We track 13F filings from hedge funds and other notable investors as part of our work researching investment strategies (we have found, for example, that the most popular small cap stocks among hedge funds outperform the S&P 500 by an average of 18 percentage points per year). 13F filings from individual fund managers can also be a source of initial investment ideas in a number of areas, including stocks with relatively high dividend yields. Read on for our thoughts on five stocks which billionaire Richard Chilton’s Chilton Investment Company owned at the end of December which currently pay dividend yields of 3% or higher going by recent dividend policy (or see the full list of stocks Chilton reported owning).
The fund increased its holdings of McDonald’s Corporation (NYSE:MCD) by 17% to a total of about 770,000 shares. McDonald’s Corporation (NYSE:MCD) had been the most popular restaurant stock among hedge funds in the fourth quarter of 2012 (find more restaurant stocks hedge funds loved). Not only does the company pay a dividend yield of 3% at current prices, but the low beta of 0.3 means that it is a good defensive stock as well. However, growth has been very low- some analysts argue that McDonald’s Corporation (NYSE:MCD) is losing out to more premium quick service restaurants- and yet the earnings multiples assume moderate growth over the next several years.
Chilton upped its stake in United Parcel Service, Inc. (NYSE:UPS) and closed December with about 650,000 shares in its portfolio. In the fourth quarter of 2012, UPS’s revenue increased only slightly versus a year earlier, yet Wall Street analysts are expecting considerable improvements on the bottom line over the next few years. The forward P/E is only 15, but we don’t have that much confidence in the analysts’ optimism. The dividend yield here is 3%. Renaissance Technologies, whose founder Jim Simons is now a billionaire, cut its stake but still owned over 2 million shares of UPS (see Renaissance’s stock picks).
According to the 13F, the fund owned about 590,000 shares of Occidental Petroleum Corporation (NYSE:OXY). The oil major trades at 11 times forward earnings estimates, which actually represents a premium to some of its peers as large oil companies are generally trading cheaply. Occidental Petroleum Corporation (NYSE:OXY)’s net income was down nearly 80% in its last quarterly report compared to the fourth quarter of 2011 as well, and even though there is a 3.2% dividend yield the stock is dependent on commodity prices (and macro activity more generally). Billionaire oilman T. Boone Pickens initiated a position during Q4 (research more stocks Pickens was buying).
Chilton and his team also included Chevron Corporation (NYSE:CVX) among their higher-yield investments, though they had been selling shares during the quarter. Fisher Asset Management, managed by billionaire Ken Fisher, was another major shareholder of Chevron Corporation (NYSE:CVX) (here are more stocks Fisher likes). Chevron Corporation (NYSE:CVX) is one of the oil majors which is priced at a discount to Occidental Petroleum Corporation (NYSE:OXY); in fact, it is valued at 9 times its trailing earnings. We would note that while net income did increase by over 40% in its most recent quarter compared to the same period in the previous year, revenue fell slightly; however, it does look worthy of further research.
Disclosure: I own no shares of any stocks mentioned in this article.
