Billionaire Chase Coleman And Feroz Dewan Like These 4 Dividend-Paying Stocks

Includes: FIS, MSI, PBI, SPGI
by: Dividendinvestr

By Serkan Unal

Billionaire Chase Coleman founded his Tiger Global hedge fund after his protégé Julian Robertson closed Tiger Management in 2000, giving Coleman $25 million in seed money for the new fund. Coleman has built Tiger Global into a $6-billion hedge fund, producing spectacular returns that have averaged more than 20% annually since the fund's inception. Coleman's long-short equity fund applies a fundamental analysis, investing significant amounts of cash into small-caps and hot tech stocks and start-ups, with a notable exposure to emerging market companies. Coleman is considered by The Hedge Fund Journal/Ernst & Young one of the world's "Tomorrow's Titans," a group of "40 emerging hedge fund managers who are making an increasing contribution to the industry's development and success."

Feroz Dewan is the co-manager of Tiger Global. We took a glance at the latest 13F filing by Coleman and Dewan's Tiger Global. As expected, the hedge fund is heavily invested in the technology sector, holding large stakes in Apple Inc. (NASDAQ:AAPL), Amazon (NASDAQ:AMZN), and Yahoo! (YHOO). Coleman also bought several new stocks paying dividends and boosted his holdings in a few stocks that could be considered his value or growth plays. Here is a closer look at Coleman's four bullish picks paying dividends, including a mail-equipment maker, S&P Dividend Aristocrat, Pitney Bowes, Inc. (NYSE:PBI).

The McGraw-Hill Companies, Inc. (MHP), a global information services provider known as the owner of Standard & Poor's, has a dividend yield of 2.4%, payout ratio of 35%, and five-year annualized dividend growth of 14.3%. As a part of its growth and value plan, MHP has split its profitable financial services segment, McGraw-Hill Financial, from the lagging education segment, McGraw-Hill Education. The latter business was sold to Apollo Global Management for $2.5 billion, and the deal is expected to close before the end of this month.

According to the company, the succeeding firm to MHP, McGraw-Hill Financial, will represent "a high-growth, high-margin benchmarks, content and analytics company in the global capital and commodities markets." The restructuring will unlock significant value for the new firm. Following a 13% revenue growth and 32% adjusted EPS from continuing operations growth in 2012, McGraw-Hill Financial expects single-digit growth in revenues and a 15% increase in adjusted diluted EPS in 2013.

However, the company is facing risks from a civil lawsuit filed recently by the U.S. Department of Justice regarding Standard & Poor's ratings of mortgage bonds prior to the financial crisis. In terms of valuation, MHP is trading at 15.0x forward earnings. Tiger Global reported owning nearly $113 million in this stock.

Motorola Solutions, Inc. (NYSE:MSI), a provider of communication infrastructure, devices, software, and services, has a dividend yield of 1.6%, payout ratio of 50%, and five-year annualized dividend growth of 4.4%. Despite weaker government spending, its government segment has been driving growth, buoyed by spending on public safety networks. The company's enterprise segment has seen lower revenues amid headwinds from the weak macroeconomic environment. According to Fitch Ratings, MSI is "on track to achieve mid-single-digit annual revenue growth through the intermediate-term, driven by broad-based strength within the Government segment." Earlier this year, the company issued 2013 revenue and EPS guidance, projecting revenue growth in the range between 5% and 5.5% and non-GAAP operating earnings growth of some 18%. Analysts expect the long-term EPS CAGR at 13.4%.

The company is innovating, with plans to introduce a new handheld device based on Windows 8 by the end of this or early next year. In terms of valuation, this high-growth stock is trading at 16.9x forward earnings, below its industry's 20.8x. However, the stock has reached its multi-year high at $62.75 per share. Last quarter, Tiger Global reported owning 1.5 million shares worth $83 million.

Fidelity National Information Services, Inc. (NYSE:FIS), the world's largest provider of banking and payments technology, has a dividend yield of 2.1%, payout ratio of 28%, and five-year annualized dividend growth of 21.9%. The stock seems to be another high-growth value play. According to the firm, FIS "supports more than 64 million credit card accounts, 42 million loyalty accounts, 130 million prepaid cards and 77 million debit cards globally." It has a particularly strong footprint in emerging markets, especially in China and Russia, where it is the largest processing provider. The robust forecast growth in emerging markets thus bodes well for the company's financial prospects.

Analysts forecast the firm's long-term EPS CAGR at 11.9%. In the 2012-2015 period, FIS sees organic revenue CAGR in the range between 4% and 7% and adjusted EPS CAGR of between 12% and 15% (see pages 11 and 12 of the presentation). FIS is also attractive as an income play, given the recurring nature of its revenues. FIS trades at 13.4x forward earnings and has a price-to-book of 1.7, both below industry metrics. Last quarter, Tiger Global reported owning almost $41 million in this stock.

Pitney Bowes, Inc., a postage meter company, has a dividend yield of 10.7%, payout ratio of 78%, and five-year annualized dividend growth of 2.4%. Boasting 31 years of dividend increases, the company is the highest-yielding S&P Dividend Aristocrat. The stock was the worst performing Dividend Aristocrat last year, but this year it has staged a rebound with a 31% increase year-to-date. It may appear as good value, given its high dividend yield and a forward P/E of only 6.9x. However, some analysts consider the stock a value trap, given that the company's current business model relies on an outdated traditional mailing technology in the age of expanding digitalization and online services.

PBI has struggled with declining revenues for several years, and its focus on increasing enterprise revenues has not yet paid off. In January 2013, the company posted fourth-quarter financial results that beat the Street views on both top and bottom lines. Moreover, it announced plans to sell its low-margin international mail business and to cut costs. PBI's 2013 guidance for revenue growth of between 0% and 3% and EPS was in line with analyst expectations. Still, analysts see PBI's long-term EPS CAGR at negative 6% for the next five years. Last quarter, Tiger Global boosted its share ownership in PBI by 1,126% to 1.84 million shares worth $19.6 million.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Business relationship disclosure: Dividendinvestr is a team of analysts. This article was written by Serkan Unal, one of our writers. 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.