5 High Yield Dividend Picks From A Famed Contrarian

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Includes: AGO, AZN, BP, PBR, SCCO
by: Bayesian Investing

Hedge fund manager David Dreman has spent his long career finding hidden gems in beaten up stocks. The contrarian investor looks for stocks that are in the bottom 20% of the market. He analyzes them based on value, with his favorite metrics being earnings yield, dividend yield and forward P/E., in order to find stocks that have been unfairly punished by the market.

The results have been impressive. Since its inception in 2003, his fund has more than doubled the S&P500 (6.3% vs 2.8% annualized). For those of you with nerves of steel, here are five dividend picks from David Dreman:

Assured Guaranty Ltd. (NYSE:AGO)

Assured Guaranty is a financial holding company based in Bermuda that provides credit underwriting services to the municipal finance, structured finance and mortgage markets. It was a bad year to be in the bond insurance business and AGO’s shares got crushed this year. Things began to turn around in Q4, after Assured Gauranty received a settlement from Bank of America (NYSE:BAC) and then blew away Q3 earnings estimates. The shares are up almost 20% in the last three months.

AGO Key Metrics

Earnings Yield

27.8%

Dividend Yield

1.4%

Forward P/E

4.6

2011 Performance

-25.8%

Astrazeneca PLC (NYSE:AZN)

AstraZeneca PLC is one of the top five pharmaceutical companies in the world and is engaged in the research, development, manufacture and marketing of pharmaceuticals and the supply of healthcare services. Asterazeneca’s share price flatlined in 2011 as a string of drug trial failures thinned its pipeline. The company has responded by cutting costs and implementing a very successful emerging market growth strategy. AZN’s EPS has held up fairly well despite the year’s disappointments and the shares now yield almost 6%.

AZN Key Metrics

Earnings Yield

15.7%

Dividend Yield

5.9%

Forward P/E

6.3

2011 Performance

0.2%

BP PLC (NYSE:BP)

BP is a major integrated energy company and is the holding company of one of the world's largest petroleum and petrochemicals groups. Unfortunately, the company is now best known for the Horizon Deepwater oil spill, the ensuing environmental disaster, and being named the most hated corporation in America. The ongoing potential for further criminal and civil penalties against BP has kept the share price depressed relative to its peers.

BP Key Metrics

Earnings Yield

13%

Dividend Yield

3.9%

Forward P/E

6.3

2011 Performance

-3.2%

Petroleo Brasileiro (NYSE:PBR)

Petrobras, as it's better known, is an integrated oil company operating out of Brazil. It has significant oil reserves in South America and a very aggressive growth plan that would see the company doubling in size within five years. Shares have been hammered this year and even underperformed the flaccid Brazilian market as investors fret about the feasibility of Petrobras’ rapid expansion plans and the always present danger of government interference.

PBR Key Metrics

Earnings Yield

11.8%

Dividend Yield

3.9%

Forward P/E

7.2

2011 Performance

-34.3%

Southern Copper Company (NYSE:SCCO)

Southern Copper Co. is one of the largest copper miners in the world and has copper interests in Peru, Mexico and Chile. This year has not been kind to the miner, between the election of socialist president Ollanta Humala and the sharp correction in copper prices. However, the shares may be due for a rebound if investors shift their focus to the fact that the company’s 2012 copper prices have been hedged, and should offer some support to their generous dividend.

SCCO Key Metrics

Earnings Yield

9.0%

Dividend Yield

8.2%

Forward P/E

10.7

2011 Performance

-38.1%

Disclosure: I am long SCCO.