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Joel Greenblatt founded Gotham Capital in 1985. He is a value investor with a focus on special situations. He developed a quantitative investment strategy called "Magic Formula Investing," based on a simple formula that identifies cheap and high-quality companies with a high earnings yield and a high return on invested capital. Based on Greenblatt's "Magic Formula" a series of Formula Investing Funds (established by FundVantage Trust) were created to provide access to Greenblatt's value weighted investing methodologies. Applying the formula, the Formula Investing US Value Select A (FNSAX) has returned 26.8% since its inception, beating the S&P 500 and Russell 1000 indices by a margin of more than 6 percentage points. Greenblatt has authored two books, "You Can Be A Stock Market Genius" and "The Little Book That Beats the Market." He is an adjunct professor at the Columbia University Graduate School of Business.

Here are Greenblatt's five largest dividend picks that yield at least 2.75%:

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KLA-Tencor Corporation (NASDAQ:KLAC) is the third largest holding in Greenblatt's Gotham Capital portfolio, with a 1.22% share that equals $14.05 million in investment. The company produces and sells process diagnostics and control solutions for the semiconductor industry. It has an earnings yield of 9.9% and a return on invested capital of 24.1%. KLA-Tencor pays a dividend yield of 2.8% on a low payout ratio of 32%. Its rival Applied Materials (NASDAQ:AMAT) pays a yield of 3.3%, while competitor Rudolph Technologies (NYSE:RTEC) does not pay dividends. The company has seen its earnings per share (EPS) grow at an average annual rate of 20.1% a year over the past five years. Analysts forecast that EPS will expand at a still-robust 12% annual rate for the next five years. In terms of the forward-earnings valuation, the stock is trading below its peers and historical P/E metrics. Among fund managers, KLA-Tencor is also popular with billionaire Ray Dalio (Bridgewater Associates-check out its top picks).

Northrop Grumman Corporation (NYSE:NOC) is the fourth-largest holding in the Gotham Capital portfolio, with a 1.17% share valued at $13.5 million. This defense contractor has a high earnings yield of 12.4% and a return on invested capital of 13.1%. The company pays a dividend yield of 3.6% on a payout ratio of 29%. The company's peers Raytheon Co. (NYSE:RTN) and Lockheed Martin Corp. (NYSE:LMT) pay dividend yields of 3.7% and 4.7%, respectively. Given the U.S. fiscal austerity, the company's earnings per share will slow down its growth to an average of 3.7% per year for the next five years from a 10.4% average annual rate achieved over the past five years. Based on the forward-earnings multiple, the company is valued slightly below its industry average, but above its own historical metrics. The stock is changing hands at $62.24 a share. In addition to Greenblatt, fund manager Jean-Marie Eveillard is very bullish about the stock (check out First Eagle Investment Management's portfolio holdings).

GameStop Corp. (NYSE:GME) is the fifth-largest holding in Greenblatt's portfolio, with a 1.11% share or about $12.8 million in investment. This world's largest video game retailer has an earnings yield of 13.6% and a return on invested capital of 11%. The company pays a dividend yield of 3.4% on a payout ratio of 25%. Its rival Amazon (NASDAQ:AMZN) does not pay any dividends, while peer Best Buy Co. (NYSE:BBY) pays a yield of 3.2%. The company's EPS grew at an average annual rate of 19.3% over the past five years, and is expected to expand at a more modest 9.4% annual rate for the next five years. The company's forward P/E is well below peers' and the company's own historical metric. The stock is currently trading at $18.37. Fund manager Whitney Tilson (T2 Partners Management-see its top picks) sold out of his stake last year.

Raytheon Co. (RTN) is the 10h largest holding in Gotham Capital's portfolio, with a 0.97% share valued at about $11.3 million. This defense contractor has an earnings yield of almost 10% and a return on invested capital of 14.3%. It pays a dividend yield of 3.7% on a low payout ratio of 37%. The company's rivals Northrop Grumman and Lockheed Martin pay yields of 3.6% and 4.7%, respectively. Given the U.S. budget cuts in the defense-related segments, the company's EPS will grow at an average of 8.6% per year over the next five years, much slower than the average growth rate of nearly 15% a year over the past five years. In terms of the forward valuation, the company is valued slightly above its peers, but below its own five-year average P/E. At present, the stock is trading at $54.64 a share. Billionaires George Soros and Ray Dalio sold out of their respective stakes in the company last year.

Applied Materials (AMAT) is the 11th largest holding in Greenblatt's portfolio, with a 0.92% stake valued at $10.6 million. The semiconductor equipment maker boasts an earnings yield of 13.5% and a return on invested capital of 21%. It also pays a dividend yield of 3.3% on a payout ratio of 36%. The company's competitor KLA-Tencor pays a dividend yield of 2.9%, while Lam Research Corporation (NASDAQ:LRCX) does not pay any dividends. The semiconductor equipment market has been in the doldrums, and a recovery is expected as of the second quarter of 2012. Applied Materials has seen its EPS grow at an 8.4% annual average rate over the past five years. EPS growth is expected to accelerate to a 9.3% average annual rate for the next five years. The company's stock is trading at $11.5 a share, with a forward P/E below that of the company's peers and the company's historical metrics. Fund managers Ray Dalio and David Dreman are also fans of the stock.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Source: Joel Greenblatt's Top 5 Dividend Picks