While most stock investors had a rough 2018, one individual was able to end the year on a positive note. Millionaire hedge fund manager and founder of Citadel, Ken Griffin, beat the market last year by a whopping $16 billion. Because of the 38% return earned by Citadel’s flagship fund, this was the largest annual profit ever seen by a Wall Street hedge fund.
Griffin’s success in a truly negative market has, for the time being, positioned him head and shoulders above the ordinary, even though we all know that past performance is no guarantee of future returns.
According to papers that are available to the public, Griffin recently made a big investment in high-yield dividend stocks, which is a common way to protect your money on the stock market.
We looked into two of Griffin’s trades using the database at TipRanks; both were purchases of buy-rated stocks with dividend yields of more than 6%. What else may have piqued Griffin’s interest in these stocks can be gleaned from Wall Street experts. Let’s investigate this in more detail.
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New York Community Bancorp (NYCB)
We’ll begin with the venerable New York Community Bancorp. Due to its recent merger with Flagstar Bank, NYCB is now a major player among US regional banks. Mortgages are just one of many products and services this bank provides to both individual and business clients.
A positive reaction to the company’s 4Q22 and full-year results announcements on January 31 was immediately reflected in the stock price. The bottom line for the fourth quarter was 30 cents per diluted share, which was the same as the bottom line for the same period last year but significantly higher than the 20 cents that had been predicted. Earnings per diluted share for the full year were $1.26, up from $1.20 the previous year.
Ninety-one point one billion dollars, up from sixty-three point two billion at the end of 4Q21, can be found on the bank’s balance sheet. Acquired assets from Flagstar accounted for $25.8 billion of the total.
The next dividend payment from NYCB was announced in January and is set to be made on February 16. With a yield of 7.1%, the dividend payment of 17 cents per common share works out to be 68 cents per year. The dividend per share has remained stable at 17 cents since 2016, and the company has paid dividends regularly since 1994.
As evidenced by his large purchases in the company in the most recent quarterly report, Ken Griffin obviously considers this bank to be a good investment. True enough, Griffin increased his stake in NYCB by over 12.4 million shares, or 13,215%. His stock in the firm is now worth more than $119 million.
Not only is Griffin an optimistic stock investor, but so are many others. RBC’s 5-star analyst covering NYCB, Jon Arfstrom, is optimistic, writing, “We view core trends as favourable with strong organic loan and deposit growth, better than expected margin expansion, and stable credit quality.” The company also announced a major restructuring of the Flagstar mortgage business, which will lead to a reduction in costs and increased productivity in the long run. Overall, we are optimistic, though we recognise that this depends on the smooth completion of the Flagstar integration and restructuring processes.
Arfstrom rates NYCB’s stock as outperform (buy) with a $12 price target for the future. The stock has a total return profile of 33% based on the current dividend yield and the anticipated price appreciation. (Check out Arfstrom’s resume here.)
If we zoom out, we see that eleven experts have given their opinion on NYCB recently, with five giving it a buy recommendation and six giving it a hold rating. This averages out to a Moderate Buy recommendation.
Newell Brands Inc. (NWL)
We’ll shift gears from finance to everyday necessities. Newell Brands is a firm whose products you have almost certainly used, even if you are unfamiliar with the name. In addition to Mr. Coffee, Paper Mate, Parker, X-Acto, and Sharpie products, as well as Rubbermaid containers, Baby Jogger strollers, and other items, Newell is in charge of producing and distributing the popular brands Paper Mate and Parker pens.
Newell is involved in many areas of life, therefore it has felt the effects of inflation during the past year. Consumers started cutting back on non-essentials as prices rose, and businesses like Newell felt the heat from higher raw material prices in their own buying departments.
The end result was a drop in sales for the company in 4Q22 compared to the same period a year prior. Net sales for the quarter declined 18.5% to $2.3 billion, and underlying sales fell 9.4%. The company’s non-GAAP EPS dropped from 53 cents in Q3 to just 16 cents in Q4. Quarterly earnings per share, however, far exceeded forecasts; analysts had been aiming for about 11 cents per share.
Moreover, Newell’s dividend distribution has been stable and predictable. The upcoming distribution to shareholders has been set for March 15 at 23 cents per share. Since 2017, Newell has maintained its dividend at 92 cents per share every year, yielding 6.1%, or over three times the average dividend yield among companies listed on the S&P 500.
The fact that Ken Griffin already held an open position on Newell Brands stock and then bought an additional 2,285,158 shares in the fourth quarter demonstrates that he thought the company was promising. This tripled his NWL stake and handed him approximately $45 million in the company.
Griffin is not the only bull in this pack.Andrea Teixeira, a consumer staples analyst at J.P. Morgan, sees positive momentum for this company.
“We continue to be bullish on the company’s long-term prospects because we anticipate that the company’s restructuring (Project OVID and Project Phoenix introduced in January; see our note) and the recent leadership shuffle announced in December will lead to improved execution of this roadmap beginning in the second half of fiscal year 2019. We acknowledge that the company is experiencing more pressure than anticipated in some discretionary categories or those more exposed to low-income consumers (e.g., small appliances, home fragrances), but we anticipate that the slack will be picked up elsewhere in 2H23 (e.g., commercial solutions, and sell out in learning and development). That’s what Teixeira thought.
Despite the fact that investors may choose to “wait and see” due to the unknown future of the consumer, the analyst believes the stock is currently trading at a price that is too low to pass up.
Teixeira thinks Newell’s prospects are promising enough to warrant an Overweight (Buy) recommendation, and her $18 price objective indicates the company’s shares have a chance to grow by 18% over the next year. Click here to see Teixeira’s resume in action!
In total, nine Wall Street analysts have weighed in on Newell Brands recently, with four recommending a buy, four recommending a hold, and one recommending a sell. This averages out to a Moderate Buy consensus recommendation.