By Aubrey Tabuga
Greenlight Capital is a New York-based hedge fund management firm that was founded by David Einhorn and former co-President Jeffrey Keswin in 1996. The fund started with a capital of $900,000. Data at Whalewisdom.com shows that Greenlight Capital has more than $6 billion of assets under management.
Einhorn is also the Chairman in and a major shareholder of Greenlight Capital RE, Ltd, a Cayman Islands-based reinsurance company. Known as a long-short value-oriented hedge fund, Greenlight has enjoyed an annual return of 22 percent for investors since its inception. During the second quarter of 2012, Einhorn bought 12 new stocks and it has closed its positions in 6 others.
In this article, I looked into Greenlight Capital's top dividend stocks. I have chosen these stocks based on the minimum yield criteria of 2%. These are Seagate Technology (STX), Microsoft (MSFT), Einstein Noah Restaurant (BAGL), Ensco (ESV), and Aspen Insurance Holdings (AHL). The historical relationship between the fund and the company is also briefly discussed.
Share to total portfolio
Einstein Noah Restaurant
Source: Finviz.com, as of October 10, 2012
Annualized Dividend Payments
Note: 2012p - partial; Source: Nasdaq.com
Seagate Technology PLC
Seagate Technology is a worldwide leader in providing electronic data storage products. The products of Seagate are designed for enterprise servers, mainframes and workstations, desktop and notebook computers, and other end-user devices like DVRs, digital media systems, personal data backup systems, and gaming consoles. STX has a market capitalization of $11.76 billion. Last year, the company has successfully acquired the HDD business of Samsung Electronics Co., Ltd. It has also acquired 64.5% of LaCie S.A. in August 2012. The company's major competitors are Western Digital Corporation and Toshiba Corporation.
STX is greatly favored by Einhorn's Greenlight Capital. The company forms 9.01% of the hedge fund's total portfolio. The fund initiated its position in STX in the first quarter of 2011 with a buy of around 3.27 million shares. It has been on the fund's favorite list ever since as Einhorn continued to buy additional shares every quarter since the first quarter of 2011. Greenlight reported once more that it had bought an additional 8.66 million shares in the second quarter of 2012; this brings its total holdings to 23.199 million shares.
Seagate has a profit margin of 19.16%. Its EPS has grown by a huge 493% this year. Seagate has been paying dividends to its investors during the past 6 quarters. In fact, the amount has been rising every year. The payment made in August was $0.32, way higher than those in February and April at $0.25.
Seagate's main products, HDDs may be facing a threat from the emergence of SSDs (Solid State Drives) but a large portion of the computing industry still relies heavily on HDDs. In addition, the HDD market is massive because it does not only include computers but also medical imaging devices, home entertainment, supercomputers, and game consoles, among others.
Microsoft is a leading producer of operating systems for personal computers, phones and other devices. Its products also include servers and their applications, and business solution applications. It is the software giant that has brought the Windows application to the computing world. Microsoft's market capitalization is a huge $261.5 billion. This year, the company has successfully bought Edgewater Fullscope's Process Industries 2 software including its intellectual property. Moreover, in an effort to go head to head with its competitors, Microsoft will soon launch its Surface Tablet October 26, when it unveils its Windows 8.
Microsoft is one of Greenlight's most favored dividend stocks. Einhorn has been holding on to his shares in this company at least for the past two years already. Although the fund has sold half of its position during the first quarter of this year, it still maintains 7.66 million shares or 3.68% of its total holdings.
Microsoft's EPS is expected to increase next year to $3.30 from a current $2.00. Microsoft's 3.08% yield is one of the highest among technology stock. The firm has been paying continuous and stable dividends since many years. The amount has been rising every year, except during the financial crisis when it remained stable at $0.13. However, the annualized dividend amount has been impressively growing. Microsoft is also a favored by hedge fund manager David Tepper.
Einstein Noah Restaurant Group
Einstein Noah Restaurant Group is a Lakewood-based restaurant company that owns, operates, licenses and franchises bagel specialty restaurants in the U.S. It operates under the brands - Einstein Bros. Bagels, Noah's New York Bagels, Kettleman Bagel Company, and Manhattan Bagel Company. Founded in 1992, Einstein Noah now operates around 777 restaurants in 39 states and the District of Columbia. The company also operates a dough production facility.
BAGL has had lower-than-expected performance during the second quarter, but the stock remained strong. Its half-year performance has improved by 23.82%. Analysts suggest that the company's differentiated offerings provide a strong, competitive edge against other chains like McDonald's or Starbucks. Its shift to healthy offerings also sells to people who are getting more and more health conscious these days.
BAGL is one of the fund's most favored stocks. Einhorn has held on to his stake of 10.7 million shares in this company continuously within the last 8 quarters. At present, the company forms 2.96% of the fund.
Einstein Noah Restaurant has a dividend yield of 2.76%. The amount paid by the company in dividends had been stable at $0.125 starting from last year. The earnings are likely to improve next year as its EPS is estimated at $1.16, higher than the current EPS of $0.88. The company's EPS has grown by 16.23% during the current year.
Ensco PLC's business is offshore contract drilling. It provides services to the oil and gas industry worldwide. As of the end of 2011, the drilling company has about 77 rigs in its rig fleet. These are located in Brazil, the Middle East and Africa region, Europe and the Mediterranean region, and the Asia Pacific region. The London-based company was founded in 1975. It currently has a market capitalization of $12.58 billion. ESV's fleet is the world's second-largest and its ultra-deepwater fleet is the newest in the industry.
Deep-sea oil drilling is one of the few industries that are growing well recently. Oil companies are going deeper to obtain oil, which means that wells take more time to develop. This gives drilling companies like Ensco more work to do. The company, therefore, will be reaping the benefits from the increasing demands.
ESV, however, has grown less important to the hedge fund through the quarters. In the 4th quarter of 2010, ESV was Greenlight Capital's top stock when it held over 9 million shares. The position was decreased significantly in the first quarters of 2011 and 2012. However, the fund still holds 3.795 million shares of Ensco or 2.8% its total portfolio.
The company's dividend yield is 2.77%. Its earnings prospect for the next year is great with an expected EPS of $7.06, way higher than the current EPS of $4.49. Its profitability is high with a net margin of 26.06%, higher than many of its competitors namely Transocean, Nabors Industries, SeaDrill, and Pacific Drilling. Ensco is a nifty dividend payer. It has not faltered in paying its investors stable dividends in many years. The payments have also been rising since 2010. The latest amount it paid was $0.375, higher than last year's average payment of $0.35.
Aspen Insurance Holdings
Aspen Insurance Holdings is a company that provides insurance and reinsurance solutions worldwide. Among the reinsurance services that it offers are property catastrophe reinsurance, risk excess, and risk solutions. It also provides casualty reinsurance that cover workers compensation, medical malpractice, general liability, and professional liability among others. Its specialty reinsurance also includes credit and surety, and agricultural reinsurance. The Bermuda-based company was incorporated in 2002. Last year, the company wrote a total amount of $2.2 billion in gross premiums.
Aspen's second-quarter net income after tax has significantly risen to $1.03 per share from only $0.05 per share last year. The company's positive earnings during the last five consecutive quarters have earned a Zacks #1 Rank (Strong Buy) on October 2.
Greenlight Capital has been holding on to its shares in the company until the 3rd quarter of 2011. From then on, it has been selling, albeit negligible, portions of its shares. However, the fund still owns 4.039 million shares worth around $116 million.
Like ESV, Aspen Insurance has not failed to pay its investors stable dividends. The last payment made by the company amounted to $0.17, higher than that during the same period last year at $0.15. Likewise, it expects increased earnings next year with an estimated EPS of $2.86, which is higher than the current EPS of $2.36. The stock has been performing quite well recently. The stock returned 20% this year alone.