By Aubrey Tabuga
Columbus Circle Investors is a growth-oriented equity manager that has a bottom-up approach to investment. The company is one of the largest money managers in the market. As of the third quarter of 2012, CCI's total asset under management is $12.9 billion according to Whalewisdom.com. The fund management company invested a great deal of its assets on Services (23.77% of the total); Technology (23.45%); Healthcare (14.24%); Financial (11.49%); and Capital Goods (7.26%).
CCI's top dividend stocks are Pfizer (PFE), AT&T (T), Coca-Cola (KO), Accenture Plc (ACN), and Home Depot (HD). I show CCI's historical trading activities with these companies and the performance of each in terms of dividend payments and growth of earnings.
% of Portfolio
The Coca-Cola Company
The Home Depot, Inc.
Source: Whalewisdom and Finviz
Annualized Dividend Payments
Pfizer Inc., a leading producer and marketer of biopharmaceutical products, is one of CCI's top dividend stocks. The asset manager bought additional shares of PFE in the third and second quarter. The company currently forms 1.83% of CCI's total portfolio. The most recent significant buy by CCI was during the first quarter of 2011 when it bought over 8 million shares of Pfizer.
The pharmaceutical company recently reported its planned acquisition of NextWave Pharmaceuticals Inc. Nextwave is a producer of ADHD drug, which has been approved recently by the FDA and is expected to hit the pharmacies by the start of 2013.
Pfizer has a high current yield of 3.58%. It has been paying consistent dividends to its investors since the latter part of 2009. The latest dividend was up by 9.53% from that of the previous year. The company is showing a healthier payout ratio (72.03%) compared to its historical level of 80.48%. PFE is expected to enjoy an EPS of $2.33 next year which is twice the current EPS of $1.15.
The Coca-Cola Company
The Coca-Cola Company is the maker of leading brands of non-alcoholic beverages. It is one of Columbus' high dividend stocks for the third quarter. CCI doubled its shares in the company in the third quarter. It has likewise bought additional shares in the second quarter. It can be recalled that fund management firm initiated its position in the company during the third quarter of 2010. The current total holdings of CI are worth $209 million, forming 1.61% of the asset manager's total portfolio.
The company's dividend yield is high at 2.75%. However, the payment has declined from $0.51 to $0.255 in the last 2 quarters of 2012. The payout ratio has slightly inched up from 50.65% to 51.17% suggesting its lower ability to produce stable dividends. Nonetheless, the company has not wavered in paying dividends to its investors for more than a decade. Its EPS is expected to increase by 8.16% annually within the next 5 years. The company is profitable with a net margin of 18.63%.
Coca-Cola is set to tap high growth areas to boost its production. It is investing $300 million in Vietnam. In addition, it will be spending $3 billion worth of investments in India for consumer marketing and brand building among other activities.
Accenture Plc is a management consulting, outsourcing, and technology services company. It serves a wide range of industries worldwide. The recent deals Accenture has won include a three-year agreement with Italian Medicines Agency (AIFA) for its integrated Medicine Evaluation System and a five-year contract from the Norwegian Directorate of Health for Accenture to set up Norway's electronic health record [HER] system.
CCI increased its shares in Accenture in the third quarter by 11%. Prior to this, the fund manager has been selling off portions of its holdings in 5 consecutive quarters. It is noted that it initiated its position in Accenture in the last quarter of 2010.
Accenture's dividend yield of 2.39% and its impressively rising payments make it to CCI's top dividend stocks. In fact, the latest payment is 18.2% higher than that for the previous year's same quarter. The attractiveness of this stock stems from its stable earnings growth. Accenture's EPS is set to grow by 10.52% annually in the next 5 years. The P/E ratio is at a healthy level of 18.01.
AT&T Inc. is a provider of telecommunications services based in Dallas, Texas. The company's wholly owned subsidiary AT&T Mobility is the second-largest wireless provider in the US and Puerto Rico. CCI further increased its holdings in AT&T in the third quarter. The company initiated its position during the previous quarter with a purchase of 5.349 million shares.
The telecom company has a high yield of 5.04%. It has not failed to pay increasing dividends to its investors for more than a decade now. Also, AT&T's earnings are estimated to grow more than two-folds to $2.59 next year from the current one [TTM] at mere $0.77. The company's sales data has been growing at an annual rate of around 15% during the past 5 years.
AT&T Inc. recently reported 151,000 new customers on contract-based plans within the latest quarter, the lowest, however, for that period since at least 2003. Meanwhile, there is a positive update on the company's labor issues. It has reported that it reached a new tentative contract agreement with over 22,000 unionized employees in southeastern U.S. This covers workers represented by the Communications Workers of America [CWA], the telecom industry's largest union.
The Home Depot, Inc. is a home improvement retailer based in Atlanta, Georgia. As of September 2012, it operated 2,249 retail stores in the United States and other countries. In the previous month, Home depot successfully closed the merger of U.S. Home Systems Inc. Through this merger, the company aims to build a better relationship with its customers through improved services. Home Depot is also expected to gain from the rebuilding of homes which storm Sandy left wrecked early last week.
CCI has sold off several shares it owned from Home Depot in the third quarter and in the previous six quarters before that. However, the company still comprises 1.35% of the fund's total holdings. Home Depot's dividend yield is at an acceptable level of 1.87%. The company has a spotless record in terms of paying dividends to the investors. Its EPS for next year is estimated at $3.38, higher than the current one at $2.80. The long term annual growth estimate is at a double-digit rate of 14.54%.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
Business relationship disclosure: EfsInvestment is a team of analysts. This article was written by Aubrey Tabuga, one of our equity researchers. We did not receive compensation for this article (other than from Seeking Alpha), and we have no business relationship with any company whose stock is mentioned in this article.