By Serkan Unal
Ken Fisher is the founder, Chairman and CEO of Fisher Investments, a money management firm with some $43 billion in assets under management. The firm deploys a global, top-down and dynamic asset allocation strategy. According to Forbes, "Fisher says he's moved out of smaller stocks lately into big-cap growth stocks, a strategy he calls 'classic later stage bull market posturing.'"
Fisher is a billionaire with net worth of about $1.8 billion. In 2010, he was recognized as one of 30 most influential figures in the investment advisory industry over the last 30 years, according to Investment Advisor magazine. Since 1984, Fisher has been writing a monthly column for Forbes called "Portfolio Strategy." He also authored eight books about investing, including five bestsellers. Fisher is a renowned value investor.
In its recently-filed 13-F, Fisher Investments revealed its fourth-quarter-2012 investment portfolio, worth $35.1 billion. In the quarter, Fisher sold out of 27 positions and initiated new stakes in 33 stocks. Fisher also significantly raised his stakes in several holdings, including a few dividend-paying stocks. Here is a closer look at five dividend-paying positions which Fisher substantially boosted in the previous quarter.
Banco Santander-Chile (BSAC), Chile's largest banking corporation by asset size, has a dividend yield of 3.0%, payout ratio of 56%, and five-year dividend growth of 8.6% annually. Its long-term annualized EPS CAGR is 8.0%. In the fourth quarter of 2012, Fisher boosted his stake in the bank by 6,782% to $18.6 million. The bank's growth is driven by the robust expansion of the Chilean economy, which the government expects to grow 4.8% in 2013. According to the bank's recent investor presentation, loan growth in Chile is expected to average 11.0% this year. The bank is seeing accelerating loan growth, improving funding mix, expanding margins, and contracting provision expenses. The bank's ROE of 18.5% is one of the highest in Chile and is more than two times larger than the average for U.S. banks. Based on pre-tax ROE and core capital ratios, the bank has the best risk-return ratio in Chile. The bank has a credit rating of Aa3 on the Moody's scale, which is better than credit ratings of Credit Suisse (CS), Deutsche Bank (DB), JPMorgan Chase & Co. (JPM), and Wells Fargo & Co. (WFC). BSAC is trading at price-to-book of 3.3, almost double the industry average but lower than the bank's five-year average of 3.5.
Wal-Mart Inc. (WMT), the world's largest discount retailer, has a dividend yield of 2.2%, payout ratio of 33%, and five-year annualized dividend growth of 12.6%. The company has raised dividends for the past 38 consecutive years and is considered one of the S&P Dividend Aristocrats. The company's long-term EPS CAGR is forecasted at 9.2%, the same as over the past five years. In the previous quarter, Fisher hiked his stake in WMT by 1,401% to $27.7 million. The retailer has posted five consecutive quarters of rising same-store sales growth in the U.S. The company is expected to continue the streak when it reports figures for the latest quarter. Wal-Mart staged a major turnaround after fixing gaps in merchandizing and pricing. However, some are concerned that Wal-Mart's sales have peaked and are likely to feel a pinch from the payrolls tax hike. In fact, this was a reason for the recent downgrade of WMT by an analyst at JPMorgan Chase. Still, the company is a good value, as its forward P/E of 13.7x is below the industry multiple of 14.9x. The company's price-to-book is also mostly in line with industry and historical metrics.
BioMed Realty Trust Inc. (BMR), a REIT that provides real estate to the life science industry in the United States, has a dividend yield of 4.5% and a payout ratio of 67% of its fiscal 2013 funds from operations (FFO). The REIT's cash distribution (dividend) was slashed in 2009, but since has risen 114%. Ken Fisher boosted his stake in the company by 406% to more than $44 million in the fourth quarter of 2012. Last year, BioMed had strong leasing momentum. Now, nearly 38% of the REIT's rents come from larger, well-established public companies, while another 25.3% of rents come from A-rated life science companies. Some of its largest tenants include the likes of Genentech/Roche (RHHBY.PK), GlaxoSmithKline (GSK), and Sanofi (SNY). In 2012, BMR generated core FFO of $1.31 per diluted share, up 9.6% from 2011. It sees 2013 FFO at between $1.36 and $1.44, versus the consensus estimate of $1.38 per share. According to Deloitte, the global pharma and biotech industry revenue growth is expected to rise to about 8.0% annually in 2016 from about 4.0% in 2012. BMR is trading at 15x forward FFO.
Verizon Communications (VZ), the second-largest U.S. telecom company by market cap, has a dividend yield of 4.6%, payout ratio of 74% of current-year consensus estimate, and five-year annualized dividend growth of 4.0%. The company pays the second-highest dividend yield in the DJIA. Ken Fisher boosted his stake in the company by 345% to more than $43 million at the end of the fourth quarter of 2012. The company is seeing notable growth, especially in its wireless segment. Its full-year 2012 revenues were up 8.1% year-over-year, while service revenues increased 7.7% year-over-year. Verizon Wireless added 2.2 million net retail connections in the fourth quarter of 2012, including a record-setting 2.1 million retail postpaid net connections. In 2012 as a whole, the company added 5.0 million net retail postpaid connections, the most in four years. Strong integration of smartphones bodes well for the company. Its robust financial performance has boosted free cash flow to $15.3 billion at the end of 2012, an increase of 13.1% from the year earlier. This could lead to higher-than-average dividend growth this year. The stock is trading at a forward P/E of 16.0x versus 14.1x for its archrival AT&T Inc. (T).
Janus Capital Group, Inc. (JNS), an asset manager, has a dividend yield of 2.5%, payout ratio of 44%, and a five-year annualized dividend growth of nearly 37%. Ken Fisher boosted his stake in JNS by 104% in the fourth quarter of 2012 to $56 million. The company has rallied amidst the market hype about a shift of investment flows out of fixed income and into equities. Equities account for 82% of JNS's assets under management. However, in the latest earnings release, the company reported a 14th straight quarter of withdrawals. In early January 2013, S&P downgraded its credit rating outlook on JNS based on an expectation of deteriorating profitability and key credit metrics this year, owing to continued net asset outflows. S&P "anticipates that Janus Capital will face considerable difficulty in improving its long-term financial performance due to the persistent negative performance fees, which will negatively impact the company's profitability over the upcoming years." JNS is trading at 15.6x forward earnings, compared to 15.1x for the asset management industry. It is somewhat more attractive based on a price-to-book of 1.3 versus 1.7 for its industry and 1.5 as its five-year average.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.