High Dividend Yields for Farallon Capital
Meena is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Editor's Note: The initial article alludes to Thomas Steyer as the head of Farallon. This is incorrect, Mr. Steyer retired at the end of 2012. In addition, this post is sourced upon the Q3 2012 13F.
Since founding Farallon Capital Management in 1986, Thomas Steyer and fellow investment manager Andrew J. M. Spokes have seen their AUM grow to exceed $20 billion, not including the $8 billion in private equity dollars that belong to Hellman & Friedman, another firm that Steyer is a partner of. It seems that Steyer was built for Wall Street success, after being groomed at Yale, Stanford, Morgan Stanley, and Goldman Sachs. In 2010, Steyer, alongside Warren Buffett and Bill Gates, participated in the Giving Pledge, which donates half of their fortune to charity. Let’s take a look at one of the methods that helped Steyer to build that fortune, specifically dividend investing.
BP (NYSE: BP) is planted at the top of our list, giving Farallon’s 845,000 shares a dividend yield of 4.8%. The major oil company continues to scour for new oil reserves, as further limits from the Middle East and other areas prevent drilling and exploration. The Street has mixed reviews of BP, perhaps caused by negative growth in earnings, revenue, and share price, although a positive slant towards buy and hold remains prevalent. Richard Perry of Perry Capital lets both an equity and call option position comprise his top five holdings.
Global investment management firm Oaktree Capital Group (NYSE: OAK) also pays Farallon a hefty dividend, amounting to 4.6%. The firm currently has an AUM of roughly $80 billion and specializes in contrarian debt investments. The stock recently saw an upgrade from Bank of America/Merrill Lynch, who pushed OAK up to a buy from neutral. OAK’s Q3 earnings beat last year helped propel the stock to an 11% gain in the past twelve months; the firm is expected to announce fourth quarter results on Valentine’s Day, so be wary if investing beforehand. Billionaire David Einhorn of Greenlight Capital devotes $75 million to OAK (check out his other financial picks here).
Next on our list is Canadian-based energy producer Encana (NYSE: ECA). Focusing primarily on natural gas in the U.S. and Canada, ECA dropped their oil assets in 2009 to give full attention to natural gas, but the depressed prices in gas have not given ECA the promise they were hoping for. The stock returned negative growth in the last year, spurred on by a number of earnings misses. ECA reports on Feb. 14 as well, with a consensus estimate of about $0.32 per share. Famed billionaire and hedge fund manager Steven Cohen of SAC Capital Advisors recently poured into Encana, possibly hoping for a push in natural gas prices in 2013. (Click here to view his other top positions). Encana pays a dividend yield of 4.2%.
On both a growth and income front, Kinder Morgan (NYSE: KMI) remains a positive play for Steyer, adding double-digit price appreciation in the past twelve months to the already impressive dividend yield of 4%. KMI recently released a positive outlook for 2013 that included projections to up their dividend payout, as well as takeover news to acquire Copano Energy for about $5 billion. This would both leverage and increase their presence in the southern U.S. after the deal closes in Q3 2013. Billionaire Stephen Mandel of Lone Pine Capital has seen his position swell into the nine-figures.
Healthcare company Sanofi SA (NYSE: SNY) finishes our list with an admirable 3.4% dividend yield. Analysts on Wall Street love SNY for their large catalog of branded drugs, even despite patent losses for some of their cancer drugs like Taxotere. SNY is highly recommended as a buy, with more than two-thirds of analysts favoring purchasing the stock. Their valuations are ambitious as well, potentially giving the stock 10% room to grow from current levels of $47.82. Fellow billionaire Ken Fisher has nearly 14 million shares of the SNY as of his last 13F filing.
This article is written by Eric Winter and edited by Meena Krishnamsetty. They don't own shares in any of the stocks mentioned in this article. The Motley Fool recommends Kinder Morgan. The Motley Fool owns shares of Kinder Morgan and Oaktree Capital. 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!