By Eric Winter
Swedish investment banker Tom Sandell has had a decorated past, earning an MBA from Columbia in the 1980s and starting his career at Bear Stearns in New York. He launched Sandell Asset Management Corp. in 1998, and it has culminated to one of his funds being awarded "Best Performing Risk Arbitrage Fund" in 2012 by The Hedge Fund Journal. His superior risk-adjusted returns can be in part attributed to some dividends collected on the way, which is why we have highlighted some of his highest-yielding stock picks as of Sandell Asset Management's last 13F filing.
With a whopping yield of 6.1%, the GEO Group, Inc. (GEO) tops our list of Sandell's high-producing dividend plays. The large yield is mainly attributed to a special dividend of $5.68 that was issued on the last day of 2012; it dwarfs the stocks typical quarterly dividends of $0.20. GEO joined a very large list of public companies that spun off cash and profits to investors through special dividends late last year, hoping to avoid some of the tax pitfalls of the looming fiscal cliff. The stock was also a huge performer in the past year, pumping up its share price to the tune of 78% versus this time last year. But has it run out of steam? Analysts say no, as they predict a rise to meet their 12-month valuations. Clint Carlson of Carlson Capital upped his position going into September of 2012.
Natural Gas transportation and storage service giant Kinder Morgan Inc. (KMI) was a standout dividend play for many fund owners in 2012, including John Bader of Halcyon Asset Management. The Master Limited Partnership performed well on many fronts (revenue, earnings, etc.) and was able to up their 2013 dividend projections as such. Investors holding into KMI's recent ex-dividend date of January 29th will be able to pocket the latest $0.37 dividend, hopefully helping KMI reach its goal payout target of $1.57 this year. Wall Street analysts want to see an 8% increase in price a year from current levels, so be on the lookout for this to pad the bottom line of many funds going forward.
Another of Sandell's dividend plays can be found in data manager Iron Mountain Incorporated (IRM). The global concern handles records management, data protection and recovery services, and information destruction. The stock provided a 3.1% yield to investors in 2012, as well as a respectable appreciation on the year, roughly matching the S&P's gain. We find some worry in its very high trailing P/E of 34 and negative revenue growth in its last reported earnings announcement versus a year prior. Billionaire Jim Simons of Renaissance Technologies cut 7% of his position in his last 13F filing.
Want to see which other dividend stocks round out Sandell's list?
Corrections Corporation of America (CXW) is another "prison play" of Sandell's, similar to the GEO group. The company owns and operates privatized correctional and detention facilities in the US and just announced the completion of an internal operations overhaul in January of this year. CXW consistently met or beat earnings announcements last year, contributing to the stock's large rise in share value, all while paying a dividend yield of 2.1%. With the business operations reorganization in the rear view mirror, we are bullish on CXW for 2012 and like the dividend as well. Keith Meister of Corvex Capital owns over 3.7mm shares of the company as of his last 13F filing.
Marathon Petroleum Corporation (MPC) finishes out our list of Sandell's latest dividend plays, and despite its lower yield of 1.80%, the stock had a lot to offer investors, rising over 70% in the past year. The low P/E ratio and high analyst appeal tell us this stock still has some legs, and for those that will buy into MPC before its next ex-dividend date of February 15th, they may see a small run-up as well as be able to collect the $0.35 dividend. The stock is making new 52-week highs as of this writing and may continue to rise as it leverages its recent Texas City refinery purchase from BP.