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The Top Dividend Payers of Brian Rogers’ Income Fund
Posted by: Holly LaFon (IP Logged)
Date: July 19, 2012 05:11PM
Brian Rogers helps oversee about half a trillion dollars and is portfolio manager of T. Rowe Price’s Equity Income Fund, whose objective is to “provide substantial dividend income as well as long-term capital appreciation through investments in common stocks of established companies.” As such, Rogers has selected a number of high-yielding companies for the fund’s portfolio. Through his guidance and strategy, the fund has returned 6.7% over the last 10 years and 9.42% year to date, compared to 0.06% and -1.02% for the S&P.
The highest yielding stocks in the portfolio are: Nokia Corporation (NOK), CenturyLink (CTL), Telefonica (TEF) and Sun Life Financial (SLF).
Rogers bought Nokia (NOK) in 2007 when the phone maker traded for over $30. He reinitiated a position this year with 7.5 million shares at an average of $5, and added 7 million additional shares when the stock dropped even further, to $3, in the second quarter. Since then the stock has dropped over 44%, for an overall downward spiral of 95% over the last five years. Today a share of Nokia costs $1.82.
Nokia’s struggling stock price has come amid $1 billion losses and a thus far unsuccessful bid to compete in the crowded smart phone market. The company’s second-quarter report, released Thursday, showed a loss per share of 0.38 euros, compared with a loss per share of 0.10 euros in the same period of 2011, its fourth straight quarter of losses. Year-over-year net sales fell 19% to $7.5 billion.
These turns of events have made the company a target of investigation for value investors. In spite of losses, Nokia still has a strong balance sheet, with more than $20.2 billion in cash and only $6.1 billion in long-term liabilities and debt. Free cash flow has also been strong for the entire decade. Net margins, however, have been deepening for the last three quarters, their worst point at 21.4% in the first quarter.
The company is exerting more effort with its Lumia smart phone to bolster sales. In the second quarter, it increased sales to 4 million units.
Nokia pays a dividend yield of 9.5%.
Brian Rogers has held CenturyLink, a communications services company, since the second quarter of 2011, when it traded for an average of $41 per share. Thursday is trades for $41.60 after advancing almost 10% in the last year.
CenturyLink has grown marginally over the last decade. Its annual growth rate has been 5.2%, and EBITDA 3.6%. In addition, it has added more cash to its balance sheet in the last several years, to a total of $2.4 billion, with more than $30 billion in long-term liabilities and debt.
In 2011, CenturyLink’s sales almost doubled when it integrated Embarq and closed the acquisition of Qwest, making it the third-largest telecommunications company in the country. It also acquired Savvis Inc., a global leader in cloud infrastructure and hosted enterprise IT solutions, in 2011. In five years, the company’s revenues jumped from about $2.5 billion to $18 billion.
In 2011, CenturyLink returned $1.6 billion to shareholders in stock repurchases and dividends, increased from $896 million, and the fourth increase since 2007. It currently pays a $0.73 quarterly dividend, with a dividend yield of 7.1%.
Rogers’ fourth-largest dividend payer is Spain-based Telefonica (TEF). The stock price has been cut almost in half since he first purchased 4,361,775 shares in the second quarter of 2011 at an average price of $24. He made several small purchases over 2011 and added 78 shares in the second quarter of 2011 when the stock had dropped to an average of $13. With the financial crisis in Europe, the stock dove almost 30% year to date.
Telefonica’s last five years of sales have fluctuated, but had an overall annual growth rate of 6.6%. EBITDA grew at an annual average rate of 15.3% in the same period. Telefonica has generated over $10 billion in cash flow in the last five years and has a strong balance sheet, with approximately $22 billion in cash, down slightly from last year. Telefonica’s long term liabilities and debt are approximately $92 billion.
Telefonica currently trades for a low P/E of 3.1 and has a dividend yield of 6.8%.
Rogers bought 4 million shares of Sun Life Financial (SLF), the Sun Life Assurance Company of Canada holding company, in the fourth quarter of 2009 at an average price of $28, and has made several small sales since then, culminating in a 200,000 share sale in the second quarter of 2012 at an average price of $22.
Sun Life Financial this year has made a resurgence of 18.5% after declining almost 55% overall in the last five years.
Sun Life’s revenue has been declining since 2009, and net income collapsed from $1.7 billion in 2010 to a net loss of $201 million in 2011. In the first quarter of 2012, the company had favorable results reflecting the impact of positive equity markets, higher interest rates and business performance.
Sun Life pays a dividend yield of 6.7%.
See the rest of the stocks in Brian Rogers’ portfolio here. Also check out the Undervalued Stocks, Top Growth Companies and High Yield stocks of Brian Rogers.
Guru Discussed: Brian Rogers: Current Portfolio, Stock Picks
Stocks Discussed: NOK, CTL, TEF, SLF,