Cliff Asness’s 3%+ Yield Investments Include AT&T Inc. (T)

In May, Cliff Asness’s AQR Capital Management filed its 13F for the first quarter of 2013 with the SEC. While the information on the specific number of shares it owns is likely out of date, we can see from our database of quarterly filings (which we use in our work developing investment strategies, including our finding that the most popular small cap stocks among hedge funds generate an average excess return of 18 percentage points per year) that AQR makes only small changes to most of its largest holdings over the course of a quarter. Read on for our quick take on its five largest positions which currently pay dividend yields of 3% or higher, or see the full list of stocks the fund reported owning.

Asness and his team reported a position of 1.8 million shares in Chevron Corporation (NYSE:CVX), making the oil and gas company their second largest 13F holding by market value. The company recently increased its quarterly dividend to $1 per share, which comes out to a 3.2% annual yield at current prices. Business has been down recently, but the stock is cheap on an earnings basis with both trailing and forward P/Es of 10. D.E. Shaw, a large hedge fund managed by billionaire David Shaw, owned 1.3 million shares of Chevron Corporation (NYSE:CVX) at the end of Q1 according to its own 13F (check out D.E. Shaw’s stock picks).

AQR increased its stake in The Procter & Gamble Company (NYSE:PG) by 3% between January and March to a total of 2.6 million shares. The diversified personal products company should be of interest to defensive investors, as it features a low beta (of 0.3) as well as a 3% dividend yield at current prices. We’d note, however, that the earnings multiples are in the high teens and recent growth in both revenue and profits has been low. The Procter & Gamble Company (NYSE:PG) is one of Warren Buffett’s favorite stocks, with his Berkshire Hathaway owning nearly 53 million shares at the end of Q1 (find Buffett’s favorite stocks).

The fund also included Pfizer Inc. (NYSE:PFE) among its top picks from its most recent filing. The pharmaceutical company has been in the process of selling off different segments of its business for the past couple years, most recently spinning out Zoetis Inc (NYSE:ZTS), which had previously been its animal health unit. Many investors like companies engaged in spinouts on the theory that management may become more focused on the core business, improving operations. Pfizer Inc. (NYSE:PFE) had been billionaire Ken Fisher of Fisher Asset Management’s top stock pick for 2013; it has underperformed the S&P 500 year to date.

AT&T Inc. (NYSE:T) was another of Asness’s high yield stock picks with the filing disclosing ownership of 5.1 million shares. Telecom giants tend to make attractive income or defensive stocks, and AT&T Inc. (NYSE:T) is no exception with an annual yield of about 5% and with little exposure to the overall economy (the stock’s beta is 0.3). Wall Street analysts expect $2.69 in earnings per share in 2014, which makes for a forward earnings multiple of 13. Billionaire David Harding’s Winton Capital Management, which invests in many high yield names, was another shareholder in AT&T Inc. (NYSE:T) (research more stocks Harding likes).

According to the filing, AQR’s largest new position in the first quarter of 2013 was its 2.9 million shares of LyondellBasell Industries NV (NYSE:LYB). As a specialty chemicals company LyondellBasell Industries NV (NYSE:LYB) is highly dependent on macro demand as shown by its beta of 2.5. The stock trades at trailing and forward earnings multiples of 13 and 10 respectively, so it is not that expensive on a trailing basis and the sell-side at least expects EPS to increase going forward. Viking Global owned over 13 million shares of LyondellBasell at the beginning of April; that fund is managed by billionaire Andreas Halvorsen (see more stocks Viking Global owns).

Disclosure: I own no shares of any stocks mentioned in this article.