We recently published a list of 10 Best Dividend Stocks to Buy According to Billionaire Leon Cooperman. Since DT Midstream Inc (NYSE:DTM) ranks 6th in the list, it deserves a deeper look.
Billionaire Leon Cooperman made headlines in April when he predicted during an interview with CNBC that the US is headed for a financial crisis. Cooperman, who calls himself a “capitalist with a heart,” said that the Federal Reserve kept interest rates near zero, but raised them dramatically in a period of 12 months. Still, the 81-year-old billionaire sees no signs that the economy is “restrictive,” as he pointed to stock market highs and speculation. The Omega Family Office chairman and CEO expects “one or two” rate cuts this year. He emphasized that the market remains overvalued.
This isn’t the first time Cooperman warned the market about recession. In February last year, the billionaire said that the market was headed for a recession, and noted that the S&P 500 high of about 4,800 recorded in 2022 could “stand for some time.” In July 2022, while talking to Bloomberg, Cooperman said that he was “shocked” that interest rates were so low.
“I am of the view that equities are the best house in the financial asset in the neighborhood, but I don’t like the neighborhood, for a lot of reasons.”
Cooperman in the Bloomberg interview in 2022 had categorically said that sooner or later the strong dollar, prices of oil and the Fed would “lead us into a recession.” He went on to add that recession would be a “2023 event” and predicted that the market would bottom somewhere near 35% to 45% below its peak of 4800.
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The billionaire had said that he would be “very surprised” if we were to see another bull market anytime soon, given his view that we’ve had one of the biggest bull runs driven by FAANG, SPACs, and speculation. The AI revolution that started in 2023 was indeed a shocker for Cooperman as his recession predictions were proven wrong.
For this article, we scanned billionaire Cooperman’s Q1’2024 portfolio and chose his top 10 dividend stock picks. Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
DT Midstream Inc (NYSE:DTM)
Number of Hedge Fund Investors: 25
Billionaire Leon Cooperman’s Stake: $38,784,447
With a dividend yield of over 4%, DT Midstream Inc (NYSE:DTM) is one of the best dividend stock picks of billionaire Leon Cooperman in 2024. The stock is up about 41% over the past one year. In April, DT Midstream Inc (NYSE:DTM) reported Q1 results. Adjusted EPS in the quarter came in at $0.99, surpassing estimates by $0.05.
DT Midstream Inc (NYSE:DTM) is involved with natural gas transportation and pipelines. DT Midstream Inc (NYSE:DTM) bulls believe the stock is poised to benefit from the broader transition to cheap natural gas, as it owns two of the largest natural gas basins in the United States: the Marcellus basin and the Haynesville basin. The company spent heavily last year, with over $700M in Capex reported for the period. However, the company is eyeing fiscal discipline in 2024. The management highlighted these plans during Q1 earnings call:
“We are confident in our full year outlook and reaffirming our 2024 adjusted EBITDA guidance range and our 2025 adjusted EBITDA early outlook, reflecting the strong positioning of our assets. We’ve increased our committed capital in 2024 and 2025 to reflect new organic projects reaching FID, with $265 million to $295 million committed in 2024 and approximately $140 million committed in 2025. This increase is reflective of projects from our prior backlog that were already contemplated in our guidance, and we will continue to expect to spend within free cash flow in 2024 and 2025.
Our short cycle growth investments continue to track on budget and on schedule, with some projects running ahead of schedule, resulting in meaningful growth contributions in 2024 and 2025. Our approach to capital allocation remains thoughtful and disciplined, with our focus on spending within cash flow over the balance of our five-year plan and achieving an investment grade credit rating.”
Analysts believe DT Midstream Inc (NYSE:DTM)’s basins are among the largest sources of wet and dry gas and their location makes them attractive for supply to main hubs in the country at attractive rates. However, the company’s lack of geographical diversification and the stock’s high valuation have been concerning. DT Midstream’s forward P/E is 17.48, much higher than the industry average of 10.92. Wall Street expects the company’s earnings to grow 11% next year but moderate to just 1.50% over the next five years on a per-annum basis. For value conscious investors, there could be many other undervalued opportunities in the mid-stream energy sector.
Overall, DT Midstream Inc (NYSE:DTM) ranks 6th in Insider Monkey’s list of the 10 Best Dividend Stocks to Buy According to Billionaire Leon Cooperman. You can visit the 10 Best Dividend Stocks to Buy According to Billionaire Leon Cooperman to see the other Billionaire Leon Cooperman’s 2024 stocks that are on his radar. While we acknowledge the potential of DT Midstream Inc (NYSE:DTM) our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than DT Midstream Inc (NYSE:DTM) but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.