Glenn Dubin, who has a net worth of nearly $2 billion, is the founder, Chairman and CEO of a New York-based investment management firm, Highbridge Capital Management. The firm is majority-owned by JPMorgan Chase (JPM). With $29 billion in assets under management, Highbridge Capital Management operates as a diversified investment firm that manages hedge funds, traditional asset management products and longer-term debt and equity investments.
We recently wrote about Dubin's top portfolio picks, including Cosan Ltd. (CZZ), MetLife Inc. (MET), and Lowe's Companies (LOW). In its latest 13-F filing with the Securities and Exchange Commission, Dubin's hedge fund revealed several new long positions. Here is a quick look at four such new dividend-paying picks in Glenn Dubin's portfolio:
Marvell Technology Group Ltd. (MRVL) is a new holding in Dubin's portfolio worth some $15.4 million. The company is a $5-billion maker of microprocessor integrated circuits, focusing on storage, wireless and mobile, and networking segments. The company started paying a regular quarterly dividend as of the second quarter of this year. Currently, the stock is yielding 2.6% on a payout ratio of 31%. Competitor LSI Corporation (LSI) does not pay dividends, while rival STMicroelectronics NV (STM) pays a dividend yield of 5.9%. Marvell's EPS grew at an average rate of about 25% per year over the past five years. Analysts expect the company to expand its EPS at an average annual rate of 14.6% for the next five years. The stock is currently hovering around its 52-week low due to a disappointing earnings performance. The company suffered from the lower demand due to the flooding of the hard disc manufacturing facilities in Thailand last year, customer Research in Motion (RIMM) problems, and a deterioration of growth in the PC sector. In the latest quarter, Marvell surprisingly missed on the top-line projections and posted earnings per share that missed the consensus estimates. The stock is currently viewed by some as a value play. On a forward P/E basis, the stock is trading at a deep discount to the semiconductor industry. The stock has a high free cash flow yield of 12.2%. Billionaire David Einhorn owns almost $300 million in the stock.
CMS Energy Corp. (CMS) is a new position in Dubin's hedge fund worth some $9 million. The company is a $6.3-billion mixed (power and natural gas) utility operating in Michigan and a North American independent power business. Over the past five years, CMS Energy grew its EPS at an average rate of 16.2% per year, while its dividends increased at a spectacular average annual rate of 44%. The stock is currently paying a dividend yield of 4.0% on a payout ratio of 74%. Its competitors American Electric Power Co., Inc. (AEP), DTE Energy Co. (DTE), and Xcel Energy Inc. (XEL) yield 4.3%, 4.1%, and 3.9%, respectively. The company's utility business provides relatively stable and growing earnings streams. The company's balance sheet is strong. The rising stream of dividend payouts made this stock especially attractive. Analysts forecast that CMS Energy's EPS will expand at an average annual rate of 6.0%, which bodes well for continued, albeit moderate increases in dividends in the future. Still, the lackluster economy, lower demand for electricity, and regulatory cases pose risks to the utility's future prospects. The stock has a ROE of 11.2% and return on invested capital ((ROIC)) of about 4.0%. Billionaire Israel Englander is also bullish about this stock.
Allegheny Technologies Inc. (ATI) is another new stock in Dubin's fund worth about $8.8 million. The company is a $3.3-billion producer of specialty metals, including high performance metals, flat-rolled products, and engineered products. The stock pays a dividend yield of 2.3% on a payout ratio of 39%. Its competitors Carpenter Technology Corp. (CRS) and Titanium Metals (TIE) are yielding 1.4% and 2.4%, respectively, while rival RTI International Metals (RTI) is not paying regular dividends. Over the past five years, Allegheny Technologies' EPS contracted at an average annual rate of nearly 19%, while its dividends expanded at an average rate of 6.7% per year. The expected rebound in the aerospace, automotive, and medical industries, the company's main customers, is expected to boost Allegheny's EPS at an average annual rate of 15.7% per year for the next five years. Allegheny Technologies is priced slightly above its respective industry on average, based on the forward P/Es. The stock is trading at a price-to-book and price-to-sales ratios well below those of its respective industry. Allegheny Technologies has a ROE of 8.0% and ROIC of 5.1%. Among fund managers, billionaires D. E. Shaw and RenTech's Jim Simons are big fans of the stock.
Kroger Co. (KR) is also a new Dubin pick valued at $6.6 million. The company is the largest operator of traditional grocery stores with some $12.5 billion in market capitalization. The company pays a dividend yield of 2.5% on a payout ratio of 57%. Its main peers Whole Foods Market, Inc. (WFM), Safeway Inc. (SWY), and Wal-Mart (WMT) pay dividend yields of 0.6%, 4.3%, and 2.1%, respectively. Over the past five years, the company's EPS shrank at an average rate of 8.2% per year, while its dividends increased at an average annual rate of 10.4%. The company's EPS is expected to rebound in the future, growing, on average, at a rate of 9.3% per year for the next five years. Although the environment remains highly competitive and margins squeezed, The Kroger Co. continues to post good performance. It beat second-quarter earnings estimates and raised its EPS guidance. Share repurchases have been buttressing the bottom-line growth. The company's free cash flow yield is 2.3%, ROE is 13.4%, and ROIC is 5.7%. As for valuation, on a forward P/E basis, the stock is trading at a deep discount to its respective industry. Still, the stock is pricey relative to its industry on average judging by the stock's price-to-book ratio. Fund manager Steven Richman (East Side Capital-check out its top picks) is the largest hedge fund investor in the stock.