James Dinan founded his investment management firm, York Capital Management, in 1991. The company currently has $15 billion in assets under management. The firm applies focused research to investment selection and disciplined risk management. Its funds follow event-driven investing.
According to Forbes, Dinan's investment firm "produced net returns of 40% in 2009 and 7.5% in 2010." Last year, York's "flagship fund was down 5.93% net of fees," posting "a negative return for just the third time in the firm's 20-year history."
With net worth of some $1.6 billion, Dinan ranks 804th richest person in the world and 286th richest man in the United States.
Here are the four largest positions in Dinan's portfolio that pay dividends:
Tyco International Ltd. (TYC) is one of the top dividend-paying picks in Dinan's latest 13F SEC filing. The position is currently valued at $204 million, based on the number of shares reported in the first quarter. Tyco International is a $24 billion manufacturing and industrial services conglomerate providing fire protection services, safety products, flow control, and electrical and metal products. The company pays a dividend yield of 1.9% on a payout ratio of 33%. Its peers, United Technologies Corp. (UTX) and 3M Co. (MMM), pay dividend yields of 2.9% and 2.6%, respectively. The company is expected to grow its EPS 11.6% a year for the next five years. However, the expected growth rate could moderate, given the increasingly difficult operating environment, especially in Europe. Still, it should be noted that a large portion of Tyco's sales are recurring. The company is expected to split into three parts on September 30, 2012, which could create a catalyst for further upside. The stock is changing hands at $51.76 a share, up 9.3% over the past year. On a forward P/E basis, the stock is trading at a premium to its industry. The stock has been the hedge funds' favorite industrial stock. Among notable fund managers, Lee Ainslie at Maverick Capital and David Cohen/Harold Levy at Iridian Asset Management are big fans of the stock.
United Technologies Corporation (UTX) is another company in Dinan's equity portfolio. The stake is currently valued at $104 million. United Technologies is a $67 billion industrial conglomerate that produces high-tech products, ranging from aircraft engines, elevators, fire and security products, to missile systems and military helicopters. The company pays a dividend yield of 2.9% on a payout ratio of 45%. Its competitors General Electric (GE), Boeing (BA), and Honeywell (HON) pay dividend yields of 3.4%, 2.4%, and 2.6%, respectively. Analysts forecast that the company's EPS growth will accelerate to 12.3% per year for the next five years. Still, defense spending cuts, including those under the process of sequestration, could take a toll on this defense industry player. The company is selling several units, including its engine division Rocketdyne to GenCorp Inc., a wind-power company, and industrial businesses of its aerospace parts manufacturer Hamilton Sundstrand. It is planning to raise as much as $3 billion in order to finance the acquisition of aerospace part maker Goodrich Corp. (GR). UTX has appealing valuation, boasting a forward P/E below that of its peers on average. The stock is currently trading at $73.29 a share, down 16.4% from last year's levels. Billionaires Ken Fisher and Dan Loeb hold large positions in the stock.
BP Plc. (BP) is also one of Dinan's equity holdings. His position in BP Plc. is currently valued at $86 million. The company is a UK-based integrated oil and natural gas giant with a market cap of some $128 billion. It pays a dividend yield of 4.6% on a payout ratio of 25%. BP Plc.'s peers Royal Dutch Shell (RDS.A)(RDS.B), Chevron Corporation (CVX), and Exxon Mobil (XOM) pay dividend yields of 4.7%, 5.3%, 3.3%, and 2.7%, respectively. The company is expected to grow its EPS at an average rate of 5% per year for the next half decade. The company has just requested a $1 billion total special dividend payout from its Russian joint venture TNK-BP (50% co-owned with a Russian consortium Alfa-Access-Renova). TNK-BP is Russia's third largest oil company. The TNK-BP Board of Directors will decide about the special dividend during the course of next week. BP's shares are changing hands at $40.40 a share, down almost 13% over the past 12 months. The company's stock is trading at eight times its forward earnings, below the multiple for its industry. BP is the second most commonly-owned energy stock by hedge funds. Fund manager Kenneth Mario Garschina (Mason Capital Management-see its top holdings) and billionaire Seth Klarman hold large positions in the stock.
Rockwood Holdings Inc. (ROC) is another of Dinan's stock holdings paying dividends. Rockwood Holdings is currently valued at $58 million. The company is a $3.3 billion producer of specialty chemicals and materials for industrial and commercial uses. It pays a dividend yield of 3.2% on a payout ratio of 36%. The company's rivals PolyOne Corporation (POL) and Huntsman Corporation (HUN) pay yields of 1.4% and 3.2%, respectively. Competitor Arch Chemicals Inc. is now part of Swiss Lonza Group Ltd. The company has seen robust EPS growth, which averaged 35.4% per year over the past five years. Its EPS growth is forecast to average 26% per year for the next half decade. Rockwood's revenues and free cash flow have risen at a strong pace over the past couple of years. As the company is the largest producer of lithium compounds and chemicals, strong demand for its lithium products, including lithium-based battery compounds, will sustain strong growth in the future. Strong sales growth is also expected from the company's surface treatment business. The company's stock is trading at $42.02 a share, down 31.3% over the past year. Its forward P/E is well below the company's historical averages. Fund managers David Cohen and Harold Levy hold the largest reported stake in the company among fund managers.