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Dianne Tordillo
Dianne Tordillo
Articles (179)  | Author's Website |

Prem Watsa’s Stocks with the Highest Yields

December 05, 2012 | About:

Out of the 48 stocks in Prem Watsa’s $1.84 billion portfolio, the following companies currently appear to have the top yields.

Frontier Communications Corp. (NASDAQ:FTR)

The dividend information for Pennsylvania-based Frontier Communications Corp. is as follows:

Yield Yield on Cost (5y) Payout Ratio Dividend Growth Rate
8.30% 6.40% 1.48 0%

Watsa first acquired Frontier in the fourth quarter of 2008, starting off with almost 19 million shares, then reducing in the first quarter of 2009. He then increased the stake by almost 20 percent in the fourth quarter of that year, and has not touched the stock since then.

Today, Watsa owns 18,620,000 shares. Frontier is sixth in Watsa’s top holdings, making up 4.9 percent of his portfolio, which is 1.86 percent of shares outstanding.

Over the last three years, Frontier’s price has been battling a dropping trend. In May of this year, the company experienced a five-year low, trading around $3.20, which is not too far away from what it is currently trading now, at $4.69 per share.

On GuruFocus, one of Frontier’s Medium Warning signs highlights the potential that the company’s payout ratio may be too high for it to sustain. And although it has the highest yield among all of the companies in Watsa’s portfolio, Frontier’s dividend yield is close to its five-year low.

With a market cap of $4.81 billion, Frontier offers a wide variety of communications service offerings, such as broadband, voice, satellite video, wireless Internet data access and data security solutions.

In its third quarter report, Frontier announced a dividend payout ratio of 40 percent, a third quarter free cash flow of $215.3 million, and a revenue of 1.25 billion – all numbers that are “the best revenue and customer metrics since the closing of one of the company’s July 2010 acquisitions,” according to Frontier Communications CEO Maggie Wilderotter.

Frontier’s stock is down 0.84 percent for today’s trading. It has a 1 star in Business Predictability, a 4 in Financial Strength and a 6 in Profitability and Growth.

New York Community Bancorp Inc. (NYSE:NYCB)

The dividend information for New York Community Bancorp Inc. is as follows:

Yield Yield on Cost (5y) Payout Ratio Dividend Growth Rate
7.70% 7.70% 0.88 10%

Watsa has had shares of NYCB since the second quarter of 2007, starting off with 20,000 shares. In 2009, 2010 and 2012, Watsa grew his stake three separate times. Currently he has a shareholding of 40,000.

Trading at $13.06, NYCB is a large bank holding company and a leading producer of multi-family loans in New York City, emphasizing on apartment buildings with below-market rents. Operating two bank subsidiaries, New York Community Bank and New York Commercial Bank, the company’s branches are found in not only New York, but also New Jersey, Ohio, Florida and Arizona. It manages total assets of $44.1 billion.

As with Frontier, GuruFocus also warns that NYCB’s payout ratio could be too high. Its 10-Year Financials reveal that its annual dividend payout growth rate is 11.56 percent. As its ratio dwells at 0.88, NYCB reported 0.85 in the quarter ending Sept. 30, and 0.84 in the quarter ending June 30, indicating its climb in the last two quarters.

NYCB stock is up 0.85 percent for today’s trading. GuruFocus ranks the company 1 star in Business Predictability, 4 out 10 in Financials Strength and 8 out of 10 in Profitability and Growth.


The dividend information for Argentinean company Cresud SA is as follows:

Yield Yield on Cost (5y) Payout Ratio Dividend Growth Rate
5.60% 34.30% 0 0%

Watsa first acquired Cresud in the second quarter of 2008, starting off with 494,910 shares, purchased at an average price of $14.72. In the last two years, Watsa’s last five trades of the company have all consisted of reductions.

Starting the series of shedding his Cresud stake fell during the last quarter of 2010, which ironically marked the same time that the stock began to trend downhill. His last reduction was in the second quarter of this year, eliminating almost 113,000 shares. Currently, Watsa owns 723,012. He had more than 2 million shares at one point, which was his highest holding amount in the company.

With a market cap of $430.4 million, Cresud is Argentina’s leading agricultural company, providing several goods for the agricultural sector such as grain, meat and milk. Through its subsidiary, IRSA, the company also participates in Argentina’s real estate market, focusing on residential property development, as well as office building, shopping mall and luxury hotel operations.

According to its 10-Year Financials, Cresud has had a declining revenue growth rate in the past 12 months, trending negatively at 18.2 percent. Its earnings per share has an annual growth rate of -0.04 percent.

As its stock trades positively by 1.27 percent, Cresud is selling for $8.36 per share. It has 1 star in Business Predictability, 5 out of 10 in Financial Strength and 7 out of 10 in Profitability and Growth.

Belle Canada Enterprises Inc. (NYSE:BCE)

The dividend information for Canadian company, Belle Canada Enterprises (NYSE:BCE) Inc. is as follows:

Yield Yield on Cost (5y) Payout Ratio Dividend Growth Rate
5.40% 9.60% 0.72 7%

Starting off with more than 3.1 million shares in 2009’s first quarter, Watsa held on for another quarter before making a high-volume trade in the third quarter, selling 2.9 million shares as BCE’s price shot up, and continuing the trend way after Watsa’s reduction.

BCE’s stock grew in value for the next two years, finally reaching a peak in this year’s third quarter. At $43.03, BCE is trading close to a 10-year high.

As the largest communications company in Canada, BCE offers a comprehensive suite of broadband communication services to residential and business customers. It has a market cap of $32.76 billion. BCE’s stock gained 2.81 percent year to date.

As with its price, BCE’s dividend yield is experiencing a high, in the last five years. Additionally, the company’s P/B ratio and P/S ratio are close to their three-year highs.

According to BCE’s financial guide, all of its fiscal expectations appear to be on track. BCE reported at least a 3 percent to 5 percent revenue growth, which it maintained throughout November, despite falling in the lower end in August.

In EBITDA, Bell increased 5.2 percent in the third quarter; its Bell Media section experienced a revenue increase up to 25 percent, while the EBITDA for its wireline segment had a margin of 39 percent. Its net earning attributable to common shareholders totaled $569 million for the third quarter, of $0.74 per share.

BCE stock is up 1.2 percent for today’s trading. It has one star in Business Predictability, 5 out of 10 in Financial Strength and 8 out of 10 in Profitability and Growth.

View the rest of Prem Watsa’s high yield stocks here.To read more about Prem Watsa, view our GuruFocus article and interview archives. Also view his latest trades here, as well as his undervalued stocks, and top growth companies .

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About the author:

Dianne Tordillo
Dianne Tordillo is staff writer for GuruFocus.com. She reports on a variety of financial news, primarily dealing with investor portfolios and stock trades. Her articles also highlight insider trades, as well as the many useful features of GuruFocus.

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