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Ray Dalio Top Dividend Picks

January 09, 2012 | About:
Ale Schuvaks

Ale Schuvaks

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Ray Dalio is the founder of Bridgewater Associates and holds more than $165 billion under management. The firm has gained a reputation as a cult-like company that follows the personal guidance of Dalio and his beliefs.

Ray Dalio is also the son of a jazz musician. He studied finance at Long Island University and later went to work for Merrill Lynch in 1972. In 1974, he became a futures trader and broker at Shearson Hayden Stone. In 1975, he founded the investment management firm Bridgewater Associates.

Dalio is a macro investor, which means that he bets mainly on economic trends, such as changes in exchange rates, inflation and GDP growth. He is different. He spends most of his time trying to figure out how economic and financial events fit together in a coherent framework.

One of the more striking features of Bridgewater Associates is the corporate culture that Dalio has created. The company itself stresses doing “whatever it takes to make the company great” and is based on the principle of "radical transparency" where finding the truth and what they can improve on trumps how you go about obtaining that information.

In an interview with John Cassidy for the New Yorker he said: “Almost everything is like a machine. Nature is a machine. The family is a machine. The life cycle is like a machine. My constant goal was to understand how the economic machine works. And then everything else I basically view as just a case at hand. So how does the machine work that you have a financial crisis? How does deleveraging work—what is the nature of that machine? And what is human nature, and how do you raise a community of people to run a business?"

Here are his top dividend picks:

CWH: CommonWealth REIT, formerly, HRPT Properties Trust, owns 332 office properties and roughly 10 million shares, or nearly a third, of Government Properties Income Trust, which it spun off in 2009.

In terms of quarter results, normalized funds from operations (FFO) came in at $70.0 million, or $0.86 per share. As of Sept. 30, 2011, 87.0% of CWH's total square feet were leased, compared to 87.5% as of June 30, 2011.

With a yield of 12.50%, book value of over $32/share, and forward P/E ratio of 4.73, this stock is a strong buy.

HPT: Hospitality Properties Trust is a real estate investment trust owning around 290 hotels and 185 travel centers in 44 states, Puerto Rico, and Canada.

On a year-over-year basis, the company's revenue per available room increased 7.7%, due to a 3.5% increase in occupancy and a 4.1% increase in rate. Also, its truck-stops continue to cover renegotiated rent levels well, at around 1.9 times for both leases.

Hospitality Properties Trust is unlike other lodging real estate investment trusts. While it is subject to the cyclical hotel industry, leasing contracts afforded the company a fairly enviable baseline for revenue through the downturn and initial recovery.

The firm also has a relatively strong balance sheet.

OFC: Corporate Office Properties Trust, or COPT, owns properties in suburban office parks. Its properties are concentrated around Washington, D.C., and Baltimore, which represent 85% of its business. The U.S. government, defence IT contractors, and data firms provide about 60% of income.

Despite the weak macro environment, the leasing segment is showing signs that the suburban office markets may be stabilizing.

The company has increased dividends steadily since its 2006 IPO and announced another $0.4125 quarterly dividend, its sixth consecutive dividend at this level.

As long as Defence spending remains a sacred cow, and the federal government continues to farm out operations to private companies, Corporate Office Properties Trust looks well positioned to benefit.

DISH: DISH Network serves customers in the U.S. via a network of owned and leased satellites. The company is struggling to grow its customer base despite the stiff competition and the very mature market. At the same time, DISH continues to take steps to remake the business with the purchase of additional wireless spectrum via DBSD and TerreStar.

Although new ways to gain access to content have begun to emerge, notably online distribution, the traditional pay television model has held its own. Though the pay-TV market has lost customers in aggregate recently, continuing weakness in the housing and employment markets have contributed to this loss.

Through all of its problems, DISH has managed to generate fairly consistent free cash flow. At the end of the third quarter, the firm was sitting on about $3.4 billion in cash versus $8.4 billion in debt, putting net debt at a modest 1.4 times EBITDA.

CLI: Mack-Cali Realty is a real estate investment trust with interests in nearly 300 properties. Its properties are in the Northeast and Mid-Atlantic U.S., with nearly 90% of its business in New Jersey and the New York metro area.

Mack-Cali Realty's collection of prime office properties provides a solid cash flow stream.

Mack-Cali is in good financial shape. Recently, debt/EBITDA was less than five times, and EBITDA covered interest expense more than three times. The firm has access to nearly $800 million via remaining capacity on its revolver. Near-term debt maturities are sizable but manageable. CLI has since continued the 45-cent dividend into 2011, with no present indications of a change on the horizon.

Rating: 3.4/5 (10 votes)

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