Billionaire Leon Cooperman’s Favorite Dividend Stocks

Most investors enjoy receiving dividend checks and enjoy owning dividend-paying stocks. Although the share price of a dividend-paying company can follows ups and downs throughout the whole year, investors still make money from holding that reliable stock. The key word here is reliable! Some high-dividend stocks may not necessarily be reliable, as their companies’ Boards may decide not to pay any dividend whenever things take a turn for the worse. Therefore, if one is looking for stocks that been consistently paying out dividends, he/she should look for financially strong and mature companies. The well-known billionaire Leon Cooperman, founder of Omega Advisors hedge fund, and his team recently disclosed their 25 top positions through an investor conference call. Thus, this article will lay out the updated list of Cooperman’s top dividend picks as of October 16.

We follow hedge funds like Omega Advisors because our research has shown that their stock picks historically managed to generate alpha even though the filings are up to 45-days delayed. We used a 60-day delay in our back tests to be on the safe side and our research showed that the 15 most popular small-cap stocks among hedge funds outperformed the S&P 500 Total Return Index by an average of 95 basis points per month between 1999 and 2012. After adjusting for risk, our calculations revealed that these stocks’ monthly alpha was 80 basis points. We have also been sharing and tracking the performance of these stocks since the end of August 2012, during which time they have returned 102%, outperforming the S&P 500 ETF by more than 53 percentage points (see more details here).

#5 Pfizer Inc. (NYSE:PFE)

Shares Owned by Omega Advisors (as of June 30): None

Portion of Omega’s Assets (as of October 16): 2.1%

Current Dividend Yield: 3.22%

Pfizer Inc. (NYSE:PFE) represents a new position for Omega Advisors, as it did not disclose any shares in the biopharmaceutical company through the 13F filing for the June quarter. The newly-disclosed position amassed 2.1% of the hedge fund’s assets on October 16 and is one of the two healthcare picks that rank among the top 25 holdings. The company has a quarterly dividend distribution of $0.28 per share, which offers a current dividend yield of 3.22%. On Thursday, the company’s officials confirmed that they had been in talks to acquire Allergan PLC (NYSE:AGN), but assured that no agreement had been reached to that point in time. The market is already pricing in a potential deal, but the shares of Pfizer are still 8% in the green year-to-date. Ken Fisher’s Fisher Asset Management reported a 31.93 million-share position in Pfizer Inc. (NYSE:PFE) through the latest round of 13F filings.

#4 Dow Chemical Co (NYSE:DOW)

Shares Owned by Omega Advisors (as of June 30): 2.32 million shares ($118.49 million)

Portion of Omega’s Assets (as of October 16): 1.7%

Current Dividend Yield: 3.3%

Dow Chemical Co (NYSE:DOW) has gained a few spots in the list of Leon Cooperman’s largest holdings since the end of the second quarter. It is worth pointing out that Omega Advisors was bullish on the stock during the second quarter, when it added some 442,000 shares to the holding. On October 22, the company’s Board of Directors declared a quarterly dividend of $0.46 per share, which marks an increase of 10% from the previously-paid dividend. As a result, the Dow’s dividend increased by 21% on a compound annual basis since the last quarter of 2009. Even more to that, Dow Chemical has paid out cash dividends each quarter since 1912, which emphasizes the reliability of this company. Meanwhile, the stock is up 13% since the beginning of the current year, which represents one more reason to own this stock. Dan Loeb’s Third Point was the largest shareholder of Dow Chemical Co (NYSE:DOW) within our database at the end of the June quarter, holding 23 million shares.

#3 Navient Corp (NASDAQ:NAVI)

Shares Owned by Omega Advisors (as of June 30): 7.73 million shares ($140.76 million)

Portion of Omega’s Assets (as of October 16): 1.8%

Current Dividend Yield: 4.83%

Navient Corp (NASDAQ:NAVI) lost a few positions in the list of Omega Advisors’ top holdings and accounts for 1.8% of the hedge fund’s assets as of October 16. The loan management, servicing and asset recovery company has recently announced the approval of a quarterly dividend of $0.16 per share for the fourth quarter. This provides a current dividend yield of 4.83%. The shares of the company are 38% in the red year-to-date, but it is hard to overlook that they are trading at a P/E ratio of 4.92, which makes the stock look attractive. Therefore, the mix of cheap valuation and high dividend makes this stock an attractive opportunity at the moment. D.E. Shaw & Co. L.P., founded by David E. Shaw, held a 8.93 million-share stake in Navient Corp (NASDAQ:NAVI) at the end of June.

#2 Targa Resources Corp (NYSE:TRGP)

Shares Owned by Omega Advisors (as of June 30): 1.77 million ($157.76 million)

Portion of Omega’s Assets (as of October 16): 1.8%

Current Dividend Yield: 6.63%

Targa Resources Corp (NYSE:TRGP) was among the ten largest holdings in Leon Cooperman’s portfolio at the end of the second quarter, but currently represents the 16th-largest holding and accounts for 1.8% of Omega Advisors’ assets. Just recently, the general partner of one of the largest providers of natural gas and natural gas liquids in the U.S. announced a quarterly cash dividend of $0.91 per share, or an annualized dividend of $3.64 per share, which denotes an increase of 4% quarter-over-quarter and 24% year-over-year. The stock currently has a 6.63% dividend yield. However, the shares of the company have lost 46% year-to-date, mainly due to the challenging energy environment. This stock may represent a safe bet on the energy sector turnaround, considering its rich dividend payments. Clint Carlson’s Carlson Capital owned roughly 434,000 shares of Targa Resources Corp (NYSE:TRGP) at the end of June.

#1 Chimera Investment Corporation (NYSE:CIM)

Shares Owned by Omega Advisors (as of June 30): 14.13 million shares ($193.68 million)

Portion of Omega’s Assets (as of October 16): 2.3%

Current Dividend Yield: 13.59%

Chimera Investment Corporation (NYSE:CIM) was the seventh-largest equity holding of Omega Advisors on October 16, accounting for 2.3% of its assets. Leon Cooperman’s hedge fund increased its position in the company by 2.09 million shares during the second quarter. A little more than a month ago, the company announced a quarterly cash dividend of $0.48 per share, which generates a whopping current dividend yield of 13.59%. It is also worth pointing out that the stock is trading at a very attractive level at the moment, considering its forward P/E ratio of only 7.10. In fact, the mortgage REIT is one of the cheapest stock picks of Leon Cooperman in terms of forward P/E as of October 16 (read more details). In the meantime, the stock has lost slightly over 11% since the beginning of the year. Israel Englander’s Millennium Management acquired a 4.0 million-share stake in Chimera Investment Corporation (NYSE:CIM) during the second quarter.

Disclosure: None