Billionaire Ken Fisher Boosts His Stake in These 4 Dividend Stocks
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Billionaire Ken Fisher’s Fisher Asset Management has filed its quarterly 13F disclosure with the SEC, presenting its portfolio of equity holdings as of the end of the March quarter. The portfolio’s top positions continue to include large-cap, dividend-paying stocks such as Pfizer, Johnson & Johnson, Cisco Systems, General Electric, and Wells Fargo. During the quarter, Fisher also significantly boosted his stake in Apple and several other positions that pay attractive dividend yields.
With this in mind, here is a closer look at four stocks paying yields above 2% that Fisher was bullish about last quarter
Fisher boosted his position in McDonald's (NYSE: MCD) by 27% to more than 2.3 million shares. The company reported a 1% rise in its first-quarter revenues and a 2% increase in EPS, as comparable sales dipped 1% partly because of “comparisons against strong prior year results that included an additional day in 2012 due to leap year.” Despite its expectations that “challenging global environment and bottom-line pressures” will persist, McDonald's is targeting 2013 sales growth in the range of 3%–5% and operating income growth in the range of 6%–7%.
The company’s CEO recently suggested McDonald's could start offering all-day breakfast menus and delivery in some countries and U.S. locations, which could help bolster its sales in the future. The company also continues to expand globally, planning to open up 1,600 new restaurants worldwide this year. McDonald's operates in 119 countries around the world, including China, which the company sees as a major opportunity despite food safety issues. McDonald's has raised dividends for 36 years in a row. Its current yield is 3.0% and its payout ratio is 54%.
Rio Tinto PLC (NYSE: RIO), the world’s second-largest mining company, was another position in Fisher’s portfolio that saw a notable increase last quarter. Fisher increased his ownership in Rio Tinto by 29% to some 10 million shares. This dividend payer has a yield of 3.5%, a payout ratio of 27% of its current-year EPS estimate, and five-year annualized dividend growth of 4.0%. The company’s shares look inexpensive, valued at 7.7x its 2013 earnings and 6.9x its 2014 earnings. With the weakness in the commodities markets, the stock has lost 8.6% over the past 12 months.
Still, Rio Tinto reported strong first-quarter operating results, achieving record first-quarter iron ore production, shipment and rail volumes. Rio Tinto is expanding iron ore output capacity and expecting a 4.7% increase in production this year. On the other hand, Rio Tinto’s mined copper output jumped 26% year-over-year last quarter; however, copper output will be adversely affected by a landslide at the company’s Bingham Canyon copper mine that took place in April. After taking a $14 billion impairment charge in its full-year 2012 results, Rio Tinto is now divesting non-core assets and aiming to achieve $5 billion in cost savings over the next two years. The company’s new CEO has promised a greater focus on shareholder returns.
Syngenta AG (NYSE: SYT), a Swiss-based agri-business focused on crop productivity, is also one of Fisher’s positions that markedly increased last quarter. Fisher hiked his Syngenta stake by 24% in the quarter to some 881,667 shares. The company is attractive in the long-term based on the generally positive outlook for agri-businesses producing crop productivity and protection products amid a growth in emerging markets’ population and per capita incomes leading to higher food (including grains) consumption and planting. Last year, Syngenta saw its sales rise 7% (10% in constant currency) to $14.2 billion and adjusted EPS jump 15%.
Sales growth rates in North and Latin Americas were 20% and 12%, respectively. The strong sales momentum has carried into 2013, with the first-quarter reported sales up 6% year-over-year (8% in constant currency). Syngenta’s strong long-term outlook is reflected in the company’s goal to reach $25 billion in sales of its eight key crops by 2020 (from $13.4 billion in 2012). Since 2007, Syngenta’s EPS grew at a CAGR of 14%, while its dividends grew at a CAGR of 17%. Last month, the company’s shareholders approved a 19% dividend increase. Currently, Syngenta pays a dividend yield of 2.4% on a payout ratio of 50%.
BP (NYSE: BP) was another of Fisher’s position with a large first-quarter boost in ownership. Fisher hiked his share count in BP by 28,478% to nearly 1.47 million shares. The company looks like a good value, trading at only 8.7x forward earnings, below its peers on average, and 10% above book value. BP is severely bruised in the aftermath of the Deepwater Horizon disaster in 2010. As a result, it has been divesting assets—to the tune of $38 billion—in order to cover associated expenses. Despite the woes, the company has been showing solid financial performance. In the previous quarter, it realized an adjusted profit of $4.2 billion, down 9% year-over-year, but some 30% better than expected by Wall Street.
Both oil prices and production were lower. However, the company is planning to increase capacity and output, targeting upstream investments to drive growth in higher-margin areas. Thus, BP expects to see its operating cash flow swell by 50% in 2014 from 2011. On March 21, BP completed the sale of its 50% interest in TNK-BP to Russia’s Rosneft for a total of $27.5 billion in cash and Rosneft shares. As a result, BP now owns 19.75% of Rosneft. BP pays a dividend yield of 4.9% on a payout ratio of 43%.
Fisher’s moves can be a source of good ideas for research, given his track record as an investor. Testifying to his reputation in the investment arena is the fact that in 2010, Investment Advisor magazine named Fisher one of the 30 most influential figures in the investment advisory industry over the last 30 years, and it’s always important to track hedge fund sentiment.
McDonald’s turned in a dismal year in 2012, underperforming the broader market by 25%. Looking ahead, can the Golden Arches reclaim its throne atop the restaurant industry, or will this unsettling trend continue? The Motley Fool's top analyst weighs in on McDonald's future in a recent premium report on the company. Click here now to find out whether a buying opportunity has emerged for this global juggernaut.
This article is written by Serkan Unal and edited by Jake Mann. Insider Monkey's Editor-in-Chief is Meena Krishnamsetty. They don't own shares in any of the stocks mentioned in this article. The Motley Fool recommends McDonald's. The Motley Fool owns shares of McDonald's. 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!