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Over the last quarter century, there have been many difficult times to invest, such as the dotcom bubble, the financial crisis, and the collapse of the coronavirus. But none are as brutal as bear market investors are currently enduring.Bond Market Enters Its Worst Year so farduring benchmarking S&P 500 It posted its worst first-half return in more than half a century.
Bear market declines can be unnerving, especially for new investors, but they have long presented an opportunity for successful money managers to deploy their capital. Through much of 2022, the billionaire money his manager has been aggressively investing in the stock market.
Perhaps most interestingly, select billionaires are aggressively increasing their existing positions in ultra-high yielding dividend stocks. (“Ultra-high yield” is an arbitrary term I use for income stocks that yield at least 7%.) Dividend stocks are usually profitable and have a track record, so during a bear market can be a wise buy.
Below are three ultra-high yielding dividend stocks with yields of 8% or higher that billionaires absolutely love.
AGNC investment: Yield 18.2%
The first passive income driver that elected billionaire wealth managers couldn’t stop buying is mortgage real estate investment trusts (REITs). AGNC Investment (AGNC -1.01%)The company pays dividends monthly and boasts an impressive yield of over 18%. For context, the company has averaged double-digit yields in all but one of the last 13 years.
Citadel Advisors billionaire Ken Griffin bought over 4.27 million shares in AGNC in the second quarter. Meanwhile, the billionaire fund his manager, Israel England of Millennium Management, opened positions totaling nearly 2.81 million shares in the quarter ended June.
Without digging too deep into the weeds, mortgage REITs want to borrow money at the lowest possible short-term lending rates and use that capital to buy high-yield assets such as mortgage-backed securities (MBS). That’s where the industry got its name (mortgage REIT).
A recent problem has been the Federal Reserve’s historically hawkish monetary policy, aimed at keeping inflation in check. Rapidly rising interest rates have pushed short-term borrowing costs up sharply. Add to this an inverted yield curve, and both AGNC’s net interest margin and book value decline. Given that most mortgage REITs remain close to their book value, this means short-term earnings and lower share prices.
But there may be light at the end of this hated industry tunnel. Higher interest rates are pushing up short-term borrowing costs, but will also increase yields on MBS that AGNC continues to buy. Over time, this could be a recipe for expanding net interest margins.
Additionally, AGNC operates an incredibly ‘safe’ investment portfolio. As of the end of September, all but $1.7 billion of the approximately $61.5 billion investment portfolio is agency assets. “Agency” assets are backed by the federal government in the event of a default of the underlying securities. This added protection allows AGNC to deploy leverage to increase profit potential.
Sabra Healthcare REIT: Yield 9.5%
The second super high-yielding dividend stock clearly favored by billionaire money managers is Sabra Healthcare REIT (SBRAMore 0.55%)Sabra’s yield of 9.5% is roughly in the middle of the yield range over the past six years.
Under Form 13F filed with the Securities and Exchange Commission, Citadel’s Griffin and Millennium’s Englander sold approximately 1.46 million shares of Sabra Healthcare and 1.95 million shares to the fund’s existing shares during the quarter ended June. added to each position. With Sabra’s share price declining in recent years, the acquisition activity of Citadel and Millennium seems to indicate that he’s looking for REIT bargains among billionaires.
Owner of more than 400 combined skilled nursing and senior housing facilities, the biggest problem for Sabra was the COVID-19 pandemic. While COVID-19 can pose a danger to people of all ages, it hits older people especially hard. 2020 has been a period of heightened uncertainty, with lower occupancy rates and an increased likelihood of rent delinquency.
Thankfully, the worst didn’t come true for Sabra. But that doesn’t mean the company wasn’t shaken.
For example, we were forced to redo a master lease agreement with one of our top lessees, Avamere. The new agreement with Avamere gives Sabra Health Care the opportunity to recover higher rental fees should Avamere’s performance improve.
Since the pandemic deepened in late 2020, Sabra has seen a steady recovery in occupancy rates for its skilled nursing and senior housing communities. Previously, the company had focused on rental recovery rates in the mid-99th percentile since the pandemic began.
As the worst of the pandemic could be reflected in the rearview mirror, the company’s balance sheet needs to be improved (i.e. selling some of its skilled nursing homes to lower its debt leverage) and to capitalize on its aging population. You can turn your attention to the positioning of North American population. With an aging population and a growing need for senior housing and advanced care, Sabra could have a significant impact on rental pricing power.
Altria Group: Yield 8.4%
The 3rd Ultra-High Yielding Dividend Stock That Billionaires Absolutely Love Is The Tobacco Giant Altria Group (MO -2.48%)The company is known for targeting payout percentages of around 80% and currently yields 8.4%.
As stock market volatility increased in the first half of this year, Renaissance Technologies billionaire Jim Simmons, along with billionaire John Overdeck and Two Sigma Investments’ David Siegel, sought the security of buying Altria. Simons oversaw his addition of just over 5 million shares in the second quarter, while Overdeck and Siegel added about 3.52 million shares to the fund’s equity.
If U.S. tobacco stocks like Altria have taken a big hit, it’s slowed growth. Adult smoking rates have fallen sharply over the decades as consumers have learned more about the dangers of using tobacco products. This is bad news in terms of Altria’s volume, but it’s not the full story.
Altria, for example, has such strong pricing power that it can typically outweigh the decline in tobacco shipments. Nicotine, found in tobacco, is an addictive chemical and the company is fully aware that its products are treated as non-discretionary. Soaring prices have yet to scare core customers.
In addition to this, it helps if you are the company behind a popular premium cigarette brand in the United States.As of the end of June, Altria held 48.2% of all cigarettes in the United States, while Marlboro had 42.7%. %.
Altria’s work on alternative tobacco products is also interesting. Although its investment in e-cigarette company Juul has not been successful, Altria has not ruled out additional investments in e-cigarette companies.It also acquired a $1.8 billion stake in a licensed cannabis producer in Canada chronos group If the U.S. federal government gives cannabis the go-ahead, Altria stands ready to step in to guide Cronos’ product development, marketing and distribution.
Tobacco stocks are not the growth story they used to be, but they continue to deliver modest but steady returns to shareholders.
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