The financial services sector is up by more than 10% year-to-date and nearly 21% in the last 12 months. However, it’s not the growth in stock price of these companies that we are interested in today. Some of these companies offer a lucrative dividend yield and have been able to attract a strong following from the hedge fund industry. As such, we decided to list the top five finance stocks that boast dividend yields of around 5% or greater, in their order of popularity among the hedge funds in our database. We believe these stocks make for intriguing propositions for readers who are looking for a stable fixed income from some of their investments.
We pay attention to hedge funds’ moves because our research has shown that hedge funds are extremely talented at picking stocks on the long side of their portfolios. It is true that hedge fund investors have been underperforming the market in recent years. However, this was mainly because hedge funds’ short stock picks lost a ton of money during the bull market that started in March 2009. Hedge fund investors also paid an arm and a leg for the services that they received. We have been tracking the performance of hedge funds’ 15 most popular small-cap stock picks in real time since the end of August 2012. These stocks have returned 118% since then and outperformed the S&P 500 Index by around 60 percentage points (see the details here). That’s why we believe it is important to pay attention to hedge fund sentiment; we also don’t like paying huge fees.
5. PacWest Bancorp (NASDAQ:PACW)
Investors with Long Positions (as of June 30): 22
Aggregate Value of Investors’ Holdings (as of June 30): $272.01 Million
The hedge fund interest in PacWest Bancorp (NASDAQ:PACW) rose significantly during the June quarter, as only 15 funds held an aggregate investment of $250.70 million in the company at the end of March. The $4.32 billion bank holding company offers a dividend yield of 4.73% following a slump in its stock price in the wake of the market’s volatility in August, pushing it down by nearly 7% year-to-date. Ken Fisher‘s Fisher Asset Management and Amy Minella’s Cardinal Capital head the list of PacWest Bancorp (NASDAQ:PACW)’s investors within our database, holding 2.20 million shares and 1.42 million shares respectively.
4. Itau Unibanco Holding SA (ADR) (NYSE:ITUB)
Investors with Long Positions (as of June 30): 23
Aggregate Value of Investors’ Holdings (as of June 30): $454.71 Million
Despite the almost 4% dip in the stock price during the second quarter and the huge 41.43% dip so far this year, professional money managers haven’t given up on Itau Unibanco Holding SA (ADR) (NYSE:ITUB), as hedge fund ownership only dropped from 24 funds which had investments worth about $448.45 million in the company at the end of the first quarter. A large part of the loss in investor confidence can be attributed to the ongoing political and economic situation in Brazil, the company’s base of operations. Even though currency fluctuations negatively impacted the company’s earnings in the June quarter, the management seems to have a good idea as to where the business should be headed in terms of making it less risky. They have been shrinking the contribution of mortgage loans and payrolls in the last two years, which now constitute only 20% of the portfolio as opposed to 40% two years ago. Currently Itau Unibanco Holding SA (ADR) (NYSE:ITUB) offers a yield of 5.83% and AQR Capital Management, which is led by Cliff Asness is the largest shareholder of the company within our database, holding 10.32 million shares.
3. KKR & Co. L.P. (NYSE:KKR)
Investors with Long Positions (as of June 30): 30
Aggregate Value of Investors’ Holdings (as of June 30): $610.66 Million
Although the number of hedge funds with a stake in KKR & Co. L.P. (NYSE:KKR) increased from 24 at the end of March, aggregate investment fell from $629.02 million, while the stock traded nearly sideways during the second trimester. The most attractive feature of KKR & Co. L.P. (NYSE:KKR) is perhaps its 8.44% dividend yield resulting from its quarterly dividend payout of $0.42, which was recently slashed from $0.46 in May. John W. Rogers‘ Ariel Investments raised its stake in KKR & Co. L.P. (NYSE:KKR) by 10% during the second quarter to 6.85 million shares valued at $156.49 million.
2. Navient Corp (NASDAQ:NAVI)
Investors with Long Positions (as of June 30): 32
Aggregate Value of Investors’ Holdings (as of June 30): $580.62 Million
Although the total investment in Navient Corp (NASDAQ:NAVI) decreased from $648.60 million at the end of March, mostly on the back of a 9% dip in the stock price, the number of hedge funds with holdings in the company increased from 25 at the end of the previous quarter. So far this year, the stock of the $4.88 billion loan management company holding a significant amount of education loans, has slumped by nearly 40%. The company reduced its earnings guidance for the full year in light of falling net interest margins and expected credit losses, which resulted in an increase in provisions for loan losses. Navient Corp (NASDAQ:NAVI) recently hit a 52-week low after news of the Consumer Financial Protection Bureau taking legal action against the company over its handling of loans surfaced in the market. Renowned activist investor Carl Icahn‘s Icahn Capital LP is the largest stockholder of Navient Corp (NASDAQ:NAVI) we track, owning some 16.27 million shares valued at $368.25 million.
1. Blackstone Group LP (NYSE:BX)
Investors with Long Positions (as of June 30): 34
Aggregate Value of Investors’ Holdings (as of June 30): $462.73 Million
Even though Blackstone Group LP (NYSE:BX)’s stock price has appreciated by 5.44% year-to-date, the company faced a declining interest from the hedge fund industry during the second quarter, as 42 funds had investments worth $485.65 million in the company at the end of March. The $42.19 billion global alternative asset management firm offers a healthy yield of 8.3%. Blackstone Group LP (NYSE:BX) recently took a majority stake in Stearns Holdings, the California-based mortgage lender. Robert Joseph Caruso‘s Select Equity Group is the largest stockholder of Blackstone Group LP (NYSE:BX) within our database, holding more than 1.96 million shares.
Dsiclosure: None
