By Brian Tracz
Billionaire Leon Cooperman recently remarked at CNBC's Delivering Alpha Conference that investing in U.S. Treasury bonds is like "walking in front of a steamroller to pick up a dime." So that got us wondering about what Cooperman's portfolio contains in the way of income-focused, high-dividend stock ideas (you can view his Omega Advisors portfolio here). Below are a number of stocks with high dividend yields that were disclosed in Cooperman's latest 13F filing, reporting holdings through June 30.
SLM Corp. is a major provider of student loans and provides a number of collection services for the Department of Education. As we noted in our review of his 13F filing, this was Cooperman's largest single holding, valued at around $239 million. Since 2010, the government has eliminated subsidies for government-provided loans. SLM is primarily in the business of servicing these loans, and private loan creation is expected to increase by $3 billion in 2012 (data by S&P). The consensus earnings per share estimate for 2012 is $2.16, up from $1.12 in 2011, and its shares are trading at 7.5 times estimated 2012 earnings. Given the stability of the student loan business, SLM is an attractive choice for income-oriented investors with a 3.1 percent annual dividend. The company has also been a historical favorite of David Abrams, manager of Abrams Capital Management.
Kinder Morgan (KMI)
An energy pipeline and transportation company, Kinder Morgan Inc. owns about 37,000 miles of oil, gas, and carbon dioxide pipelines. In May, the company acquired El Paso, the largest owner of gas pipelines in the United States-the understanding here is that the secular trend for gas pipelines will be fueled by an increased desire in the United States to eliminate its dependence on imported petroleum. The company's shares presently boast a 4 percent dividend yield annually. Additionally, the company seems normally valued, with shares trading at twice book value and at 24 times forward earnings, both of which are in the average range for the sector.
KKR Financial Holdings (KFN)
Managed by KKR Financial Advisors LLC [which is a subsidiary of KKR & Co. LP. (KKR)], KKR Financial Holdings LLC has a variety of different holdings including non-investment grade corporate debt and oil and gas stakes. Financials are a relatively volatile business, and the consensus earnings estimate for 2012 is $1.77 per share is a hair below last year's earnings, though 2013 is expected to bring earnings of above $1.85 a share. Despite this, the company maintains a 9.2 percent annual dividend and has a BBB debt rating from Fitch with a stable outlook.
Atlas Pipeline Partners (APL)
Atlas Pipeline Partners, L.P. is another energy transportation and infrastructure company that focuses on the transportation of natural gas throughout North America. The Street consensus estimate predicts sales of $1.9 billion in 2013, up from an estimated $1.4 billion in 2012. The company has favorable comparative valuation ratios, trading at 1.4 times book and 1.3 times sales, which are both below the sector average. The company's shares offer a 6.3 percent dividend, which is one of the highest among energy stocks.
Linn Energy (LINE)
To finish it off, Linn Energy, LLC boasts a 7.3 percent annual dividend. The company has a trailing P/E of around 8 and a price/book of 1.7, about average for the sector. The company owns a number of properties scattered throughout the United States. In its second quarter report, the company notes that it has increased total reserves by 50 percent since the end of 2011. Daily production in 2012 has averaged 667 MMcfe/d, an 81 percent increase over the 2011 average. Thus, though the company reported $0.31 per share earnings in the second quarter, down from $0.47 last year, there is plenty of reason for optimism for this stock as a long-term income play.