Dividend Stocks from Caxton Associates’ Portfolio You Shouldn't Miss
Aubrey is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Caxton Associates is a 21% gainer that any investor can emulate. The trading and investment firm based in New York was founded by Bruce Kovner in 1983. It manages client and proprietary capital via global macro hedge fund strategies. From its inception up until 2011, Caxton Associates had lost money only once. As of the latest quarter, its portfolio worth $1.561 billion was heavy on financial stocks (72.08%), services (11%), and consumer cyclical (5.88%). Here are the top dividend stocks favored by Caxton Associates one should closely watch for in 2013. I looked at the current performance of each from a fundamental perspective to see whether these are worth buying or not.
Wells Fargo (NYSE: WFC)
Caxton Associates had doubled its stake in Wells Fargo in the third quarter, bringing the total shares to 2.335 million or 5.17% of its total portfolio, based on whalewisdom.com compilation. Wells Fargo had just been named as a Top 25 Dividend Giant by the ETF Channel for its strong yield and quarterly dividend history.
Apart from these, the company has an encouraging growth prospects. Its EPS grew by an impressive rate of 27.71% this year. Although this rate is unlikely to be sustained in the long term, the EPS is expected to increase by 8.93% each year in the next 5 years. This is driven by the company’s high profit margin, which is indeed commendable at a current level of 21.54%. Moreover, Wells Fargo, with its PEG at 1.22, is relatively more undervalued than say, Bank of America and JP Morgan Chase that have PEG ratios at 4.02 and 1.33, respectively. With an expansion to happen soon in Phoenix where the company is hiring hundreds of new employees for its new Tempe mortgage center and with the industry riding a healthy trend these days, who says the big couldn’t get any bigger?
Synovus Financial (NYSE: SNV)
Caxton had increased its stake in Synovus Financial by 12% in the latest quarter. The financial services and bank holding company was seen offloading its distressed assets worth about $530 million on Dec. 10 last year. This step was aimed at reducing Synovus’ balance sheet risk. The company had been suffering from declining sales and earnings in the past years.
However, it continues to pay a stable, albeit lower, dividend amount to its investors. It is poised to recover soon as its EPS is expected to grow by 8.5% each year in the next 5 years. The growth in EPS this year is an encouraging 88.38% and the profit margin is at a double-digit figure of 11.3%. However, the company faces risk of volatile earnings with its debt-equity ratio showing an upward movement. Unless revenues pick up soon, the company may not be able to sustain paying its current dividend amount in the long run.
The TJX Companies (NYSE: TJX)
The fund manager had likewise tripled its TJX holding in the latest quarter. TJX Companies has a dividend yield of 1.06% and a good record of paying dividends. In the first quarter of 2012, the quarterly payment had been lowered to $0.095 but was later increased to $0.115. From then on, the amount has stabilized. I believe that this amount is sustainable. The payout ratio is at a healthy level of 18.27% and the company is financially sound based on its debt-equity ratio at 0.22, the lowest in years.
Likewise, here comes a company that indeed has an encouraging growth prospect. The earnings per share swelled by 17.3% in the current year and this double digit growth can be expected in the next 5 years. This is driven by the impressive growth in sales recently. In fact, quarterly revenues are up by about 10.7% (year-on-year). This stock is up for grabs if you what you seek goes beyond mere stability.
JPMorgan Chase (NYSE: JPM)
Caxton bought a significant amount of shares in JP Morgan in the latest quarter. The 846% increase had brought the stake to 473,224, which is worth over $19 million. With a profit margin of 20%, a high yield at 2.64%, and a consistently improving dividend record, JP Morgan is an attractive addition to the portfolio of dividend income seekers. In fact, the company is getting closer to its pre-financial crisis dividend amount with its latest payment at $0.30 per share.
Although this appears likely to be sustained given the expectations in the annual growth of earnings per share in the future, at about 7%, there are several things to watch out for. The company’s revenues have been declining -- quarterly revenues went down by 10% year-on-year. And despite a consistent slide in the quarterly debt to equity ratio, it is still currently at a high level with 3.54. Under such condition, earnings can become more volatile, which could affect the company’s ability to increase dividend payment in the future.
Nike (NYSE: NKE)
Caxton Associates initiated a stake in Nike in the third quarter that is equivalent to 0.61% of its total investment portfolio. Nike is in for a bright future. Its earnings per share are estimated to balloon by 14% next year. This is fueled by a robust growth in sales and sound financial standing. Quarterly sales went up by 7.4% year-on-year and the profit margin is at a decent level of 8.95% while long term debt-equity ratio is at a low 0.02.
With a dividend yield at 1.6%, this company is a strong dividend income producer. Its record is impressive; the dividend amount has been stable and increasing since June of 2007. In the past couple of years, annualized dividend had increased by up to 15%. Clearly, Nike’s appeal for those seeking a safe dividend income stream is undeniable. The recent victory of Nike over a small rival's lawsuit added a boost to this strong company.
Not all of Caxton Associates’ top dividend stocks can be considered safe income-earners. But there are some such as Nike, Wells Fargo, and TJX Companies that have outstanding dividend records and potential for growth in this year and the next. These you shouldn’t miss, as they are poised to satisfy an investor’s thirst for safe and stable dividend income.
aubrey1102 has no position in any stocks mentioned. The Motley Fool recommends Nike and Wells Fargo & Company. The Motley Fool owns shares of JPMorgan Chase & Co., Nike, and Wells Fargo & Company. 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. Is this post wrong? Click here. Think you can do better? Join us and write your own!