Jim Simons' Renaissance Technologies (RenTech) hedge fund has just released its 13F, outlining the structure of its investment portfolio. Aside from the traditional names such as Apple (AAPL), Eli Lilly (LLY), and Chipotle Mexican Grill (CMG), there are also several new picks, including dividend-paying companies. Here are 8 dividend plays Simons is betting will produce sizable returns in the coming years.
Banco Santander (STD) is a $48.7 billion financial services company with operations in Europe, Latin America, and the United States. By market capitalization, the banking group is the eurozone's largest bank and the world's fourth biggest banking corporation.
The bank has been the subject of discussions regarding the new stringent solvency requirements for Spanish financial institutions, which demand for banks to set aside $38 billion, on top of the $70 billion the Spanish banks were required to provision in February for potential losses on real estate loans.
Regardless of the new loan-loss provisions, Santander remains well capitalized and positioned to weather the European financial turmoil, mainly due to its global diversification. The bank pays a stunning dividend yield of 15.04%, which is 580 basis points above the average yield for the industry. The company has a dividend payout ratio of 76% and a forward P/E of 7.3.
Jim Simons' Renaissance Technologies initiated a new position in Banco Santander in the first quarter 2012. The hedge fund acquired 1,734,246 shares in the company at an average price of $7+ a share. The bank's stock is currently trading at $5.77 a share, almost 25% below the average acquisition cost for Simons' hedge fund.
Plains All American Pipeline LP (PAA) is another Simons' new dividend pick. The $12.5 billion company is engaged in the transportation, storage, and marketing of crude oil, liquefied petroleum, and other related oil and petroleum products. The partnership pays a dividend yield of 5.20%, almost on par with the industry's average. The company's dividend payout ratio of 80% is high, but still lower than the industry's payout ratio of 143%. Plains All American Pipeline's forward P/E is 16.5, below the industry's average forward P/E of 22.1. Simons' hedge fund initiated a new position in the company, purchasing 540,600 shares.
CME Group (CME) is a new dividend-paying addition to Simons' portfolio. The $17.3 billion company operates derivatives and futures exchanges, including the Dow Jones stock and financial indices. CME Group pays a dividend yield of 3.36%, which is 116 basis points above the industry's average. The company's dividend payout ratio is 39%. Its forward P/E is 15.3, much higher than the industry's average forward P/E of 10.9. RenTech added 261,119 shares of CME Group to its portfolio. The stock is trading at a 10% discount to its end-of-March price.
Applied Materials (AMAT) is a $14 billion semiconductor equipment manufacturer. It has a dividend yield of 3.30%, which is 120 basis points above the industry's average. The company has a dividend payout ratio of 26%. Applied Materials' stock is trading at 10.6 times its forward earnings, which is well below the industry's multiple of 15.6. Simons' hedge fund initiated a brand new 2 million share position in Applied Materials in the first quarter 2012. The stock is currently down 13.2% since the end of the first quarter.
Molson Coors Brewing Company (TAP) is a $6.4 billion brewer with a dividend yield of 3.10%, above the industry's average of 2.60%. The company has a dividend payout ratio of 35%, half the estimated ratio for the industry as a whole. It is currently trading at 11 times its forward earnings, well below the industry's average of 26.8. RenTech opened a position in the brewer by purchasing 244,700 shares. The stock is down 10% since the end of March.
Time Warner (TWX) is a $34.3 billion company and one of the world's largest companies in the entertainment industry. The company pays a 2.89% dividend yield, which is 130 basis points above the industry's average yield. It has a dividend payout ratio of 35%, at par with its peers. The company's shares are trading at 10.6 times its forward earnings, which is better than the industry's ratio of 15.1. Simons' hedge fund had 3,060,134 shares of Time Warner at the end of the first quarter.
Corning (GLW) is a $19.8 billion producer of glass, ceramics, and related materials for industrial use. The company pays a 2.3% dividend yield, which is slightly higher than the industry's yield of 2.0%. The glass manufacturer's dividend payout ratio is at a low 16%. The company is attractive on valuation, trading at 9.5 times its forward earnings, compared to the industry's multiple of 16.1. RenTech had 4,250,700 shares in this glass and ceramics manufacturer at the end of March. Currently, the stock is trading at $13.1 a share, down 7.1% this quarter.
St. Jude Medical (STJ) is a $12.1 billion global manufacturer of medical devices. It has a dividend yield of 2.4%, 80 basis points above the average yield of the medical device industry. The company has a low dividend payout ratio of 35%. Its stock is currently trading at 11.1 times its forward earnings, which is well below the industry's multiple of 16.7. Jim Simons' hedge fund held 833,413 shares of this company at the end of the first quarter. The stock is down nearly 13% since then.
Overall, we like these dividend stocks. Most of them are trading at more attractive levels and they will attract a lot of investor demand if/when Greece exits the euro. Dividend stocks were great investments in 2011 and they will be in 2012 as well.