We’ve previously released a feature on the top picks of billionaire Leon Cooperman and his fund Omega Advisors, as he looks to rebound from a disappointing 2014. Among his top picks heading into 2015 were eBay Inc (NASDAQ:EBAY), Citigroup Inc (NYSE:C), Actavis plc (NYSE:ACT) and Apple Inc. (NASDAQ:AAPL).
Large-cap stocks like those top picks of Cooperman are not exactly the wisest of choices for investors who are looking for large returns to bet on. According to our research, hedge fund managers are much more proficient at generating returns from small-cap stocks than they are large-cap stocks, and the difference is quite stunning. The top 50 picks of hedge funds collectively between 1999 and 2012 did actually underperform the market. On the other hand, the top 15 small cap picks of those same funds outperformed the market by nearly 1 percentage point per month during the same period (see the details).
While billionaire investors like Leon Cooperman may not be able to generate as much alpha from their large-cap picks, that’s not to say their large-cap stocks should be avoided entirely. One of the prime benefits of investing in large-cap companies is that they often make dividend payments to shareholders four times annually. We’ve already covered some of the most popular dividend stocks among funds that we track, which include Kinder Morgan Inc (NYSE:KMI), Williams Companies Inc (NYSE:WMB), Northstar Realty Finance Corp (NYSE:NRF), and Verizon Communications Inc. (NYSE:VZ).
This time we’ll look specifically at Cooperman’s portfolio and will present three stocks from his portfolio that offer the highest dividend yield. Dividend yield is a metric that essentially rates the value of the dividend against the price of the company’s stock, encapsulating the return on an investor’s cash flow.
We start with Cooperman’s investment in Atlas Energy LP (NYSE:ATLS), which has recently turned into a position in Targa Resources (NYSE:TRGP) following the merger of Atlas Energy with Targa Resources Corp. (NYSE:TRGP). Cooperman received $9.12 in cash, 0.1809 shares of Targa Resources, and 0.5 common units of the new Atlas Energy Group which has started to trade under the ticker symbol “ATLS” on March 2nd. Atlas Energy was trading above $32 before the merger. Overall Cooperman received a cash equivalent of $30.41 for each of his Atlas Energy common units. Atlas Energy Group now holds Atlas Energy’s non-midstream assets as a result of the spin-off from ATLS” according a press release by the company. Atlas Energy Group expects to distribute between $0.70 and $0.80 per year based on its initial expectations. This implies a dividend yield of 9-10%.
Atlas Energy LP (NYSE:ATLS) was one of Cooperman’s top picks at the end of 2014, as he owned 5.83 million shares, a position he had increased by 43% during the quarter. Nor was he done there; Cooperman has further increased his position in 2015, to 7.17 million shares. Beyond Cooperman, 16 other funds were invested in Atlas Energy LP (NYSE:ATLS) at the end of the year, though none had very large positions. The next largest was Peak6 Capital’s, as the fund managed by Matthew Hulsizer owned 141,300 shares.
Next up is PennyMac Mortgage Investment Trust (NYSE:PMT), which currently has a yield of 11.87% based on its $0.61 quarterly dividend. Despite shares falling over 25% from over $28.00 in early 2013, PennyMac Mortgage Investment Trust (NYSE:PMT) has continued to regularly increase its dividends, from $0.57 at that time, to $0.59 at the start of 2014, to $0.61. Shares of the residential mortgage REIT were trending upwards in 2015 until a big earnings miss on February 4 sent them crashing down to earth. The company earned just $0.32 per share, down from $0.69 a year ago, and well below the estimates of $0.66.
PennyMac Mortgage Investment Trust (NYSE:PMT) had 18 funds invested in it at the end of the year, same as it did the previous quarter, while the funds’ invested capital was down slightly to $246.65 million from $277.78 million. Cooperman had a $60.79 million stake of 2.88 million shares accounting for nearly one-quarter of the total investment of all tracked funds, though he wasn’t the top shareholder; that honor went to Emanuel J. Friedman’s EJF Capital with 3.04 million shares valued at $64.09 million.
Lastly is Chimera Investment Corporation (NYSE:CIM), which sports a yield of 11.52% at current trading levels, based on its current quarterly dividend of $0.09. Nor is there any reason to suspect the current dividend payments will be going anywhere, anytime soon, as Chimera Investment Corporation (NYSE:CIM) has been paying out $0.09 per share in dividends since the middle of 2012, when shares were trading nearly as low as $2.00 at one point.
Chimera Investment Corporation (NYSE:CIM) has in fact been paying out generous dividends since 2009, after shares crumbled following the 2008/2009 financial crisis. Cooperman first took a stake in the second quarter of 2012, and increased it massively over several quarters to become the largest shareholder among the funds that we track by the end of 2012, a position he has yet to relinquish. He did however slash his position by 23% during the fourth quarter of 2014, leaving him with 49.76 million shares. According to our data, Brian Taylor of Pine River Capital Management was the second largest shareholder after Cooperman, with ownership of 22.90 million shares.
Disclosure: None
