Rising interest rates are generally accompanied by strong economic growth, but a potential increase in interest rates could eventually affect the slow-growth stocks that generate returns primarily through dividends and interest. A September Fed interest rate hike seemed almost inevitable until a few week ago, when China’s economic slowdown caused a plunge in the global stock markets. Furthermore, a wide range of variables have an effect on companies’ values and their dividend payouts. However, one of the key factors that has a direct impact on most energy companies’ valuations and dividends is the price of oil. The S&P 500 Energy Index is down by over 18% year-to-date, which has made most investors and traders worried about oil companies and the sustainability of their dividends. Even so, we identified five energy dividend stocks that hedge funds had a great deal of money invested in during the second quarter and prepared a list by their popularity among the funds we track at Insider Monkey.
Most investors don’t understand hedge funds and indicators that are based on hedge funds’ activities. They ignore hedge funds because of their recent poor performance in the bull market. Our research indicates that hedge funds underperformed because they aren’t 100% long. Hedge fund fees are also very large compared to the returns generated and they reduce the net returns experienced by investors. We uncovered that hedge funds’ long positions actually outperformed the market. For instance the 15 most popular small-cap stocks among funds beat the S&P 500 Index by more than 60 percentage points since the end of August 2012. These stocks returned a cumulative of 118% vs. a 57.6% gain for the S&P 500 Index (read the details). That’s why we believe investors should pay attention to what hedge funds are buying (rather than what their net returns are).
5. Noble Corporation plc (NYSE:NE)
Investors with Long Positions (as of June 30): 27
Aggregate Value of Investors’ Holdings (as of June 30): $258.90 Million
There are five hedge funds within our database that added Noble Corporation plc (NYSE:NE) to their portfolios during the second quarter. By the same token, the value of the shares held by the hedge funds tracked by Insider Monkey increased from $159.96 million. The offshore drilling contractor for the oil and gas industry pays out a quarterly cash dividend of $0.375 per share, which provides a current annualized dividend yield of 12.11%. It’s worth mentioning that the shares of Noble Corporation gained 3.47% during the trading session on Friday amid higher oil prices, and are now down slightly over 22% year-to-date. The price of crude oil was on the rise towards the end of the week following positive U.S. economic data and reports indicating low crude oil supply in Nigeria. Steven Cohen’s Point72 Asset Management initiated a 3.87 million-share position in Noble Corporation plc (NYSE:NE) during the second quarter, allowing it to take the spot of the largest equity holder in the company within our database.
4. BP p.l.c. (NYSE:BP)
Investors with Long Positions (as of June 30): 33
Aggregate Value of Investors’ Holdings (as of June 30): $1.12 Billion
BP p.l.c. (NYSE:BP), an integrated oil and gas company, has paid a quarterly cash dividend of $0.60 per share for the past four quarters, which implies a current dividend yield of 7.27%. 37 hedge funds within our database owned stakes in the company at the end of the first quarter, whereas the value of the stakes on June 30 decreased from $1.18 billion over the quarter. The stock has lost more than 12% year-to-date, but achieved a quick rebound at the end of the week after the aforementioned crude oil price upswing. Oil prices had dropped to six-year lows earlier in the week, impacted by the worries around China’s economy, which is the second-largest oil consumer in the world. Pzena Investment Management, founded by Richard S. Pzena back in 1996, is by far the largest shareholder of BP p.l.c. (NYSE:BP) within our database, holding a stake of 11.37 million shares.
3. ConocoPhillips (NYSE:COP)
Investors with Long Positions (as of June 30): 43
Aggregate Value of Investors’ Holdings (as of June 30): $1.50 Billion
ConocoPhillips (NYSE:COP), which is the largest independent exploration and production company based on production and proved reserves in the world, recently announced an increase in its quarterly dividend to $0.74 per share from $0.73, which was paid for four quarters in a row. The freshly-increased dividend is payable on September 1, and currently offers investors a dividend yield of 6.45%. Nine hedge funds and other investors that we observe discarded their positions in ConocoPhillips collectively during the second quarter. At the same time, the value of the positions held by hedge funds totaled $1.65 billion at the end of the first quarter. The independent E&P company has had a rough year thus far, considering that its stock has declined by 32% year-to-date. Jean-Marie Eveillard’s First Eagle Investment Management holds a 7.65 million-share position in ConocoPhillips (NYSE:COP).
2. Chevron Corporation (NYSE:CVX)
Investors with Long Positions (as of June 30): 50
Aggregate Value of Investors’ Holdings (as of June 30): $2.11 Billion
Chevron Corporation (NYSE:CVX), a company that engages in petroleum, chemicals, power, and energy operations worldwide, received a vote of confidence from the hedge funds we observe. The number of hedge funds owning its shares increased by three during the quarter, while the value of the total investments in the company increased from $1.49 billion. Chevron Corporation pays out an annualized dividend of $4.28 per share, which currently generates a 5.51% dividend yield. The company’s stock performance follows the industry’s ups-and-downs, delivering a negative return of 28% year-to-date. A little while ago, the company reported its financial results for the second quarter, posting earnings of $571 million or $0.30 per diluted share, compared to $5.7 billion or $2.98 per share reported a year ago. Ken Fisher’s Fisher Asset Management slightly increased its stake in Chevron Corporation (NYSE:CVX) during the second quarter to 3.53 million shares.
1. Macquarie Infrastructure Corporation (NYSE:MIC)
Investors with Long Positions (as of June 30): 69
Aggregate Value of Investors’ Holdings (as of June 30): $2.07 Billion
Unlike the previously-discussed companies, the shares of Macquarie Infrastructure Corporation (NYSE:MIC) have gained nearly 10% since the beginning of the year. There were 70 hedge funds within our database that had positions in the company at the end of the first quarter. In the meantime, the value of these positions shrank from $2.30 billion during the quarter. Macquarie increased its quarterly cash dividend by 16.8% year-over-year to $1.11 per share, which generates a current dividend yield of 5.74%. The company posted a net loss, before tax, of $97.0 million for the second quarter, compared to net income of $15.2 million a year ago. However, the company’s consolidated revenue increased by 50.8% year-over-year to $423.7 million. Richard McGuire’s Marcato Capital Management is among the largest equity holders in Macquarie Infrastructure Corporation (NYSE:MIC) within our database, owning a 3.53 million-share stake.
Disclosure: None
