In the prevalent low interest rate environment, dividend stocks have become increasingly popular among retail investors. However, many lose sight of the risks involved with investing in companies that offer an exceptionally high dividend yield, and also face difficulty in selecting companies that provide the least level of risk given a particular dividend yield. To put these concerns to rest we looked into the latest 13F filing of one of the greatest investor of our times, George Soros of Soros Fund Management, and extracted three of his most valuable positions including Dow Chemical Co (NYSE:DOW), General Motors Company (NYSE:GM), and LyondellBasell Industries NV (NYSE:LYB), having a dividend yield higher than 3%. Earlier, we also formulated a list of the most popular dividend stocks among over 700 hedge funds that we track, that sport a dividend yield of more than 4%.
George Soros is widely known in investment circles as ‘the Man Who Broke the Bank of England’ in light of his $10 billion bet in 1992 when he sold short the British pound. He made a $1 billion as the bank caved in. Soros Fund Management founded in 1969, calls its main series of hedge funds, Quantum Group of Funds. The 84 year old money manager believes in the investment philosophy of ‘reflexivity’, which entails that owing to emotional biases of market participants good investment opportunities can be found by carefully studying the value and market prices of assets. In 2010 the investment firm was reported to be one of the most successful in the world, delivering an average annual return of more than 20% for four decades. The fund’s holdings are primarily concentrated in two sectors namely, information technology which accounts for 28% of the holdings and health care contributing 18% to the portfolio value.
Dow Chemical Co (NYSE:DOW) was Soros’ favorite among high dividend stocks as he increased his stake in the company by 77% to 5.18 million shares valued at $236.43 million. The company which is a worldwide manufacturer and supplier of products used primarily as raw materials in the manufacture of customer products and services increased its quarterly dividend from $0.37 to $0.42 in the fourth quarter to take its dividend yield to 3.59%. This is also the highest yield as compared with other companies on this list. Moreover, Dow Chemical Co (NYSE:DOW) has consistently increased its dividends since 2011.
Dan Loeb of Third Point and Oz Management’s Daniel S. Och owned 22 million shares valued at $1.0 billion and 13.7 million shares valued at $624.93 million respectively at the end of the fourth quarter. Dow Chemical Co (NYSE:DOW) and Saudi Arabian Oil Co. recently announced plans to move ahead with production in their $20 billion Sadara Chemical joint venture project.
Moving on to another popular dividend stock in Soros’ portfolio, General Motors Company (NYSE:GM), which sports a dividend yield of 3.18%. The automobile manufacturer is up by nearly 11.7% over the last 52 weeks, and started paying quarterly cash dividends of $0.3 only since first quarter of 2014. General Motors Company (NYSE:GM) has been marred by 5 different recalls during the first half of 2014 which involved 29 million cars in North America alone. In light of this, the popularity of the company fell among hedge funds with 107 invested in the company as opposed to 118 a quarter earlier. Warren Buffett of Berkshire Hathaway and Appaloosa Management Lp’s David Tepper held 41 million shares valued at $1.43 million and 14.68 million shares valued at $512.44 million respectively.
The last dividend stock in our list, LyondellBasell Industries NV (NYSE:LYB) had the backing of 8 billionaires among those that we track, with their aggregate investment in the company being $1.48 billion at the end of 2014. Andreas Halvorsen of Viking Global is one of them with 4.05 million shares vlaued at $321.47 million. Soros initiated a position in LyondellBasell by purchasing 2.83 million shares valued at $224.94 million. The global independent chemical company had its IPO in October 2010 and although up by nearly 218% since then, it is down by nearly 3.3% over the last 52 weeks.
LyondellBasell Industries NV (NYSE:LYB) had the second highest dividend yield of 3.29% in this list. The company increased its quarterly dividend payout by 16% in the second quarter of 2014 to $0.7.
We track hedge funds because their stock picks, especially their small-cap picks, managed to outperform the market on average. For instance, the 15 most popular small-cap stocks among hedge funds outperformed the market by nearly 1 percentage point per month between 1999 and 2012. We have been sharing these stock picks in our newsletter and these stocks returned a cumulative of 135% since the end of August 2012. S&P 500 ETFs returned less than 55% during the same period (read the details here). Bottomline is that George Soros isn’t interested in these companies for their dividend yield. He invests in them because of their capital appreciation potential, though he doesn’t mind getting paid while waiting for capital appreciation.
Disclosure: none
