5 Top Dividend Stocks Favored By John Paulson

Includes: AEM, CVC, HIG, WFC, XL
by: Efsinvestment

By Aubrey Tabuga

Paulson & Co. Inc. is an employee-owned hedge fund founded by John Paulson. It was the world's fourth-largest hedge fund in 2011. John Paulson became famous worldwide for making $15 billion in a single year by betting against the real estate bubble in 2007. He had continued to earn the respect of the hedge fund industry when he made $5 billion in profits in 2010. It was the highest amount ever earned by an individual over a period of one year. As of the end of the third quarter, Paulson had $12.7 billion under its management. The bulk of hedge fund's portfolio is focused on financial (40.31%), healthcare (18.41%), basic materials (12.61%), services (11.37%).

Those who are seeking for investment options that can yield stable dividend income may want to take a look at Paulson's top dividend stocks in the latest quarter. These are Hartford Financial Services Group Inc. (NYSE:HIG), Wells Fargo & Company (NYSE:WFC), Agnico-Eagle Mines Ltd. (NYSE:AEM), Cablevision Systems Corporation (NYSE:CVC), and XL Group plc (NYSE:XL). I analyze each of them from a fundamental perspective, focusing on dividend history, the ability to produce dividend income, and growth prospects, to see if these are worth buying or not.


Shares Held

Market Value

% of Portfolio

% Change


EPS (next year)

Hartford Financial Services Group Inc.







Wells Fargo & Company







Agnico-Eagle Mines Ltd.







Cablevision Systems Corporation







XL Group plc







Sources: whalewisdom.com; finviz.com; and nasdaq.com;

Annualized Dividend Payment

Hartford Financial Services Group Inc.

Wells Fargo & Company

Agnico-Eagle Mines Ltd.

Cablevision Systems Corporation

XL Group plc











































Source: nasdaq.com

Hartford Financial Services Group Inc.

Paulson sold over 11.8 million shares or 37% of its stake in Hartford in the third quarter. This brought the holding to 2.99% of the hedge fund's total portfolio. Paulson has been selling portions of its stake in the company in the last 2 years.

Hartford Financial Services Group, Inc. is an insurance and financial services provider operating in the U.S. and Japan. It had recently completed the divestiture of its subsidiary - Woodbury Financial Services Inc. to AIG's SunAmerica Financial Group, Inc. Woodbury is a leading independent broker-dealer in the U.S. Analysts note that the divestiture is likely to improve Hartford's cash balance since it will get as much as $115 million, including payment for dividends, as part of the deal.

The stock is up by 37.59% from last year. Hartford's profit margin has significantly improved in the latest quarter. Its net margin of 6.07% as of the end of September was the highest in six quarters. Hartford has a dividend yield of 1.83%. Since February 2009, the company is paying stable dividends. However, its payout ratio had grown from a historical level of 11.58% to 36.16%. This was a result of the significant decline in the EPS this year of 57.38%. Nonetheless, the company expects its EPS to grow by 19.78% next year. Investors can also look forward to an EPS growth of approximately 11.95% each year in the long term.

Wells Fargo & Company

Paulson continued to hold on to its position in Wells Fargo for the third quarter in a row. As of the end of September, the stake consisted 0.95% of the hedge fund's total portfolio. Wells Fargo & Company is a provider of corporate, commercial, and retail banking services. Its business is segmented into community banking; wholesale banking; and wealth, brokerage, and retirement. The company has recently been experiencing double-digit growth in jobs and new business in Chicago. The increasing demand in this area has led Wells Fargo's workforce to grow by 13.4 percent in Illinois and 12.8% in Chicago over the last couple of years. The company is among the group of banks that will delay homeowner evictions until after New Year's Day.

The stock has gained a significant 23.81% from the previous year. WFC's attractiveness lies in its double-digit- and improving- profitability. The third quarter profit margin of 20.99% was higher than that for the third quarter of 2011, at 18.05%. The company's dividend yield is currently at 2.65%. It has been paying stable and increasing dividends since 2009. More importantly, Wells Fargo exhibits improved ability to raise dividends. From a historical payout ratio of 57.63%, it went down to merely half, 24.21%. The EPS is likely to grow by 8.68% next year, and by 8.38% annually in the long term.

Agnico-Eagle Mines Ltd.

Paulson & Co. maintained its position of 1.016 million shares in Agnico-Eagle Mines in the third quarter. It was equivalent to 0.41% of its portfolio. The hedge fund initiated its position in Agnico-Eagle in the second quarter of the previous year. Agnico-Eagle Mines Limited explores and produces minerals such as gold, silver, copper, zinc, and lead in Canada, Finland, and Mexico. The Toronto, Canada-based company had recently announced the divestiture of 7,795,574 common shares of Queenston Mining to Osisko Mining Corporation. The shares are equivalent to 9.21% of the issued and outstanding shares. Meanwhile, the company just reported that its investors will be paid a dividend of $0.20 on December 17, 2012.

The stock price has grown by an impressive 50.55% year-to-date. The company is slowly recovering in terms of its net margin; from -15.83% in the end of the third quarter of 2011, this year's third quarter margin was 19.77%. In terms of dividend, yield is at 1.49%. The company has been paying stable dividends since last year. This is likely to be sustained as the EPS is expected to grow by 19.91% next year. The long-term annual growth estimate is 6.10%.

Cablevision Systems Corporation

Paulson maintained its stake in Cablevision in the latest quarter. Paulson just bought its new position in the previous quarter. As of the end of September, the hedge fund had 2.1 million shares in the company or 0.26% of its total holdings. Cablevision Systems Corporation is a telecommunications and media company based in Bethpage, New York. It is the fifth-largest cable company in the United States. Cablevision had recently announced that it will increase the price of its high-speed internet service by $5 a month. The price increase, which will be implemented in early 2013, is the first in a decade. This will result to an increase of 3.2%, on average, in monthly bills of regular internet customers.

The stock had gained 5.21% from the previous year. The company's profitability fell in the third quarter to -0.22. The net margin for the same period last year was 2.36%. Cablevision is a loyal payer of dividends; it has been paying increasing dividends since 2008. Currently, the payment is at $0.15. However, CVC's ability to produce dividends may be weakening. The payout ratio has significantly grown from its historical level of 26.78% to 90.85%. Nevertheless, the EPS is expected to grow by 26.15% next year, which is a bit higher than its growth this year. Investors can also look forward to an annual long-term growth of 11.23% for earnings per share.

XL Group plc

Paulson has been selling significant portions of its stake in XL Group in the last 6 quarters. As of the end of September, the hedge fund had 1.2 million shares, which is equivalent to 0.23% of its total investment portfolio. XL Group is a company based in Dublin, Ireland that provides insurance and reinsurance services to various firms and enterprises around the world. The company is boosting its business on securities linked to natural disasters as it hires Craig Wenzel to work on this area. Wenzel will have the new position of Senior Vice President, Capital Markets. XL's third quarter operating income surged by 112% from a year ago, and it surpassed Zacks' consensus estimate by 22%. Also, earnings have grown by about 118% from the same period last year.

The stock price continues to exhibit a robust performance. Shares have gained 28.86% from the previous year. The net margin as of the end of the third quarter was 9.46%, way higher than in the same period last year at 2.56%. The company enjoys a high yield of 4.18%. XL Group has been paying stable dividends since 2009. However, the payout ratio has ballooned from 44.35% to 253.37%, which suggests a significantly weakened ability to raise dividends. Nonetheless, its growth prospects are quite robust. EPS is estimated to grow by 26.88% next year. Investors can also expect earnings per share to go up by 8.75% per year in the long term.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Business relationship disclosure: EfsInvestment is a team of analysts. This article was written by Aubrey Tabuga, one of our equity researchers. We did not receive compensation for this article (other than from Seeking Alpha), and we have no business relationship with any company whose stock is mentioned in this article.