Ken Fisher is the founder, Chairman, and CEO of Fisher Investments, a money management firm with some $42 billion in assets under management. The firm has more than 25,000 private clients and employs more than a thousand employees. As regards its investment strategy, Fisher Investments deploys a global, top-down and dynamic asset allocation strategy.
Fisher is a billionaire with net worth close to $2 billion. Since 1984, he has been writing a monthly column for Forbes called "Portfolio Strategy." He also regularly contributes to other financial media, including Bloomberg Money and The Financial Times. Fisher has authored eight books, including five bestsellers: "The Only Three Questions that Count" (2006), "The Ten Roads to Riches" (2008), and "How to Smell a Rat: the Five Signs of Financial Fraud" (2009), "Debunkery" (2010), and "Markets Never Forget-But People Do" (2011).
Fisher is a renowned value investor. Here is a quick look at four of his latest dividend-paying picks:
McDonald's Corp. (MCD) is one of the top dividend-paying picks in Fisher's hedge fund, valued at $479 million at the end of the second quarter. That position was boosted by 238,728% from the previous quarter. McDonald's is one of the most valuable global brands. The company is a $92-billion chain of hamburger fast food restaurants, the largest of its kind in the world. Currently, McDonald's has a dividend yield of 3.4% on a payout ratio of 58%. Its peers Darden Restaurants (DRI) and Yum! Brands (YUM) pay dividend yields of 3.6% and 2.0%, respectively. Burger King Worldwide, Inc. (BKW) does not pay dividends. Over the past five years, McDonald's saw its EPS and dividends grow at average annual rates of 18.1% and 22.9%, respectively. Analysts forecast that EPS growth will average about 9.5% per year for the next five years. The stock has strong future prospects based on the expected robust growth in international markets, especially as the middle class bourgeons in China and India. The stock has a high ROE of 38% and a return on invested capital [ROIC] of 20.5%. On a forward P/E basis, McDonald's stock is trading below the restaurants and bars industry. The stock's forward P/E is below the average annual ratio values for each year of the past decade. The stock is up 4.4% over the past year. RenTech's Jim Simons is also bullish about the stock.
LVMH Moet Hennessy Louis Vuitton (LVMUY.PK) is another major dividend-paying position in Fisher's portfolio that has seen a major boost in the second quarter. The position was hiked by 448% to a total value of $391 million at the end of the second quarter. This ADR represents the shares of a luxury-products company that sells a diversified product mix ranging from wine and spirits to leather bags, perfumes and cosmetics. The company pays a dividend yield of 2.2% on a payout ratio of 39%. Its main competitor PPR S.A., trading on the Paris stock exchange, is yielding 2.9%. Over the past five years, the company's EPS and dividends grew at average annual rates of 9.6% and 14.4%, respectively. Positive developments in equity markets and the expected economic rebound following a global economic soft patch will bode well for luxury goods sales. The increasing income levels around the world, especially in emerging markets, as well as the increasing preference for designer luxury brands will drive sales in the future. In terms of valuation, on a P/E basis, the stock is priced slightly below its respective industry. It is also attractive based on the price-to-book ratio that is well below the industry average. The stock is up 10.3% over the past 12 months.
Las Vegas Sands Corp. (LVS) is a new position in Fisher's hedge fund. The position was valued at $390 million at the end of the second quarter. The company is a $37-billion resorts and casino operator with facilities in the United States, Macao (China), and Singapore. The company is currently yielding 2.2% on a payout ratio of 58%. Its rival Wynn Resorts Ltd. (WYNN) pays a dividend yield of 1.8%, while competitors Caesars Entertainment Corporation (CZR) and MGM Resorts International (MGM) do not pay regular dividends. Over the past half decade, Las Vegas Sands expanded its EPS at an average annual rate of 4.7%. Analysts forecast that the company's EPS will grow at an average rate of 24.3% per year for the next five years. This accelerated rate of EPS growth suggests that dividend increases are likely in the future. The company is generally a play on the rising wealth in mainland China and East Asia in general. This, and the increasing prevalence of gaming and gambling among the Chinese population, promises to boost the top- and bottom-lines of the resort and casino operator. Still, the risks to the forecasts include a slower-than-expected economic growth in China and the weaker-than-expected growth in Macao gaming revenues. In terms of valuation, on a forward P/E basis, Las Vegas Sands is trading at a premium to its respective industry. Its price-to-book and price-to-sales ratios are higher than those of its peer group on average. The stock is up 9.0% over the past year. Among fund managers, Donald Chiboucis (Columbus Circle Investors-check out its major holdings) is also bullish about the stock.
Cisco Systems (CSCO) is also a position in Fisher's portfolio that has seen a spectacular boost. In the second quarter, Fisher hiked his stake in Cisco significantly to a total of close to $367 million. Cisco is a networking giant with a market capitalization of $100 billion. The company has paid a quarterly dividend since early 2011. Its quarterly dividend has seen a robust growth, increasing 2.3 times since its inception. This year alone, Cisco hiked its dividend by 75%. The stock is currently yielding 3.0% on a payout ratio of 38%. For the reference, the company's rivals Alcatel-Lucent (ALU) and Juniper Networks (JNPR) do not pay any dividends, while Hewlett-Packard (HPQ) pays a dividend yield of 3.6%. The company's EPS, which had grown at an average rate of about 5% per year over the past five years, is expected to accelerate to 8.7% per year for the next five years. Cisco's promise to return at least 50% of its free cash flow to shareholders points to future dividend hikes. Cisco has a high free cash flow yield of 8.9%, ROE of 16.3%, and ROIC of 12.0%. On a forward P/E basis, the stock is undervalued relative to its peer group on average. The stock's forward P/E is below the average annual ratio values for each year of the past decade.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.