Dow Chemical (DOW), Chimera Investment (CIM) Among Billionaire Leon Cooperman’s Favorite Dividend Stocks

With interest rates still at historical lows, bonds have failed to appease investors’ appetite for yield. What many investors have done is replaced bonds with dividend stocks that reward shareholders with handsome yields. Leon Cooperman is one of the billionaire hedge fund managers that has made good use of this tactic, so in this article we’ll take a look at Omega Advisors‘ top equity positions that carry hefty dividend payments as well.

Hedge fund sentiment is an important metric for assessing long-term profitability. At Insider Monkey, we track over 740 hedge funds, whose quarterly 13F filings we analyze to determine their collective sentiment towards several thousand stocks. However, our research has shown that the best strategy is to follow hedge funds into their small-cap picks. This approach can allow monthly returns of nearly 95 basis points above the market, as we determined through extensive backtests covering the period between 1999 and 2012 (read more details here).

#5 New Media Investment Group Inc (NYSE:NEWM)

– Annual Dividend: $1.32

– Dividend Yield: 8.28%

We’ll start with New Media Investment Group, a holding company that invests in local media assets. During the second quarter, Leon Cooperman has trimmed his fund’s exposure to the stock, reducing its holding by 1% to 3.17 million shares worth $57.3 million at the end of June. Hedge fund interest in New Media Investment Group Inc (NYSE:NEWM) cooled down a bit during the quarter, as the number of long hedge fund positions among the funds we track fell to 15 at the end of June, from 18 at the end of March. Israel Englander has decided to dump 79% of his investment during the quarter, leaving Millennium Management with 115,737 shares worth $2.09 million. Analysts at Citigroup are not very optimistic about the prospects of New Media Investment Group Inc (NYSE:NEWM). They have recently downgraded the stock to ‘Sell’ from the previous ‘Neutral’ rating and have reduced their price target to $13 per share from $17 per share. According to the note issued to investors, the analysts pointed to the fact that M&A activity in the sector is slowing down and the company could face challenges in trying to achieve its target of $1 billion in M&A by the end of the current year. This will negatively affect synergies, which will in turn put pressure on New Media Investment Group’s EBITDA.

#4 New Residential Investment Corp (NYSE:NRZ)

– Annual Dividend: $1.84

– Dividend Yield: 12.93%

Although Cooperman and his team have cut their stake in New Residential Investment Corp by nearly 20% during the quarter, this is still one of Omega Advisors’ top equity positions. According to its latest 13F filing, the fund held 5.38 million shares valued at a little over $74 million. New Residential Investment Corp (NYSE:NRZ) has a market cap of $3.61 billion and is currently trading at an earnings multiple of 10, significantly lower than the industry average of 26. So far this year, the stock has been on a solid uptrend, managing to advance by around 17%. The smart money sentiment towards New Residential Investment Corp (NYSE:NRZ) took a nosedive during the second quarter, with only 12 of the funds followed by Insider Monkey having reported a stake as of the end of June, down from 22 registered three months earlier. Billionaire Ken Griffin and his team are very bullish on this stock, having increased their investment by over 3,000% to 1.12 million shares valued at $15.5 million.

We continue with this top on the next page.

#3 Chimera Investment Corporation (NYSE:CIM)

– Annual Dividend: $1.92

– Dividend Yield: 12.08%

Another real estate investment trust, the same story. Omega Advisors’ stake in Chimera Investment Corporation was reduced by 43% during the second quarter to 5.59 million shares reportedly worth $87.8 million. At the beginning of August, Chimera Investment Corporation (NYSE:CIM), released second-quarter financial results, missing profit forecasts. The company posted a net income of $74.1 million or $0.51 per share when adjusted for non-recurring costs. Analysts, in turn, had projected $0.53 per share. The mortgage investor also reported a 2.4% increase in revenue to $137.9 million. Chimera Investment Corporation (NYSE:CIM) gained a slight increase in popularity among the funds we follow, as the number of long positions inched up to 13 at the end of the second quarter, from 12 a quarter earlier. Among them, Robert Raiff, the manager of Raiff Partners, has made a bullish play on Chimera Investment, having initiated a position that contained 150,000 shares at the end of June.

#2 Dow Chemical Co (NYSE:DOW)

– Annual Dividend: $1.84

– Dividend Yield: 3.54%

In their latest 13F filing, Omega Advisors and Leon Cooperman indicated ownership of 1.98 million shares of the US chemical giant, down by 11% during the quarter. The value of this position at the end of June was estimated at $98.7 million. As Dow Chemical Co (NYSE:DOW) edges closer to its merger with E I Du Pont De Nemours And Co (NYSE:DD), some hedge funds decided to join the party as well. The number of investors from our database long the stock increased by four to 48 during the second quarter. Among these funds, Dan Loeb‘s Third Point held the largest stake in Dow Chemical: 20 million shares, down by 20% from the previous quarter. The merger of the two chemical giants hit a snag last week, as European Union’s antitrust regulator halted its review of the deal because the companies did not supply important information that was required. Dow Chemical Co (NYSE:DOW) downplayed this delay, claiming it is “a routine procedural part of the European Commission process.” Both companies, however, said it is possible the deal’s closing date could move to early 2017.

#1 Navient Corp (NASDAQ:NAVI)

– Annual Dividend: $0.64

– Dividend Yield: 4.64%

Although Navient’s dividend does not have the largest yield, this is Leon Cooperman’s favorite dividend stock. During the second quarter, his investment in the loan management company was reduced by 2% to 13.8 million shares valued at $164.9 million at the end of June. Clint Carlson of Carlson Capital has also taken steps to reduce exposure to Navient Corp (NASDAQ:NAVI), having cut his fund’s stake by 41% to 3.59 million shares worth $42.9 million according to the fund’s latest 13F filing. At the end of the second quarter, roughly 10% of Navient’s common stock was held by 32 of the funds tracked by Insider Monkey, up from 27 registered a quarter before. At the end of July, analysts at Goldman Sachs downgraded Navient Corp (NASDAQ:NAVI) from ‘Buy’ to ‘Neutral’ but have maintained their price of $15 per share. For the second quarter, the company posted a 3.4% drop in revenue to $1.03 billion and a net profit of $125 million. On a per-share basis, Navient reported earnings of $0.47 in the period, topping analysts’ estimates of $0.44 per share.

Disclosure: none.