Stanley Druckenmiller is one of the most famous hedge fund managers. He ran Duquesne Capital, a macro hedge fund that he founded in 1981. Druckenmiller shut down his fund in August 2010 because he felt increasingly frustrated with an inability to deliver consistently high returns to his clients. His funds returned about 30% net of fees since 1986. While Druckenmiller was returning less than 30% in 2008 and 2009 (actually, 11% and 10%, respectively), he still outperformed most hedge funds. At the time of closing, Duquesne Capital managed $12 billion in assets.
Druckenmiller, who was managing George Soros' Quantum Fund, became popular when he earned more than $1 billion in a day on a short position that benefited from a forced devaluation of the U.K. pound. After closing his investment company, Druckenmiller opened a family office to manage some of his wealth. With an estimated net worth of $2.5 billion, Druckenmiller is one of the richest people in the world.
Here are Stanley Druckenmiller's largest five positions that pay dividends:
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Altria Group (MO) is the one of the largest equity holdings in Druckenmiller's portfolio, according to the latest 13F filing with the SEC. That stake is currently valued at $124 million, based on the number of shares owned at the end of the first quarter. The company is primarily a producer of tobacco products, whose famous brands include Marlboro, Basic, L&M, and Parliament. The company also has a nearly 30% stake in brewer SABMiller. Altria Group's market capitalization is $73 billion. The company pays a dividend yield of 4.6% on a payout ratio of 76%. Altria Group's peers Philip Morris International (PM), Reynolds American (RAI), and Lorillard (LO) pay dividend yields of 3.5%, 5.2%, and 4.8%, respectively. Altria Group's EPS grew at an average annual rate of 1.6% over the past five years.
Analysts forecast that the company's EPS will expand at 6.1% a year for the next five years. The company's growth is stifled by the triple forces of litigation, taxation, and regulation. However, with some of the best tobacco brands, strong pricing power, and growth in other segments of operations (e.g. smokeless tobacco), the company is progressing ahead. It has a substantial cash-generating power and pays a very attractive dividend yield. The company's stock is trading on a forward P/E that is almost on par with that of its industry. The stock is changing hands at $36.04 a share, up 38% over the past year. The stock is popular with fund managers Phill Gross and Robert Atchinson of Adage Capital Management and Cliff Asness.
McDonald's Corporation (MCD) is another large stake in Druckenmiller's portfolio. It is currently valued at $73 million. McDonalds is a $90 billion chain of hamburger fast food restaurants, the largest of its kind in the world. The company pays a dividend yield of 3.2% on a payout ratio of 53%. Its peers Yum! Brands (YUM) and Darden Restaurants (DRI) yield 1.8% and 4.1%, respectively, while rival Burger King Worldwide, Inc. (BKW) does not pay dividends. The company has seen robust EPS and dividend growth over the past five years.
As the company's overall sales are dragged down by weak international sales, especially in East Asia and Western Europe, McDonald's is seeing some headwinds in the near terms. However, its future growth potential based on the expected rise of the middle class in emerging markets such as China, Brazil, India, and Russia remains intact. Analysts forecast that the EPS growth will average 9.8% a year for the next five years, about half the growth rate realized over the past five years. McDonald's has a forward P/E below that of the company's respective industry. The stock is changing hands at $88.87 a share, up 2% over the past year. Billionaires Jim Simons and D. E. Shaw also hold large stake in the company.
Merck & Co. (MRK) is also one of the largest holdings in Druckenmiller's investment portfolio. That stake is currently valued at $60 million. The company is a global developer, manufacturer, and distributor of biopharmaceutical products. It has a total market capitalization of $136 billion. The stock pays a dividend yielding 3.9% on a payout ratio of 75%. The company's competitors AstraZeneca (AZN), Eli Lilly (LLY), and Pfizer (PFE) pay dividend yields of 8.6%, 4.5%, and 3.8%, respectively. On average, the company's EPS was flat over the past five years.
Analysts forecast that it will expand at a rate of 4% per year for the next half decade. Boosted by a sales jump of its diabetes medication Januvia, the company posted adjusted earnings of $1.05 a share versus $0.95 in the year-earlier quarter on sales of $12.31 billion versus $12.15 billion the year earlier. Analysts had expected profit of $1.01 a share on sales of $12.15 billion. The company also reaffirmed its guidance for the year. A company with low debt, Merck & Co. boasts a low forward P/E of 11.6, well below that for the pharmaceutical industry on average. The stock is currently trading at $44.70 a share, up 27% over the past year and at its new 52-week high. Among fund managers, Phill Gross and Robert Atchinson hold the largest stake in the company.
Pfizer is another big pharma stock in Druckenmiller's portfolio. This position is valued at $56 million. Pfizer is a U.S.-based multinational pharmaceutical company with a market cap of $179 billion. It pays a dividend yield of 3.8% on a payout ratio of 72%. Pfizer's peers Johnson & Johnson (JNJ), Novartis AG (NVS), and Merck & Co. yield 3.6%, 4.4%, and 3.9%, respectively. The company's EPS shrunk over the past five years and its dividend was slashed in 2009. Analysts currently expect that Pfizer's EPS will grow at 2.3% per year for the next five years.
The company is seeing lower sales revenues from expiring patents and is facing stiff competition from low-cost generic drugs. It is also in the process of concluding several late-stage trials of its Alzheimer's drugs. The stock is trading at a forward P/E that is significantly below the industry and company's own historical metrics. PFE is trading at $23.80 a share, up 23% over the past year and at its new 52-week high. Among fund managers, billionaires Ken Fisher and D.E. Shaw are major investors in the company.
Qualcomm (QCOM) is another large holding in Druckenmiller's portfolio. That stake is currently valued at almost $45 million. Qualcomm is a $100 billion digital wireless telecom equipment and services giant. It pays a dividend yielding 1.7% on a payout ratio of 30%. Its peers Broadcom (BRCM) and Texas Instruments (TXN) yield 1.2% and 2.6%, respectively. Alcatel-Lucent (ALU) does not pay dividends. Qualcomm's EPS grew at an average rate of 13.4% a year over the past five years. That rate of growth is expected to accelerate to 14.3% per year for the next five years.
Over the past five years, the company boosted its dividend at an average annual rate of 12.4%. The company recently reported earnings that missed the consensus earnings estimates. It also lowered guidance for fiscal 2012. Still, Qualcomm reported increased deployment of 3G/4G networks across the emerging nations. The firm is currently in the process of restructuring. A new unit, Qualcomm Technologies, will be set up to manage the firm's R&D, and product and services businesses, including semiconductors.
The parent will continue to manage its licensing division and corporate functions as well as the company's patents. Qualcomm stock is currently changing hands at $58.90 a share, up almost 8% over the past year. It has a forward P/E above that for its industry on average. Billionaires Ken Fisher and Stephen Mandel also hold large stakes in the company.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.