Leon Cooperman, a former general partner and Chairman/CEO of Goldman Sachs Asset Management, started his hedge fund, Omega Advisors, in 1991. He grew his fund's assets under management to the current $5.6 billion. Omega Advisors is an equity long/short fund that applies a macro approach and fundamental valuation in investment decisions. The fund primarily invests in U.S. equities and hedging markets. Returning 12% in first quarter of 2012, Omega Advisors outperformed the average hedge fund by a margin of 7 percentage points.
With a cumulative net worth of $2 billion, Leon Cooperman is currently ranked 634 on the list of Forbes Billionaires and number 224 in the United States. He is currently bearish on U.S. Treasury bonds, which he calls "the least attractive investment in a world of 'financial repression'." He sees the government bond market as the "worst place to put money for the next three years." Cooperman seems to like dividend stocks.
Here are Leon Cooperman's largest five positions that pay dividends:
SLM Corporation (SLM), commonly known as "Sallie Mae," is the single largest holding in Leon Cooperman's first-quarter portfolio. Currently, it is valued close to $260 million. This stake was slightly trimmed by 3% in the first quarter. The company is the biggest education finance company in the United States, with market capitalization of $7.4 billion. Analysts forecast Sallie Mae's earnings per share (EPS) growth to average 8.3% per year for the next five years, compared to an EPS contraction at an average rate of nearly 17% per year over the past five years. The company beat analysts' earnings estimates in the previous quarter as loan originations increased amid 2010 legislation that ended government lending through private companies. Sallie Mae is now making headway into the private student loan market. The company's loan charge-off rates have been on a decline, despite concerns that the student debt is becoming an increasing burden.
The company pays a dividend yield of 3.4% on a payout ratio of 46%. Competitor Nelnet (NNI) pays a dividend yield of 1.8%, while rival First Marblehead Corporation (FMD) does not pay any dividends. Commercial bank rivals such as KeyCorp (KEY) and Citigroup (C) pay dividend yields of 2.6% and 0.1%, respectively. The stock is currently changing hands at $15.17 a share, up 10.2% year-to-date. On a forward P/E basis, the company is trading at a large discount to the consumer finance industry and the financial sector. Fund managers Jonathon Jacobson (Highfields Capital Management-see its top picks) and David Abrams (Abrams Capital Management-check out its portfolio) hold sizable stakes in the company.
Atlas Pipeline Partners LP (APL) is the second largest share in Omega Advisors' first-quarter portfolio, presently valued at more than $159 million. With a market capitalization of $1.6 billion, the company gathers and processes natural gas and transports natural gas liquids. The master limited partnership's profitability depends on a rebound in natural gas prices, which is expected in the course of the next two years. The partnership's EPS are forecast to expand 6.1% per year for the next five years. The partnership pays a dividend (distribution) yield of 7.8%. This distribution represents distributable cash flow coverage per limited partner unit of 1.1x for the first quarter of 2012. The company's peers EQT Corporation (EQT) and ONEOK Inc. (OKE) pay yields of 1.7% and 3.0%, respectively. As regards the partnership's valuation, on a forward P/E basis, the partnership units are trading on par with the pipelines industry. Currently, the partnership units are changing hands at $29.90 a share, down 22% year-to-date. Billionaire Jim Simons also holds a stake in the company.
Linn Energy (LINE) is the third largest position in Cooperman's first-quarter portfolio. It is currently valued at $181 million. The stake was increased by 21% in the first quarter. The company is a $7.3 billion independent oil and natural gas producer. It pays a dividend yield of 8.1% on a payout ratio of 60%. Its competitors Vanguard Natural Resources (VNR) and EV Energy Partners (EVEP) pay dividend yields of 9.6% and 6.9%, respectively. The company has hedged 100% of its projected oil output through 2015 at prices higher than the prevailing market price. Also, it has fully hedged its future natural gas production through 2017. The Street expects the company to boost its EPS at an average rate of 8.5% per year for the next five years. The stock is changing hands at $37.29 a share, down 2.4% from the beginning of the year. Among fund managers, the company is also popular with billionaire Jim Simons.
Apple Inc. (AAPL) is the fourth largest position in the Omega Advisors' first-quarter portfolio, currently valued at nearly $167 million. Apple is the largest publicly-traded company in the world, with market capitalization of $532 billion. Its product lines, including iPhone, iPad, iPod, and Mac, have seen impressive growth over the past several years, which has propped up the company's EPS growth to as high as 65% per year over the past five years. Analysts forecast that Apple's EPS will rise at an average rate of close to 21% per year for the next five years. The company will start paying a quarterly dividend in the coming quarter. At current prices, the annualized dividend will yield 1.9% on a payout ratio of 26%. Apple's competitors Microsoft (MSFT) and Hewlett-Packard (HPQ) pay dividends yielding 2.7% each, while rival Google (GOOG) does not pay any dividends. Microsoft and Google have both introduced their own versions of tablets, called Surface (Microsoft) and Nexus 7 (Google), which will compete with Apple's blockbuster tablet iPad. At the current price, Apple is trading at a premium relative to Dell and HPQ. The stock is changing hands at $568 a share, up 36% year-to-date. Billionaires David Einhorn, Dan Loeb, and Julian Robertson are all bullish about the stock.
KKR Financial Holdings LLC (KFN) has the eight largest share in Cooperman's first-quarter portfolio, currently valued at $133 million. The company is a $1.5 billion specialty finance firm investing in financial assets, such as corporate junk-grade senior secured and unsecured loans, mezzanine loans, high-yield bonds, and distressed debt securities, as well as private equity. The company pays a dividend yield of 8.5% on a payout ratio of 42%. Its peers Prospect Capital Corporation (PSEC) and Main Street Capital Corporation (MAIN) yield 10.8% and 7.4%, respectively. KKR Financial is currently trading at $8.58 a share, down almost 2% year-to-date. In terms of the forward valuation, the stock is trading below the broader sector. Billionaire Jim Simons also has a small stake in the company which he has been reducing.