Seeking Alpha
Profile| Send Message|
( followers)  

Whitney Tilson is the founder and managing partner of T2 Partners LLC Hedge Fund. T2 Partners was founded in 1998 and currently manages $353 million in assets. Mr. Tilson is a value investor who follows the investment philosophies of Benjamin Graham and Warren Buffett. In this article I examine the six highest yielding stocks in this guru's portfolio.

Chimera Investment Corporation (NYSE:CIM) CIM has a market cap of $3.12 billion with a price to earnings ratio of 5.27. The stock has been trading in a 52 week range between $2.38 and $4.34. The stock is currently trading around $3. The company reported second quarter revenues of $195 million compared to revenues of $183 million in the second quarter of 2010. Second quarter net income was $117.8 million, compared to net income of $124 million in the second quarter of 2010.

One of CIM’s competitors is Analy Capital Management (NYSE:NLY). NLY is currently trading around $17 with a market cap of $16.45 billion and a price to earnings ratio of 6.31. NLY pays a dividend which yields 14.2% versus CIM whose dividend yields 17.3%.

T2 Partners owns 300,000 shares of CIM. T2 Partners purchased 50,000 shares of CIM in the fourth quarter of 2010. CIM is a Real Estate Investment Trust (REIT) that primarily invests in non-agency mortgage securities. Non-agency securities are not government backed, and are therefore vulnerable to mortgage holder defaults.

CIM increased its 2010 net income by 64%, and has increased its net income in four out of the last five quarters. Investors are willing to accept the risk of investing in this type of company, because of the high dividend yield. The company began paying a quarterly dividend in the fourth quarter of 2007. Since then, the dividend has varied but it is now $0.52.

The company should be able to continue paying dividends as its second quarter balance sheet showed $16 million in cash. CIM’s stock price, along with many other REIT’s has suffered this year, and is down by 25.8% over the last 52 weeks. If I were to invest in a REIT, I would prefer to invest in NLY which has paid quarterly dividends since 1997, and whose stock price is down by only 3.9% over the last 52 weeks. I rate CIM as a hold. CIM is one name that can keep paying its big dividend.

Black Rock Kelso Capital Corporation (NASDAQ:BKCC) BKCC has a market cap of $652.35 million with a price to earnings ratio of 8.31. The stock has traded in a 52 week range between $6.30 and $12.97. The current stock price is around $8.91. The company reported second quarter revenues of $50.2 million compared to revenues of $28.2 million in the second quarter of 2010. Second quarter net income was $38.9 million compared to net income of $22.3 million in the second quarter of 2010.

One of BKCC's competitors is the Jeffries Group Inc. (JEF). JEF is currently trading around $15 with a market cap of $3.24 billion and a price to earnings ratio of 9.99. JEF pays a dividend which yields 2% versus BKCC whose dividend yields 12.1%.

T2 Partners owns 48,016 shares of BKCC. T2 Partners purchased 47,595 shares of BKCC in the fourth quarter of 2009. BKCC invest in small and midsized companies and could be classified as a “business development company” (BDC). The company has done a terrific job of increasing earnings and increased year-over-year second quarter revenues by 78% and net income by 74%. The company has paid quarterly dividends since the third quarter of 2007. The dividend has varied from quarter to quarter but is currently at $1.28. The stock price is down by 23.9% over the last 52 weeks.

This stock is extremely cheap (price to earnings ratio 8.31/price to book ratio 0.88) and has a high yield dividend of 12.1%. The stock price has increased by 19.7% over the last month, and I think that investors are beginning to see that this stock is a terrific value. I rate BKCC as a buy.

BP Plc. (NYSE:BP) BP has a market cap of $143.77 billion with a price to earnings ratio of 6.3. The stock has traded in a 52 week range between $33.62 and $49.50. The stock is currently trading around $45. The company reported third quarter revenues of $97.6 billion compared to revenues of $72 billion in the third quarter of 2010. Third quarter net income was $4.91 billion compared to net income of $1.78 billion in the third quarter of 2010.

One of BP’s competitors is the Exxon Mobil Corporation (NYSE:XOM). XOM is currently trading around $81 with a market cap of $396.17 billion and a price to earnings ratio of 10.74. XOM pays a dividend which yields 2.3% versus BP whose dividend yields 3.7%.

T2 partners owns 161,281 shares of BP. T2 Partners last significant BP transactions was to sell 20,000 shares of BP in the second quarter of 2011. For 2010 BP reported net income of $-3.72 billion. The lost was primarily due to costs resulting from the Deepwater Horizon oil spill for which BP shared responsibility.

BP has made an impressive comeback and has reported $17.65 billion in net income through the first three quarters of 2011. In spite of the disaster, the stock price is up by 11.5% over the last 52 weeks. BP’s stock price is relatively cheap, and the 3.7% yield is attractive. BP cut its dividend in half in the first quarter of 2011 from $3.36 to $1.68. I believe that BP will continue to increase its earnings. I also suspect that BP will increase its dividend once it moves forward from the oil spill disaster. I rate BP as a buy.

General Electric Company (NYSE:GE) GE has a market cap of $182.50 billion with a price to earnings ratio of 13.17. The stock has traded in a 52 week range between $14.02 and $21.65. The stock is currently trading around $17. The company reported third quarter revenues of $35.4 billion compared to revenues of $35.9 billion in the third quarter of 2010. Third quarter net income was $3.22 billion compared to net income of $2.06 billion in the third quarter of 2010.

One of GE’s competitors is Caterpillar Inc. (NYSE:CAT). CAT is currently trading around $97 with a market cap of $62.62 billion and a price to earnings ratio of 14.8. CAT pays a dividend which yields 1.9% versus GE whose dividend yields 3.5%.

T2 Partners owns 30,536,500 shares of GE. T2 Partners purchased 900,000 shares of GE in the third quarter of 2011. GE is a diversified conglomerate that has been profitable for decades. The company has paid quarterly dividends since 1962. Since 2010, GE has increased its dividend three times by 50%. The stock price is up by 7.68% over the last 52 weeks and 3.5% over the last three years.

People who invest in GE do not expect fast growing earnings, or an exceptionally high dividend yield. What GE offers is safety and consistency, with a secure and respectable dividend. I recommend GE for investors that want a hands-off investment that they can buy and hold for a long period of time. I rate GE as a buy.

Johnson & Johnson Company (NYSE:JNJ) JNJ has a market cap of $179.38 billion with a price to earnings ratio of 15.97. The stock has traded in a 52 week range between $57.50 and $68.50. The stock is currently trading around $65. The company reported third quarter revenues of $16 billion compared to revenues of $15 billion in the third quarter of 2010. Third quarter net income was $3.2 billion compared to net income of $3.4 billion in the third quarter of 2010.

One of JNJ’s competitors is Novartis AG (NYSE:NVS). NVS is currently trading around $58 with a market cap of $141.03 billion and a price to earnings ratio of 13.58. NVS pays a dividend which yields 3.4% versus JNJ whose dividend yields 3.5%.

T2 Partners owns 1,110 shares of JNJ. T2 Partners purchased all 1,110 shares of JNJ in the third quarter of 2010. JNJ is a drug and medical device manufacturer that has been very profitable for many years. The company also has an excellent dividend paying history. JNJ has paid quarterly dividends since 1970 and has increased its dividend six times by 72.7% over the last five years. The stock has increased by 2.7% over the last 52 weeks and 18% over the last three years. Investors that are looking to hit a homerun, should not invest in JNJ. However, JNJ is an excellent stock pick for investors that want a low maintenance investment that offers security and a steady dividend income. I rate JNJ as a buy.

Seagate Technology (NASDAQ:STX) STX has a market cap of $6.9 billion with a price to earnings ratio of $14.97. The stock has traded in a 52 week range between $9.05 and $18.35. The stock is currently trading around $16. The company reported first quarter revenues for the period ending on September 30 in the amount of $2.8 billion, compared to revenues of $2.7 billion in the first quarter of 2011. First quarter net income was $140 million compared to net income of $149 million in the first quarter of 2011.

One of STX’s competitors is Western Digital Corporation (NASDAQ:WDC). WDC is currently trading around $27 with a market cap of $6.29 billion and a price to earnings ratio of 8.28. WDC does not pay a dividend versus STX which pays a dividend with a 4.4% yield.

T2 Partners owns 843,348 shares of STX. T2 Partners sold 37,832 shares of STX in the second quarter of 2011. STX is the world’s largest manufacturer of hard disk drives. The company has seen its revenues and net income slip because of fierce competition and lower demand for PC’s and laptop computers. In the 2011 fiscal year, the company’s net income was down by 215%. STX has a spotty dividend history.

The company suspended its dividend payments in 2010 because of large losses in 2009. The company reinstated its dividend payments in April of 2011 in the amount of $0.72. The stock's recent performance has been exceptional. The stock price is up by 11.4% over the last 52 weeks, and is up by 47% over the last month. Most of the stock's price increase has occurred since October 20th when the company announced above expected earnings. The company will also benefit from the recent flooding in Thailand, which will cripple the production of its competitor Western Digital. I would be wary about buying shares of STX at this time because of its recent enormous price run-up. I rate STX as a hold.

Source: 6 Highest Yielding Stocks in Whitney Tilson's Portfolio