Billionaire Leon Cooperman's 'Off-The-Radar' Dividend Picks

Includes: GCI, KKR, NYX, WMB, WU
by: Insider Monkey

By Marshall Hargrave

Billionaire Leon Cooperman grew up the son of a South Bronx plumber and attended Hunter College while working at Xerox through the mid 1960s. Cooperman then was able to graduate from Columbia with an MBA and became a Goldman Sachs partner. Following his stint with Goldman, Cooperman founded Omega Advisors in 1991. Cooperman's firm focuses on domestic equities, with a specific focus on value investing - where Cooperman employs a strategy centered on fundamental analysis and a top-down approach for sector selection. Cooperman has taken refuge in five dividend-paying stocks that are off the radar from conventional mega-cap stocks (check out Leon Cooperman's newest picks here).

Williams Companies (NYSE:WMB) was Cooperman's 20th largest 13F holding and pays a 4.1% dividend yield. Williams is an energy infrastructure company that is a big play on the North American natural gas market. Williams expects to drive profits with increases in midstream and gas pipeline operations. CapEx is expected to see a large jump by the end of the year - up over $6.5 billion from 2011's $2.8 billion, which will help further build infrastructure for gas transportation.

We see Williams as a solid bet on the natural gas industry as a whole, as the company looks to spend $25 billion on a major CapEx plan through 2017. The energy transport company also plans on increasing its dividend payments by 20% in 2013 and 2014. Lower natural gas prices have put pressure on the stock of late, down 6% year to date, but Williams' earnings valuation (30x) is at a discount to top peer Kinder Morgan (35x).

The Western Union Company (NYSE:WU) is Cooperman's 27th largest 13F holding and pays a dividend yield of 3.9%. This money movement company should see positive growth from more prosperous emerging markets over the interim. Stabilization of the global economy has also helped boost revenues and transaction volume. Revenues are expected to grow 2% this year, with future increases coming from new agreements to provide money transfer services for banks. Western Union has made great strides in cost-cutting to focus on higher volumes and lower pricing. Western Union trades at only 6.5x earnings, compared to the industry average around 20x. The company also has a solid forward EPS growth rate of 9% that puts its PEG at a paltry 0.8.

Gannett (NYSE:GCI) is a newspaper company that pays a dividend yielding 4.5%. The contraction in publishing revenues is expected to continue to decline 7.5% this year, following a decrease of 7.9% in 2011. Total revenue growth is expected to be flat for the time being as Gannett takes initiatives to slow the decline in print revenues. Gannett trades below its top peers on a P/E basis, trading at only 9x earnings, compared to publishing peers Meredith Corporation (14x) and the New York Times (13x).

Gannett should also be able to benefit from a new revenue model that includes online subscription fees. This should help Gannett return its promised $1.3 billion to shareholders via buybacks and dividends through 2015. Billionaire investor Warren Buffett was one of Gannett's top fund owners (check out Warren Buffett's newest picks).

KKR & Co. L.P. (NYSE:KKR) is a global investment company that pays the highest dividend yield of our five stocks at 6%. KKR is more focused on private equity when compared to peers with around 80% of its fee-paying assets concentrated in the PE realm. KKR also manages to hold a majority of non-private equity assets in publicly traded securities, which allows the company to monetize its gains more easily. KKR trades at a 1.8x P/B and expects earnings to come in at $0.47 per unit for the next four quarters. Compared to other top investment firms, KKR is by far the cheapest at 7x earnings, with Apollo at 18x and BlackRock at 15x.

NYSE Euronext (NYSE:NYX) also pays a robust dividend yield of 5.1% and expects revenues to be up in the single-digits in 2013 after being down 18% in 2012. Next year's rebound should be driven by a modest uptick in trading volume, as consumer confidence continues its upward momentum.

Another boost to earnings should come from an improving IPO market and a cost savings target of $250 million by 2014. NYSE expects continued strong cash flow to support its dividend, with cash flow from operations hitting $1 billion in 2011 and a dividend payout ratio just shy of 50%. On a forward P/E basis, NYSE trades below its major peers at 11x, compared to CBOE (18x) and NASDAQ (12x). Billionaire investor Ken Griffin - founder of Citadel Investment Group - was the top fund owner of NYSE in 3Q (see Ken Griffin's latest picks here).

To recap: we believe that Cooperman's dividend bets are solid value plays, and are particularly under the radar of the blogosphere at the moment. Williams is a solid investment in natural gas, while Western Union has been pressured of late - down over 30% year to date - due to a weak global economy. Gannett is a very intriguing value play with turnaround potential given the weakness in print. KKR and NYSE should see positive trends thanks to a pick up in confidence in the investment community.

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

Business relationship disclosure: This article is written by Insider Monkey's writer, Marshall Hargrave, and edited by Jake Mann. They don't have any business relationships with any of the companies mentioned in this article and they didn't receive compensation (other than from Insider Monkey and Seeking Alpha) to write this article.