Its full-year 2012 adjusted operating income per share of $1.34 was 2.9% lower than in 2011. The earnings declines were attributed to lower benefits operating income, deferred annuities earnings, and individual life earnings. As a result, Symetra’s operating return on average equity dipped to 8.5% in 2012 from 9.5% the year before.
The insurance provider sees its adjusted operating income per share in the range of $1.30-to-$1.50 in fiscal 2013, which is a notable improvement from 2012. In terms of valuation, the stock looks like a good value, trading at a 25% discount to its book value.
GulfMark Offshore, Inc. (NYSE:GLF), an offshore marine support and transportation services company, was also among last quarter’s picks by Price’s MFP Investors. The position was the fund’s eight largest, valued at more than $21 million. GulfMark pays a dividend yield of 2.6% on a payout ratio of 42%. The stock looks poised to achieve a robust EPS CAGR of 15% for the next five years.
Higher offshore exploration and production spending will drive GulfMark’s growth. The outlook is very bullish in terms of customer demand for both deep- and shallow-water offshore markets, according to ENSCO PLC (NYSE:ESV). Barclays PLC (ADR) (NYSE:BCS) believes that the oil and natural gas exploration and production cap-ex has entered a multi-year, double-digit growth spending up-cycle internationally.
GulfMark’s growth will particularly benefit from the surging subsea demand, which is expected to reach $77 billion over the next five years, a 63% increase over the previous half-decade. Another catalyst for growth will be the surge in spending on floating production systems, which, between 2013 and 2017, will total $91 billion, double the value over the preceding five years. GulfMark is trading at 17.0 times forward earnings, above the 16.0x forward multiple of its industry. However, the stock is trading at its book value, which is only 45% of the industry’s average book valuation.
ConocoPhillips (NYSE:COP), a high-yielding energy company, also made the list of Price’s top fourth-quarter picks. The company was MFP Investors’ ninth largest position, valued at more than $20 million. ConocoPhillips is also a $1.4 billion holding in Warren Buffett’s portfolio.
The company has a dividend yield of 4.5%, a payout ratio of 48%, and a five-year annualized dividend growth of 10.6%. It is trading at a price-to-book of 1.5x versus its industry’s average of 1.6x.
ConocoPhillips is in the process of repositioning to improve its balance sheet and growth capacity. It is disposing of its assets, and has sold off some $2.1 billion so far, with another $9.6 billion in agreement for disposition. The company is using this money to boost North American production from unconventional oil and natural gas shale plays, targeting a 3%-to-5% production CAGR through 2016. The scope for future dividend hikes is notable.
On the whole, Michael Price’s dividend picks represent a range of industries, with the greatest focus in energy, particularly GulfMark and ConocoPhillips. Intel Corporation (NASDAQ:INTC) gives the activist hedgie a value and income play, while Symetra and McGraw-Hill adhere to a similar investment philosophy. It’s always important to watch hedge funds for these very reasons, and MFP Investors is a perfect fund for piggyback investors searching for dividend-payers trading at undervalued multiples.
Disclosure: none
