSE:BP)

– Number of Hedge Fund Shareholders (as of June 30): 40
– Total Value of Hedge Funds’ Holdings (as of June 30): $1.76 billion
– Hedge Funds’ Holdings as Percent of Float (as of June 30): 1.60%

With 40 hedge funds reporting long positions in BP plc (ADR) (NYSE:BP) as of the end of June, up by six from the beginning of April, the stock ranked as the most popular high-dividend stock (with an annual yield of around 7% currently) that also enjoyed positive hedge fund sentiment during the second quarter. Although Brent prices fell in late-July, they reversed in August on the back of supportive Saudi and Iranian comments. If Brent prices reach the $50-to-55 mark and stay there, BP’s dividend will likely be sustainable over the long-term. Jim Simons‘ Renaissance Technologies raised its stake in the super-major by 51% in the second quarter, to almost 1.5 million shares at the end of June.

Disclosure: None