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By Matt Doiron

We don't recommend blindly following hedge fund managers' picks in many cases, but quarterly 13Fs which disclose many hedge fund positions are still useful in identifying initial investment ideas in our view. We also research investment strategies based on 13Fs, including our finding that the most popular small cap stocks among hedge funds outperform the S&P 500 by 18 percentage points per year on average. In fact, our portfolio which mimics hedge fund picks in this particular case earned an excess return of 33 percentage points over the last 11 months.

One way to use 13Fs to find investment ideas is to focus on stocks satisfying various criteria, including stocks which pay high dividend yields. Read on for our thoughts on the five largest positions in billionaire Leon Cooperman's Omega Advisors' portfolio (check out the full 13F on the SEC's website) which currently pay dividend yields of at least 4% or see the fund's stock picks over time.

Omega reported a position of 6.3 million shares in Linn Energy (LINE), a troubled oil and gas company. Linn had been planning to acquire Berry Petroleum in order to shore up its cash generation capabilities, but that deal has encountered delays and complications. Linn currently makes very high dividend payments on a monthly basis, resulting in an annual yield of more than 10%, but the payout ratio is quite high and so many investors are concerned that the dividend will have to be cut. The stock is down nearly 40% in the last year.

Kinder Morgan (KMI), which owns pipelines and terminals used in the transportation and storage of natural gas and other petroleum products, was another of Cooperman's dividend picks. The company recently increased its quarterly dividend to 40 cents per share (though we'd note that the history of paying dividends is limited) which comes out to a yield of 4.3%. Natural gas infrastructure has a bright future as the industry moves towards more export capacity, but at a forward P/E of 24 we'd think a good deal of growth is already priced in at Kinder Morgan.

The fund increased its stake in real estate investment trust Chimera (CIM) by 17% during the second quarter of the year. Chimera has actually been cutting its quarterly dividend payments over the last few years, and the stock remains down over 50% from its levels prior to the financial crisis. It does still pay a yield of over 10%, however, as real estate investment trusts are incentivized through the tax code to distribute a large share of taxable income to shareholders. The company invests in mortgage-backed securities and other real estate loans, so this return comes with a good deal of risk.

The 13F showed Omega with 3.5 million shares of contract offshore driller Transocean (RIG) in its portfolio at the beginning of July. With Wall Street analysts generally bullish on offshore drilling, their forecasts have Transocean as a bargain at 8 times forward earnings estimates and a five-year PEG ratio well below 1. We'd note that the higher capital expenditures in offshore drilling make it particularly sensitive to oil prices. Transocean recently increased its dividend, and at current prices pays an annual yield of 4.8%; it seems to be worthy of further research for investors who don't mind the connection to oil.

Cooperman and his team owned 4.3 million shares of Atlas Pipeline Partners (APL) according to the filing. It is another midstream natural gas company, which gathers and processes produced natural gas in the south central U.S. It currently pays a dividend yield of 6.8%, as markets are wary on the company: adjusted earnings per share figures have regularly been below expectations and higher costs have driven net income down compared to a year ago. The forward earnings multiple is 19, so even at these levels investors are generally expecting improvements on the bottom line going forward instead of further weakness.

Source: Billionaire Leon Cooperman's Dividend Picks