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by Serkan Unal

Ken Griffin, a billionaire with $3.1 billion in net worth, is a founder and CEO of Citadel LLC, the world's second-largest multi-strategy hedge fund management company with assets under management of some $12.5 billion. The firm bases its investments on a combination of fundamental research and quantitative analysis using advanced computer-based models. The firm's flagship funds, Kensington and Wellington, lost as much as 50% during the financial crisis; however, they rebounded more than 20% in 2011. Barron ranks Citadel Kensington Global Strategies fund, with a 3-year compound annual return of 29.4%, one of the best performing hedge funds in 2011.

In a newly released 13F with the Securities and Exchange Commission, Griffin's Citadel LLC highlighted its portfolio of equity holdings at the end of the third quarter. The company continues to invest in large-cap, high-quality companies with proven earnings power and the capacity for large capital appreciation. Its holdings are diversified across industries, and many of its picks pay attractive dividends. Here is a closer look at five dividend-paying stocks in which Griffin boosted his stake significantly.

Comcast Corporation (CMCSA) is a $94-billion U.S. entertainment, communications, and cable products and services company. The company is the largest U.S. cable and Internet service provider in terms of subscribers. Citadel LLC boosted its stake in the company by 11,563% in the third quarter to $160 million. Comcast pays a dividend yield of 1.8% on a payout ratio of 30% of trailing earnings and 20% of trailing free cash flow. Its peers DirecTV (DTV) and Dish Network Corp. (DISH) do not pay regular dividends.

Since 2008, Comcast has raised dividends at an average annual rate of 27.4% per year. The company hiked its dividend by an impressive 44% earlier this year. Comcast's EPS grew at an average annual rate of 16.5% per year over the past five years. Analysts forecast EPS growth averaging 15.6% annually for the next half-decade. The company reports that its cable services are showing "real strength in every part of the business, producing sustainable and profitable growth."

Comcast has more than doubled its free cash flow per share since 2008. It continues the trend, as its free cash flow for the first nine months of this year is up 19% year-over-year. This bodes well for additional dividend hikes and share buybacks in the future. The stock has a high free cash flow yield of 7.7% and a ROE of 12.5%. In terms of valuation, its forward P/E of 16.3 is well below the ratio of 25.1 for its respective industry, but above a forward P/E of 10.0 for rival DirecTV. Billionaire Ken Fisher is also bullish on this stock.

General Electric (GE) is an industrial conglomerate producing a broad range of products from wind turbines and jet engines to medical imaging technologies and financial services. Citadel LLC hiked its stake in the company by 3,633% in the third quarter to $159 million. GE's dividend is currently yielding 3.4% on a payout ratio of 54%. Its peers Siemens AG (SI) and Honeywell International (HON) are paying dividend yields of 2.9% and 2.8%, respectively.

While GE slashed its dividends in 2009 and 2010, it has boosted its quarterly payout by 70% since June 2010. A hike in the dividend is expected from the Board meeting in December. The global economic slowdown shrank GE's EPS by 8% per year over the past five years. Now, however, a rebound in the global economic growth is expected to boost GE's EPS by 11% per year for the next half decade. The company has been focusing on higher-margin industrial segments, reducing its reliance on the financial branch, GE Capital, which now has stabilized as well.

GE has also supported growth through strategic acquisitions that strengthen its business model, with a promise to produce solid returns in the future. In the long run, the company stands to benefit from accelerated industrialization and urbanization in emerging markets as well as from the global push toward clean energy. GE's stock has a free cash flow yield of 3.8% and ROE of 11.5%. In terms of valuation, with a forward P/E of 12.2, it is trading on par with its diversified industrials industry and close to its rival Honeywell International. Billionaires Ken Fisher and George Soros are big fans of this stock.

Eaton Corporation (ETN) makes power management, hydraulic systems, and aerospace components for use in automotive, aerospace, agriculture, and fluid power systems. Citadel LLC upped its stake in this company by 42,648% to $144 million. Eaton Corporation has a dividend yield of 3.1% and a payout ratio of 37%. Its rivals Johnson Controls (JCI), Honeywell International , Illinois Tool Works (ITW) pay dividend yields of 3.0%, 2.8%, and 2.6%, respectively.

Over the past five years, the company's EPS and dividends grew at average rates of 6.0% and 12.0% per year, respectively. EPS growth is forecast to accelerate to 9.0% per year for the next half-decade. Eaton has a strong competitive position in the cyclical global industrial equipment market and is likely to outperform peers in the weak macro operating environment. The company is in the process of acquiring Cooper Industries plc (CBE), which will solidify its market position. Eaton Corporation has a solid financial position with reasonable debt levels and notable return on equity of 17%. The stock has a forward P/E of 11.7, trading at a discount to its respective industry (with a forward P/E of 13.0). Billionaire Jim Simons is a big fan of the stock.

Aflac Inc. (AFL) is a supplemental health and life insurance company operating in Japan and United States. In the third quarter, Citadel LLC upped its stake in the company by 360% to $134 million. Aflac pays a dividend yield of 2.8% on a payout ratio of 23% of trailing earnings and 4.4% of operating cash flow. The company is a dividend aristocrat that has increased dividends for 30 years in a row. Aflac grew dividends at an average rate of 11% over the past five years. This year, it hiked dividends by a much smaller 6.1%. Aflac's competitors Unum Group (UNM) and CNO Financial Group (CNO) pay yields of 2.7% and 0.9%, respectively.

Aflac's EPS growth averaged 7.2% per year over the past five years. The insurer's EPS growth is forecast to accelerate to 10.8% per year for the next five years. The stock's low payout ratios and accelerating EPS growth bode well for future dividend hikes. The company has seen especially robust demand for its products in Japan, from which it derives a lion's share of revenues. However, facing criticism for such a large Japanese exposure, the company has been increasing its investment stakes in U.S. government bonds. The stock has a rock-solid balance sheet with low debt-to-equity ratio of 28%, an exceptional free cash flow yield of 60%, and a ROE of 20%. Its forward P/E is 7.4, on par with that of the life insurance industry. Unum Group and CNO Financial have forward P/Es of 6.4 and 9.2, respectively. Fund managers Phill Gross (Adage Capital) and John Rogers (Arial Investments) hold stakes in the company.

Abbott Laboratories (ABT) is a global pharmaceutical giant with a market capitalization of $99 billion. In the previous quarter, Griffin's Citadel LLC boosted its stake in the company by 18,317% to nearly $111 million. Abbott Laboratories is in the process of splitting into a medical products business that will be named AbbVie, and will trade under a new ticker symbol, ABBV, and the company that will retain Abbott's name, focusing on medical devices, diagnostics, and nutritional products. Abbott Laboratories pays a dividend yield of 3.2% on a payout ratio of 50%. Its peers Merck & Co. (MRK) and Sanofi SA (SNY) are paying higher dividend yields of 3.9% and 4.0%, respectively.

Over the past five years, Abbott's EPS expanded at a robust rate of about 22% per year, while its dividends increased at an average annual rate of 9.6%. Analysts forecast EPS growth of 8.6% per year for the next five years. The stock has a high ROE of 24%. Its forward P/E is 12.0; hence, the stock is trading at a slight premium to the pharmaceutical industry. Merck & Co.'s forward P/E is close at 11.9. Among fund managers, Mason Hawkins (Southeastern Asset Management) has more than $540 million invested in the stock.

Source: Billionaire Ken Griffin Boosts His Stakes In These 5 Dividend Paying Stocks