Billionaire Ken Fisher founded private investment firm Fisher Investments, an independent money management firm, in 1979. The firm has about $45 billion in assets under management. The firm's investment philosophy is based on the idea that supply and demand of securities are the only determinants of the securities' pricing. Fisher also bases his strategy on identifying and playing market inefficiencies. His portfolio strategy relies on the expertise of a large team of research analysts to accomplish this objective.
Fisher has been writing the Portfolio Strategy column for Forbes for 27 years. He is the fourth-longest running columnist in Forbes' history. He is the author of eight books, including four New York Times bestsellers: The Only Three Questions that Count (2006), The Ten Roads to Riches (2008), How to Smell a Rat (2009), and Debunkery (2010). Fisher, who has an estimated $1.7 billion in net worth, is currently ranked #764 on the list of Forbes Billionaires.
Here is a quick overview of Ken Fisher's largest positions that pay dividends:
Johnson & Johnson (JNJ) share in Fisher's fund is valued at nearly $710 million as of the first quarter of 2012. This stake was increased by 6% in that quarter. The company is a multinational pharmaceutical, medical device, and consumer goods company. It has a market capitalization of $182 billion. J&J has seen its earnings per share (EPS) shrink at an average annual rate of 1.4% over the past five years. Despite this contraction, the company was able to boost its dividends, on average at an 8.5% annual rate during that time. Analysts forecast that the company will increase its EPS by an average of 6.5% per year for the next five years.
The company has raised its dividend every year since 1963. Currently, its stock yields 3.7% on a payout ratio of 67%. Johnson & Johnson's competitors Pfizer (PFE), Novartis AG (NVS), and Covidien PLC (COV) pay dividend yields of 3.9%, 4.5%, and 1.7%, respectively. Until now, the company has been primarily an income play due to its generous dividend. Growth has been curtailed by patent expirations and the weak economy. J&J has recently acquired a Swiss medical-device maker Synthes in its largest acquisition in history. The acquisition will prop up J&J's EPS starting this year. After the merger, J&J will have about 70% of the market for plating systems used to surgically repair fractures of the wrist. Johnson & Johnson also acquired a China-based medical device maker, Guangzhou Bioseal Biotech. Earlier this month, J&J was upgraded by JPMorgan, Jefferies, and Raymond James on recently launched cancer, hepatitis, and HIV drugs. J&J stock is changing hands at $66.4 a share, up 1% year-to-day. The shares are trading at a premium relative to the industry. Legendary investor Warren Buffett is also bullish about the company.
Rio Tinto Plc. (RIO) share in Fisher's fund is valued at almost $642 million as at the end of the previous quarter. The company is an $83 billion minerals mining and processing company engaged in the production of aluminum products, copper, gold, molybdenum, silver, nickel, and other minerals. Rio Tinto pays a dividend yield of 3.9% on a payout ratio of 61%. The company's competitors BHP Billiton (BHP) and Vale S.A. (VALE) pay dividend yields of 3.5% and 6.0%, respectively. Rio Tinto's EPS contracted at an average rate of 11.5% per year over the past five years. However, analysts forecast a robust rebound, with EPS expanding at 16.8% a year for the next five years. The forecast could prove overzealous, given a dim medium-term outlook for commodities. The stock is currently changing hands at $46.62 a share, down 14.7% year-to-date. On a forward-earnings basis, the company is trading at a large discount to its industry and the company's own five-year average P/E. Fund managers Russell Hawkins and Israel Englander (Millennium Management-check out its top holdings) are investors in the stock.
Royal Dutch Shell (RDS.A)(RDS.B) share in Fisher Asset Management's portfolio is valued at $637 million at the end of March 31 quarter. The company is the Dutch-British oil and natural gas giant and Europe's largest oil company. It pays dividend yields of 4.7% on class A shares and 5.3% on class B shares. The company's payout ratio is at 30% on class A shares and 34% on class B shares. The company's competitors BP Plc. (BP), Total S.A. (TOT), Statoil (STO) pay dividend yields of 5.0%, 6.0%, and 4.0%, respectively. Shell is expanding on new international projects, including those in Russia, Canada, and French Guyana. The recessionary environment in Europe and falling oil prices do not bode well for the energy giant. As regards the new trend in natural gas, in partnership with China National Petroleum and Korean Gas, Shell plans to build a liquid natural gas (LNG) terminal on the British Columbia coast to ship LNG to Asia, where prices are six times higher than in North America. The company's forward P/E is above that of its peers on average and the company's own historical metrics. The shares of Royal Dutch Shell are currently trading at $64.57 a share (class A) and $67.06 a share (class B), down 13% year-to-date. Fund manager David Dreman (Dreman Value Management-check out its portfolio) is also bullish about the company.
General Electric (GE) share in Fisher's fund is valued at close to $614 million as of the end of the previous quarter. GE is a $207 billion diversified industrial conglomerate providing a range of products and services, including aircraft engines, power turbines, household appliances, and financial services. The company pays a dividend yielding 3.4% on a payout ratio of 52%. The company's competitors 3M Company (MMM), Honeywell (HON), and Siemens AG (SI) pay dividend yields of 2.7%, 2.7%, and 3.4%, respectively. The company's EPS shrunk at an average rate of 8% per year over the past five years. Banking on a broad-based economic recovery, analysts forecast that GE's EPS will rebound at a solid rate of 12.4% per year for the next five years. However, given strong headwinds in the medium term, including an especially weak European market from which the company derives a fifth of its sales, that robust growth rate could be challenged. The company's stock is currently trading at $19.46 a share, up 6% year-to-date. The stock has a forward P/E on par with that of its industry but lower than the company's historical ratio. Billionaire George Soros is also fan of the stock.
Exxon Mobil (XOM) share in Fisher Fund Management's portfolio is valued at $578 million, based on the March 31 quarter statistics. The company is a U.S.-based oil and natural gas giant, with a market capitalization of some $382 billion. Exxon Mobil pays a dividend yield of 2.8% on a low payout ratio of 23%. Chevron (CVX) and ConocoPhillips (COP) yield 3.7% and 5.0%, respectively. With a total of $10.75 billion per year paid to shareholders, Exxon Mobil is the single largest corporate dividend payer. The company's EPS increased at an average rate of 5% per year over the past five years. Analysts expect that Exxon Mobil's EPS will grow at an average rate of 8.6% per year for the next five years. The plunge in oil prices, if sustained, and a possibly weaker demand for oil amid an economic slowdown could adversely affect revenues and earnings. Given that Exxon Mobil is the largest U.S. natural gas producer, depressed natural gas prices also bode poorly for the company. Exxon Mobil shares are trading at a premium relative to the company's peers on average, but below the firm's own historical ratios. Shares are changing hands at $81 a share, down almost 6% year-to-date. The company is also popular with billionaire Donald Yacktman and fund managers Phill Gross and Robert Atchinson of Adage Capital Management (see its top picks).
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.