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We like those hedge fund managers who are willing to share their investment opinions with the public. Joel Greenblatt, the founder of Gotham Asset Management, is one of these managers. He is famous for his “little book” – full name “The Little Book That Beats the Market,” in which his described his quantitative investment strategy of picking stocks, known as Magic Formula Investing. In addition to the New York Times bestselling “little book,” Greenblatt has also published “You Can Be a Stock Market Genius: Uncover the Secret Hiding Places of Stock Market Profits.” He is also the co-founder of “Value Investors Club,” a website for value investors to share their investment ideas. The club awards $5,000 to the member who submits the best idea once a week.

Greenblatt is a value investor with a focus on special situations. Below we compiled a list of high dividend stocks in the latest 13F portfolio of Greenblatt’s Gotham Asset Management. All companies have at least $10 billion market cap and 3% dividend yield.

Company Name

Ticker

Value

Activity

Dividend

NORTHROP GRUMMAN

NOC

7734

156%

3.59%

RAYTHEON CO

RTN

7331

21%

3.84%

MICROSOFT CORP

MSFT

7253

-10%

3.15%

LORILLARD INC

LO

6099

6%

4.77%

ALTRIA GROUP INC

MO

1843

-40%

5.75%

LILLY ELI & CO

LLY

1579

27%

5.04%

REYNOLDS AMERICAN

RAI

1443

-32%

5.55%

INTEL CORP

INTC

1211

-48%

3.40%

CONAGRA INC

CAG

755

64%

3.78%

LOCKHEED MARTIN

LMT

710

11%

5.23%

CAMPBELL SOUP CO

CPB

638

New

3.56%

PHILIP MORRIS INTL

PM

608

-59%

4.13%

ISHARES TRUST

EFA

520

-67%

3.37%

INTL PAPER

IP

505

-51%

3.79%

B C E INC

BCE

466

New

5.14%

MERCK & CO

MRK

378

-87%

4.77%

ABBOTT LABS

ABT

209

-86%

3.54%

The largest position of high-dividend stocks in Greenblatt’s portfolio at the end of September was Northrop Grumman Corp (NYSE:NOC). According to the 13F filing of Gotham, the fund boosted its stakes in NOC by 156% over the third quarter. At the end of September, Gotham had $7.7 million invested in NOC shares. NOC has a dividend yield of 3.59% and returned 9.11% since the end of September, lower than the 11.40% for SPY. NOC has a market cap of $14.74B and a relatively low P/E ratio of 9.16. It is very likely that the stock is currently trading at a discount.

Greenblatt also invested over $7 million in Raytheon Co (NYSE:RTN) and Microsoft Corp (NASDAQ:MSFT). As of September 30, his Gotham invested $7.3 million in RTN, up 21% from the end of June. RTN returned 12.64% since the end of the third quarter, versus 11.40% for SPY. MSFT did not perform too well in the fourth quarter. The $216B market cap stock returned 4.05% so far since the end of September, underperforming the market by about 7 percentage points. MSFT has a dividend yield of 3.15% and a P/E ratio of 9.33, relatively low compared with its peers. Jean-Marie Eveillard was also bullish about MSFT. At the end of September, his First Eagle Investment Management reported to own $475 million worth of MSFT stocks.

Another mega-cap high dividend stock in Greenblatt’s portfolio is Intel Corp (NASDAQ:INTC). Gotham had $1.2 million invested in INTC as of September 30. Since then, INTC returned 18.25% so far, beating the market by almost 7 percentage points. INTC has a dividend yield of 3.40%. Ken Fisher’s Fisher Asset Management invested $400+ million in INTC at the end of September.

Other large-cap dividend stocks Greenblatt is bullish about include Lorillard Inc (NYSE:LO), Altria Group Inc (NYSE:MO), Lilly Eli & Co (NYSE:LLY), and Reynolds American Inc (NYSE:RAI). Tobacco companies outperformed the market over the past couple of years and they have been distributing high dividends to their investors as well. We think high-dividend stocks are much better alternatives to 10-year Treasuries that yield around 2%. And focusing on the dividend stock picks of great hedge fund managers such as Greenblatt is one of the best ways of picking good dividend stocks.

Source: 17 Dividend Stocks In Joel Greenblatt's Magic Formula Portfolio