Three Dividend Ideas From George Soros

Anjali is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.

George Soros is a prominent hedge fund manager and American Hungarian business magnate. He is also known as “The Man Who Broke the Bank of England” because of his $1 billion profit during UK currency crisis in 1992. Although he closed down his hedge fund for outside investors in 2011, he still manages his family wealth in Soros Fund Management LLC. I scanned his top 20 portfolio holdings for dividend ideas and the following three stocks appear to be compelling buys.

Company Name

Shares Held

Dividend Yield

Payout Ratio

General Electric Company (NYSE: GE)

8,577,000

3.00%

55%

PepsiCo, Inc. (NYSE: PEP)

892,500

3.10%

55%

The Clorox Company (NYSE: CLX)

675,692

3.50%

59%

Source: 13F filing, Yahoo Finance

Here’s a look at these stocks in detail.

General Electric 

General Electric is one of the highest dividend paying industrial companies. This, along with a bullish view on US gas keeps me positive on this stock.

The following are the key growth drivers for GE’s businesses going forward: 

  • Mining: GE launched 7 new platforms, to become complete solution provider and not just an electric drive manufacturer. Its acquisitions Dresser, Converteam, and Fairchild are being bundled into one solution (the Industrea deal will close in the coming months).  Long missing investments in its sales force is now taking place, and will drive revenue synergies from any new acquisition, along with product support.
  • Aviation: High and increasing installed fleet base is indicating strong service revenue growth.
  • Oil & Gas:  High margins (14% estimated in ’12), are augmented by stronger pricing and optimizing cost structure.

GE has a large order backlog in majority businesses lines which will help it to achieve a growth rate of around 10% in 2013. Further, GE may go for a share repurchase program next year which will be another growth catalyst to its share price.

PepsiCo

Pepsi reported a good Q2’12 EPS, beating estimates for the fourth straight quarter. According to consensus estimates, its Q3 EPS is estimated at $1.16 and I would not be surprised if it is able to beat expectations this time as well. Pepsi has launched major marketing campaign including NFL sponsorship, which is expected to increase its sales in Q3. The company continues to enjoy leadership position in its high margin food division with its portfolio constituting 50% beverages and 50% food.

Its alliance with Tingyi in China will help it to target a broader market and their cobranded products will give a further advantage against Coca Cola in juice segments. PEP is also going for bottler deconsolidation in Mexico; which will streamline its operations, and result in major cost savings. Its continued focus on expanding product categories will bring incremental revenues in the long run.

A strong record of dividend payout makes it lucrative to defensive investors. Moreover, improved consumer spending in Eastern Europe is expected to boost Q3 results.  I would recommend this as a buy.

Clorox

With series of successful new product introductions and current product line enhancements; Clorox continues to post strong volume growth and market share increases, despite increasing prices across the board.

CLX has been a solid defensive stock, with a focus in emerging markets like Argentina, Colombia, Peru, Mexico, and Venezuela. It has added few more brands including Clorox Healthcare, HealthLink, Aplicare, and Dispatch products in its already strong portfolio of some of the world’s most trusted brands.  Its continued commitment on advertising, improved channel mix (dollar, club, grocery etc.), investment in R&D, and launching new products or extending current brands will keep it on the track of its target 3 - 5% long-term sales growth rate.

On the other side, it is expected to have huge cost savings from a series of activities, including its investment in SAP in Latin America, transformation in domestic bleach practices, and phasing out of regular bleach. Furthermore, once it’s recent acquisition of Away-From-Home businesses are fully integrated; this will boost its cost savings and free cash flow. I continue to see the upside for CLX and recommend this a buy.

Interested in Additional Analysis?

For GE, the recent financial crisis struck a blow, but management took advantage of the market's dip to make strategic bets in energy. If you're a GE investor, you need to understand how these bets could drive this company to become the world's infrastructure leader. At the same time, you need to be aware of the threats to GE's portfolio. To help, The Motley Fool offers comprehensive coverage for investors in a premium report on General Electric, in which their Industrials analyst breaks down GE's multiple businesses. You'll find reasons to buy or sell GE, and you'll receive continuing updates as major events unfold during the year. To get started, click here now.

 


AnjaliPaliwal has no positions in the stocks mentioned above. The Motley Fool owns shares of The Clorox Company, General Electric Company, and PepsiCo. Motley Fool newsletter services recommend PepsiCo. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.If you have questions about this post or the Fool’s blog network, click here for information.

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