By Eric Winter
Daniel Loeb is no stranger to stock market success, banking a nine-figure salary each year from 2005 to 2007 with skilled investing through his $5bn fund, Third Point Capital. Primarily investing in technology stocks, Third Point's flagship fund gave its fortunate investors a 42% bump in portfolio value in 2010 alone. Loeb garnishes some of these returns by investing in dividend-paying stocks, providing additional income payouts throughout the fiscal year. Let's take a look at five of Loeb's highest yielding dividend plays as indicated by his last 13F filing. We should note that Loeb isn't an income investor, and he invested in these stocks because he expects significant capital gains over the next 1-2 years.
One of Loeb's highest yielding dividend stocks in the latter half of 2012 was Newell Rubbermaid Inc. (NWL). The household name controls a number of brands, including Calphalon, Sharpie, and Paper Mate. NWL saw positive growth in 2012, beating earnings estimates every quarter, although suffering from negative revenue growth between Q3 2012 and Q3 2011.The attractive 2.6% dividend yield was a nice complement to the near 30% appreciation in stock price, and we join sell-side analysts by expecting it to go even higher and push past its current yearly highs, where it stands now. John Rogers of multi-billion dollar fund Ariel Investments holds almost $80mm in the stock.
LyondellBasell Industries N.V. (LYB) stands as a powerhouse stock, providing Loeb with an extremely high return of 45% over the last year, as well as giving additional value through its 2.6% dividend yield. The chemical giant joined a significant handful of other stocks like Wynn and Choice Hotels Intl. that paid a special dividend in Q4 2012 ($2.75 to be exact, in addition to the previously declared $0.40). The special distribution amounted to $1.6bn for investors holding into the November ex-dividend date. LYB reports earnings tomorrow, so potential investors should let the dust settle before jumping in. Andreas Halvorsen of Viking Global has built a position in LYB that dwarfs Loeb's.
Declaring a dividend for the first time in its company's history this year, Apple, Inc. (AAPL) was another of Loeb's dividend picks, as well as one of his top three holdings. As of his last 13F filed, Loeb held almost 10% of his fund in the tech empire, growing his position size by almost double from Q2 to Q3 2012. Apple had an annual payout of $10.60 in 2012, and is due to pay $2.65 per share again on February 14th for investors holding into the seventh of that month. Loeb joined a high number of hedge fund managers affected by AAPL's spill after its latest earnings announcement, which brought on a roughly $60 drop in share price. Its next dividend payment will hardly make a dent in that loss of market cap, and bargain buyers should gauge the uncertain sentiment around the stock before piling in. Fellow billionaire Ken Fisher felt the burn along with Loeb in a big way (check out Fisher's other holdings here).
Another of Loeb's dividend-earners for the year was found in aerospace product and service provider United Technologies Corporation (UTX). UTX was fundamentally one of Loeb's best picks out of this list, displaying both positive quarterly revenue and earnings growth versus the last year's comparable quarter, as well as a modest forward P/E versus trailing, indicating a possible increase in earnings for 2013. Wall Street is betting that UTX's four consecutive earnings beats will continue, enabling the company to factor a mean price target of $95.95 a year out from here. United's current dividend yield is 2.40%, making UTX both a good growth and income play.
Murphy Oil Corporation (MUR) rounds out our list of Loeb's top dividend plays with a yield of 2.00%. It recently beat Q4 earnings estimates in a big way, coming out with a $0.77 surprise over expected. MUR also joined LyondellBasell in giving out a special dividend in December of 2012 ($2.50 in Murphy's case); both companies handed out the distributions in anticipation of looming tax rate increases due to the fiscal cliff. Despite Murphy's recent positivity in the eyes of their shareholders, most analysts on the Street are encouraging holding versus accumulation, as reported earnings and revenue still came in negative versus this time last year. William B. Gray, manager of almost a trillion dollars in assets, has a position in MUR comparable to Loeb's (see where else Gray is invested here).
Disclosure: I am long AAPL.