By Serkan Unal
George Soros, one of the world's most famous investors and financiers, earned $1 billion from shorting the British pound in September 1992. He seems to have struck the same luck again last year and this so far, as his short trade on the Japanese currency has produced a gain of about $1 billion since November 2012. Soros has been making bets across asset classes and sectors based on macroeconomic events and economic theory. He currently runs a family office with some $24 billion in assets under management.
Soros' family office recently filed its 13-F regulatory disclosure with the SEC for the fourth quarter of 2012. Based on the filing, Soros sold out of his stakes in 69 companies, while he entered 70 new positions, including several positions paying dividends. Here is a closer look at Soros' four new stocks paying dividend yields above 2.0% and boasting the potential for capital appreciation and dividend growth over the longer term. The stocks are listed based on their size in the overall portfolio.
Ford Motor Company (F), the second largest U.S. automaker by market share, has a dividend yield of 3.1% and a payout ratio of 29% of the current-year EPS estimate. Recently, the company doubled its quarterly dividend. Last quarter, Soros reported owning nearly $41 million worth of the stock. The company's EPS for the fourth quarter of 2012 and the whole year beat analysts' estimates; however, its 2013 outlook was below investors' expectations, given deeper anticipated losses in Europe and a break-even position in Latin America. Still, Ford's North American sales are driving growth. There is a strong pent-up demand in the U.S. as the aging vehicle fleet hit the record-high average age of 11.3 years in January 2013. This year, U.S. vehicle sales are running at an annualized rate of 15.3 million, above the five-year high of 14.5 million reported in 2012. Ford predicts that U.S. sales could grow as much as 8% in 2013. In addition, Ford's sales are booming in China and India. Based on the company's predication from 2011, Ford expects China and India sales to boost its global vehicle sales by 50% to 8 million by 2015. Despite the company's upbeat predictions, analysts at Barclays and Deutsche Bank recently downgraded the stock based on valuation, margin expansion, and anticipated "lowering expectations." Ford still looks as good value, trading at 9.4x forward earnings versus 17.1x for General Motors Co. (GM) and 22.4x for Toyota Motor Co. (TM).
Invesco Ltd. (IVZ), an asset manager, has a dividend yield of 2.5%, payout ratio of 34% of the current-year EPS estimate, and five-year annualized dividend growth of about 6.0%. Last quarter, Soros reported owning almost $40 million worth of the stock. Invesco Ltd. currently has some $712.6 billion in assets under management. The company's AUM has benefited from positive inflows into both passive and active investment vehicles. Even though the company missed analysts' expectations, mainly on bottom lines due to rising compensation costs, the company's growth outlook is sanguine. Analysts forecast the company's long-term EPS CAGR at a robust 14.6%. Its growth will be driven by rising investment flows amidst the company's broad diversification. The stock is up nearly 11% over the past 12 months and is trading close to its 52-week high. Last month, both JPMorgan and Morgan Stanley downgraded the stock based on its valuation, softer sales of its leading product, and margin expansion. The stock is currently trading at a forward P/E of 13.7x, below an industry multiple of 15.4x. Its price-to-book of 1.5 is also lower than the industry average ratio of 1.7. The stock's long-term EPS growth expectations suggest a potential for appreciation and dividend growth in the future.
Newell Rubbermaid Inc. (NWL), the maker of plastic items, including plastic bins and cookware, has a dividend yield of 2.5% and a payout ratio of 33% of the current-year EPS estimate. The company's quarterly dividend was slashed back in 2009, from 21 cents to 5 cents per share, but since it has risen threefold. Last quarter, Soros reported owning $33.4 million in NWL stock. Over the past four quarters, the company has been posting estimate-beating EPS results. Its cost cutting and emerging market growth have been propping up the bottom line. The company expects to see core sales growth of between 2% and 4% this year, with the EPS guidance in the range between $1.78 and $1.84. The midpoint of NWL's EPS guidance meets the analysts' EPS estimate of $1.82. The company has seen marginal, but still positive EPS revisions over the past 30 days. Its forward P/E of 13.2x is on par with its respective industry's forward earnings multiple. However, the stock is priced below industry based on a price-to-book of 3.4 (an industry price-to-book ratio is 4.3). In 2010, there were rumors that the company was a takeover target-involving Procter & Gamble (PG) as a rumored acquirer. However, those rumors dissipated over time. Several prominent hedge funds, including Ken Griffin's Citadel Investments, Ariel Investments, and Phill Gross's Adage Capital, have positions in NWL.
PNC Financial Services Group Inc. (PNC), one of the largest U.S. diversified financial services organizations, has a dividend yield of 2.5% and a payout ratio of 25% of the current-year EPS estimate. The bank's quarterly dividend was slashed in 2009, from 66 cents to 10 cents per share, but since it has increased fourfold. The bank generates a large share of fee-based revenues, which may improve this year. Moreover, the bank also has a high exposure to commercial and industrial loans, including commercial real estate construction exposure, which is expected to rise smartly with the rebounding economy. In general, the strong Midwest economy, supported by farming and hydraulic fracking industries, has given support to the bank's growth. Growth is also driven by acquisitions, including that of RBC's U.S. retail banking business. Interestingly, PNC owns 36 million shares of the world's largest asset manager, BlackRock Inc. (BLK), and derives 11% of its profit from its BLK investment. Given BLK's spectacular performance over the past several years, this PNC position has proven to be lucrative. However, it is relevant to note that some of the bank's weaknesses include a contracting net interest margin and capital ratios slightly below those of its peers. Also, the bank has an ROE of 7.2%, below its industry's average ROE of 8.3%. It is trading at 90% of book value.