|SYMBOL||% OF PORTFOLIO|
|JPMorgan Chase & Co.||JPM||3.4%|
|CME Group, Inc.||CME||2.4%|
|The Home Depot, Inc.||HD||1.8%|
|Walgreens Boots Alliance, Inc.||WBA||1.4%|
|MFA Financial, Inc.||MFA||1.3%|
|Ares Capital Corporation||ARCC||1.0%|
|Kinder Morgan, Inc.||KMI||1.0%|
|Two Harbors Investment Corp.||TWO||1.0%|
|Invesco Mortgage Capital||IVR||1.0%|
|KKR & Co. LP||KKR||0.9%|
|The Williams Companies, Inc.||WMB||0.9%|
|The Blackstone Group LP||BX||0.9%|
|Apollo Investment Corp.||AINV||0.8%|
|LyondellBasell Industries NV||LYB||0.8%|
|Duke Energy Corp.||DUK||0.8%|
|Washington Real Estate Investment Trust||WRE||0.8%|
|Och-Ziff Capital Management Group, LLC||OZM||0.5%|
|Senior Housing Properties Trust||SNH||0.5%|
|Apollo Global Management, LLC||APO||0.5%|
|Chimera Investments Corp.||CIM||0.4%|
|Digital Realty Trust, Inc.||DLR||0.4%|
|Las Vegas Sands Corp.||LVS||0.4%|
|Lamar Advertising Co.||LAMR||0.4%|
|Outfront Media, Inc.||OUT||0.4%|
|Helmerich & Payne, Inc.||HP||0.4%|
|Philip Morris CR||TABAK CP||0.3%|
|Dynex Capital, Inc.||DX||0.2%|
|Capstead Mortgage Corp.||CMO||0.2%|
|SYMBOL||% OF PORTFOLIO|
|China Mobile Ltd.||941 HK||3.1%|
|Roche Holding AG||ROG VX||1.9%|
|Atlantia S.p.A.||ATL IM||1.8%|
|Royal Dutch Shell plc ADR||RDSA||1.8%|
|Swisscom AG||SCMN VX||1.6%|
|UBS Group AG||UBSG VX||1.6%|
|Novartis AG||NOVN VX||1.6%|
|Vodafone Group PLC||VOD||1.6%|
|TDC A/S||TDC DC||1.3%|
|Koninklijke Ahold NV||AH NA||1.3%|
|Nestle SA||NESN VX||1.2%|
|Telenor ASA||TEL NO||1.1%|
|Zurich Financial Services AG||ZURN VX||1.1%|
|Munich Reinsurance Group||MUV2 GR||1.0%|
|DBS Group Holdings Ltd.||DBS SP||1.0%|
|Singapore Telecommunications Limited||ST SP||1.0%|
|Husky Energy, Inc.||HSE CN||1.0%|
|Toyota Motor Corp.||7203 JP||1.0%|
|Taiwan Semiconductor Manufacturing Co. Ltd.||2330 TT||0.9%|
|Hopewell Holdings Ltd.||54 HK||0.8%|
|Canadian Oil Sands Ltd.||COS CN||0.8%|
|Electricite de France SA||EDF FP||0.7%|
|Korea Tobacco & Ginseng Corp.||033780.KS||0.7%|
|Turkcell Iletisim Hizmetleri A.S.||TCELL.TI||0.7%|
|Reckitt Benckiser plc||RB/ LN||0.7%|
|BT Group plc||BT/A LN||0.7%|
|GAM Holding AG||GAM SW||0.6%|
|Telefonica Brasil ADR||VIV||0.6%|
|Saudi Basic Industries Corp.||SABIC AB||0.6%|
|Total SA||FP FP||0.6%|
|Norilsk Nickel, JSC||NILSY||0.5%|
|China Merchants Holdings International||144 HK||0.5%|
|Wolters Kluwer N.V.||WKL NA||0.5%|
|Jasmine Broadband Internet Infrastructure Fund||JASIF/F TB||0.5%|
|Allianz SE||ALV GY||0.5%|
|Daqin Railway Co. Ltd.||601006 C1||0.5%|
|MTN Group Ltd.||MTN SJ||0.5%|
|Sands China Ltd.||1928 HK||0.5%|
|GlaxoSmithKline plc||GSK LN||0.5%|
|MegaFon OAO||17GK LN||0.4%|
|Gjensidige Forsikring ASA||GJF NO||0.4%|
|Enagas SA||ENG SM||0.3%|
|Huaneng Power International, Inc.||902 HK||0.3%|
|Scor SE||SCR FP||0.3%|
|NWS Holdings Ltd.||659 HK||0.3%|
|Ambev SA ADR||ABEV||0.3%|
|Jiangsu Express Co., Ltd.||177 HK||0.3%|
|Wynn Macau Ltd.||1128 HK||0.3%|
|Sydney Airport||SYD AU||0.3%|
|Snam S.p.A.||SRG IM||0.3%|
|Bank of China||3988 HK||0.3%|
|Industrial & Commercial Bank of China Ltd.||1398 HK||0.2%|
|Terna Rete Elettrica Nazionale S.p.A.||TRN IM||0.2%|
|Aberdeen Asset Management plc||ADN LN||0.2%|
|EDP - Energias do Brasil SA||ENBR3 BZ||0.2%|
|Liechtensteinische Landesbank AG||LLB SW||0.2%|
|Mighty River Power Ltd.||MRP NZ||0.2%|
|China Resources Power Holdings Co.||836 HK||0.2%|
|Saic Motor Corp., Ltd.||600104 C1||0.1%|
|St. Galler Kantonalbank||SGKN SW||0.1%|
|Statoil ASA||STL NO||0.1%|
|Banque Cantonale Vaudoise||BCVN SW||0.1%|
|Yanbu National Petrochemical Co.||YANSAB AB||0.1%|
|Endesa, S.A.||ELE SM||0.1%|
|Santos Brasil Participacoes S.A.||STBP11 BZ||0.1%|
|TeliaSonera AB||TLSN SS||0.1%|
|Jaguar Mining, Inc.||JAGGD US||0.0%|
|SYMBOL||% OF PORTFOLIO|
|Ally Financial, Inc.||ALLY||0.1%|
|Principal Financial Group||PFG||0.1%|
|Centaur Funding Corp.||151327202||0.1%|
|GMAC Capital Trust||361860208||0.1%|
|Farm Credit Bank of Texas||30767E307||0.1%|
|First Tennessee Bank||337158208||0.0%|
|Halcon Resources Corp.||HK||0.0%|
|Barclays Bank plc||06739H776||0.0%|
|First Niagara Financial Group||33582V207||0.0%|
|SYMBOL||% OF PORTFOLIO|
|QBE Capital Funding III Ltd.||74734PAA0||0.2%|
|ZFS Finance USA Trust II||98876YAA8||0.1%|
|Capital One Bank||14040HAN5||0.1%|
|NiSource Finance Corp.||65473QAS2||0.1%|
|Genworth Holdings, Inc.||372491AA8||0.1%|
|NuStar Logistics LP||67059TAA3||0.1%|
|Otter Tail Corp.||689648AR4||0.1%|
|MetLife Capital Trust X||59156CAB7||0.1%|
|Time Warner Cable, Inc.||88732JAP3||0.1%|
|JP Morgan Chase & Co.||46625HJQ4||0.1%|
|Enterprise Products Operating LP||293791AW9||0.1%|
|CRH America, Inc.||12626PAJ2||0.1%|
|Zachry Holdings, Inc.||988745AA3||0.1%|
|Enbridge Energy Partners LP||29250RAR7||0.1%|
|Energy Transfer Partners LP||29273RBA6||0.1%|
|Hartford Financial Services Group||416515AW4||0.1%|
|PNC Financial Services Group, Inc.||693475AJ4||0.1%|
|Kinder Morgan Energy Partners LP||494550AZ9||0.1%|
|Oneok Partners LP||68268NAE3||0.0%|
|Level 3 Communications, Inc.||52729NBP4||0.0%|
|Entergy Gulf States Louisiana, LLC||29365PAN2||0.0%|
|Gastar Exploration USA, Inc.||36729WAA1||0.0%|
|Goldman Sachs Group, Inc.||38141GEU4||0.0%|
|Transatlantic Holdings, Inc.||893521AA2||0.0%|
|Arizona Public Service Co.||040555CL6||0.0%|
|Teppco Partners LP||872384AC6||0.0%|
|Coeur d'Alene Mines Corp.||192108AY4||0.0%|
|WMG Holdings Corp.||92930MAG8||0.0%|
|National Rural Utilities CFC||637432LR4||0.0%|
|Ameren Illinois Co.||02361DAG5||0.0%|
|Anheuser-Busch InBev (BRL)||03523TAY4||0.0%|
|Comcast Cable Communications, LLC||20029PAG4||0.0%|
|RAAM Global Energy Co.||74920AAC3||0.0%|
|TMX Finance, LLC/Titlemax Finance||87261NAG5||0.0%|
|DCP Midstream, LLC||23311RAC0||0.0%|
|Alabama Power Capital Trust V||01039XAA8||0.0%|
|National Life Insurance of Vermont||636792AA1||0.0%|
|Enable Oklahoma Intrastate Transmission, LLC||29348QAB8||0.0%|
|Alaska Communication Systems Group, Inc.||01167PAE1||0.0%|
|Bank of America Corp.||06051GFH7||0.0%|
|Great River Energy||39121JAA8||0.0%|
|SYMBOL||% OF PORTFOLIO|
|FBR Securitization Trust, Series 2005-2 Class M1||30246QAG8||0.1%|
|CVS Pass-Through Trust||336249AC1||0.1%|
|Fairway Outdoor Funding, LLC, Series 2012-1 Class B||30605XAB9||0.0%|
|Morgan Stanley Capital, Inc., Series 2005-HE7 Class A2C||61744CWK8||0.0%|
|Merrill Lynch Mtg Investors Trust, Series 2004-A4 Class M1||59020ULT0||0.0%|
|Northwind Holdings, LLC, Series 2007-1A Class A1 Floating Rate Note||668457AA2||0.0%|
|San Bernardino County California Redevelopment Agency (San Sevaine)||79685PCK4||0.0%|
|JPR Royalty, LLC||46635XAA1||0.0%|
|Wells Fargo Asset Securities Corp., Series 2005-AR1 Class 1B1||949781AG3||0.0%|
|Banc of America Funding Corp., Series 2006-I Class SB1||05951VAN9||0.0%|
|Residential Asset Securities Corp., Series 2006-KS4 Class A3||75406EAC5||0.0%|
|Citigroup Commercial Mtg Trust, Series 2004-HYB2 Class B1||17307GEF1||0.0%|
|Bear Stearns ARM Mtg, Series 2003-6 Class 2B-1||07384MXJ6||0.0%|
|SYMBOL||% OF PORTFOLIO|
|Telefonica Emisiones SAU||87938WAB9||0.6%|
|Enel Finance International S.A.||29268BAB7||0.2%|
|Federative Republic of Brazil (BRL)||105756BJ8||0.2%|
|Deutsche Telekom International Finance BV||25156PAC7||0.2%|
|Odebrecht Offshore Drilling Finance Ltd.||67576GAA5||0.2%|
|Sirius International Group||964152AB8||0.2%|
|CFG Holdings Ltd./CFG Finance, LLC||12527MAA8||0.1%|
|Bakkavor Finance 2 plc (GBP)||EJ7114972||0.1%|
|Arcos Dorados Holdings, Inc. (BRL)||03965UAA8||0.1%|
|Lowell Group Financing plc (GBP)||EJ1073307||0.1%|
|Cimpor Financial Operations B.V.||17186LAA1||0.1%|
|ELM B.V. (AUD)||EG3891660||0.1%|
|VimpelCom (UBS SA)||90263MAE4||0.1%|
|Tullow Oil plc||899415AC7||0.1%|
|Banco Santander Brasil S.A. (BRL)||EJ5896455||0.1%|
|Dai Ichi Mutual Life Insurance Co., Ltd.||23380YAB3||0.1%|
|GFL Environmental Corp. (CAD)||36168PAA4||0.0%|
|Telemar Norte Leste SA||87944LAE9||0.0%|
|DEPFA Bank plc (EUR)||EF0830127||0.0%|
|Schahin II Finance Co. (SPV) Ltd.||80629QAA3||0.0%|
|Ambev International Finance Co., Ltd. (BRL)||02319LAB1||0.0%|
|B.A.T. International Finance, plc||05530QAB6||0.0%|
|Alrosa Finance S.A.||02109TAC6||0.0%|
|Abengoa Greenfield, S.A.||00289WAA9||0.0%|
|Consolidated Energy Finance S.A.||20914UAB2||0.0%|
|Petro Co., Trinidad Tobago Ltd.||71657YAD4||0.0%|
|Cia de Eletricidade do Estado da Bahia (BRL)||20442CAA5||0.0%|
|Petrobras Global Finance B.V.||71647NAB5||0.0%|
|Itau Unibanco Holding S.A. (BRL)||46556LAC8||0.0%|
|Gaz Capital SA||368287AE8||0.0%|
|CEMEX Espana Luxembourg||151288AB3||0.0%|
|Cash Store Financial (CAD)||14756FAB9||0.0%|
|Morgan Stanley (BRL)||61747YBA2||0.0%|
|SYMBOL||% OF PORTFOLIO|
|Academi Holdings, LLC, 11.00%, 7/24/2020||00400KAB7||0.1%|
|Private Restaurants Properties, Inc.||ACI01N763||0.1%|
|NCP Finance LP, 11.00%, 9/25/2018||62886YAB0||0.1%|
|Texas Competitive Electric Holdings Co., LLC, 4.648%, 10/10/2015||955XXEII9||0.1%|
|Synergy Aerospace Corp., 6.50%, 3/3/2015||065433A24||0.1%|
|North Atlantic Trading Co., Inc., 7.75%-8.75%, 1/13/2020||65733EAB2||0.1%|
|Laureate Education, Inc.||BL1186727||0.0%|
|Rue21, Inc., 5.63%, 10/9/2020||78128EAB8||0.0%|
|ET Two LLC, 10.00%, 9/30/2019||26924BAA1||0.0%|
|ET Three LLC, 10.00%, 9/30/2019||29760LAA0||0.0%|
|CEMEX S.A.B. de C.V., 4.661%, 2/17/2017||LN300522||0.0%|
|SYMBOL||% OF PORTFOLIO|
JPMorgan is a diversified financial company with banking, investment banking, private banking, asset management, securities services and credit card operations. The entity is the result first of a merger between JP Morgan and Chase Manhattan and then the acquisition of BankOne by JPMorgan Chase.
The diversified nature of JPM gives it some characteristics that are different from a traditional bank. Investment banking and securities processing are impacted more by the level of activity in the financial markets than by economic strength or interest rate movements. Revenue growth in asset management and private banking is mostly a function of growth in assets under management. Credit card operations are similar to traditional banking and can benefit from the economies of scale that have resulted from combining JPMorgan Chase and BankOne.
JPM believes that its various business units can improve the profitability of each other. Loans to potential investment banking clients have the potential to help win investment banking deals and increase loan volume. There may be synergies between asset management, private banking and investment banking. However, realizing the synergies between these businesses is not easy or automatic.
Jamie Dimon is the Chairman and CEO of JPM. Dimon is one of the most respected and highly thought of managers in the financial services sector. Prior to Dimon becoming CEO, JPMorgan Chase had not delivered the results that investors hoped for. The performance of the company in navigating the liquidity crisis and credit problems associated with the housing downturn and recession of 2007-2008 appears to have been extremely favorable relative to other industry leaders and could position the company for market share gains and high profitability in the future.
CME Group, Inc. operates securities and commodity exchanges. The company serves the risk management and investment needs of customers around the globe. It offers wide range of products across various asset classes based on interest rates, equity indexes, foreign exchange, energy, agricultural commodities, metals, weather and real estate. Its products include both exchange traded and over-the-counter derivatives. CME Group brings buyers and sellers together through its CME Globex electronic trading platform across the globe and its open outcry trading facilities in Chicago and New York City. It provides hosting, connectivity and customer support for electronic trading through its co-location services. It also provides clearing and settlement services for exchange-traded contracts, as well as for cleared over-the-counter derivatives transactions. The company also offers a wide range of market data services-including live quotes, delayed quotes, market reports and a comprehensive historical data service and have expanded into the index services business through CME Group Index Services. CME Group was founded in 1898 and is headquartered in Chicago, IL.
Source – FactSet
Home Depot, Inc. is a home improvement retailer that sells building materials and home improvement products. It operates The Home Depot stores, which provides full-service, warehouse-style stores that sells a wide assortment of building materials, home improvement products and lawn and garden products and provide a number of services. The company offers national installation services through pre-screened independent contractors for products ranging from floors to roofs, windows to water heaters, and kitchen cabinets to vinyl siding. Its retail stores offer professional customers, including repair and remodel contractors, special services and support to make them more successful on the job site. It serves professional remodelers, general contractors, repairmen, small business owners, and tradesmen. Home Depot was founded by Bernard Marcus, Arthur M. Blank, Kenneth Gerald Langone and Pat Farrah on June 29, 1978 and is headquartered at Atlanta, GA.
Source – FactSet
MFA is a real estate investment trust ("REIT") which invests in mortgage securities issued by U.S. Government sponsored entities Fannie Mae and Freddie Mac, and other private residential mortgage loans. MFA can pass through income earned from portfolio investments directly to shareholders without paying tax at the entity level, provided it continues to qualify as a REIT.
MFA has more than $2.5 billion of equity capital, which is leveraged with short maturity credit instruments to support an investment portfolio of more than $8 billion. It must pay out most of its earnings in dividends to shareholders, in accordance with IRS regulations.
MFA executed its initial public offering more than 10 years ago. It has substantially increased its size since becoming a public company by issuing new shares. MFA earns spread income on the difference between its yield on mortgage securities and its cost of borrowing. It assumes varying degrees of interest rate risk associated with owning investments that generally have longer maturities than the financings employed to fund these. It takes credit risk on portions of its portfolio that are invested in private mortgage securities and whole loans, a strategy it began to employ since the onset of the mortgage finance crisis that began in 2007. MFA's earnings increase when short maturity interest rates are lower than intermediate and longer maturity rates, and vice-versa. The extremely low short-term interest rate environment in place since late 2008 has supported very attractive spread earnings, and dividends. MFA's book value and dividend could be expected to decline during an environment of relatively high short-term interest rates, such as that experienced in the middle of the last decade.
MFA's dividend payments are a function of its skill earning spread income, in managing portfolio interest rate risk, and in managing credit risk. A modest degree of capital growth may be achieved if MFA can sell new equity above book value or sell investments at a profit. Book value erosion is also possible if MFA sells new shares at a discount to book value, or suffers losses on investments.
Intel is the world's leading provider of semiconductors (microprocessors) for the personal computer industry. Intel's products provide computers with the ability to process data, and encompass such functions as graphics, memory and power management.
Historically, Intel was dependent upon the desktop computing market for growth. More recently, notebooks and network infrastructure components have served as incremental drivers of demand. Developing markets growth has also been a positive development for Intel in lower-end personal computer markets.
While there are significant barriers to entry in the microprocessor market, it remains fiercely competitive. In years past, the biggest source of competitive differentiation was processing speed (often referred to as clockspeed), an area where Intel traditionally dominated. More recently, the focus has shifted to solutions that help to maximize battery life in the case of notebooks, mobile handsets, and tablets, and to those that minimize power consumption in the case of servers. In these end markets, Intel has much lower market penetration.
Intel has been shareholder friendly in recent years in its capital management. The annual dividend has increased more than 10% per year since 2005, and the company has reduced shares outstanding.
Target Corp. owns and operates general merchandise stores. It also operates SuperTarget stores with a line of food and general merchandise items and offers an assortment of general merchandise, including many items found in the company's stores and a complementary assortment, such as extended sizes and colors, sold only online. Target was founded by George Draper Dayton in 1902 and is headquartered in Minneapolis, MN.
Source – FactSet
Ares Capital Corporate is a business development company ("BDC"), organized under the U.S. Investment Company Act to invest primarily in loans to middle market businesses. Provided that Ares meets conditions required to maintain its status as a BDC, it can pass through income earned from portfolio investments directly to shareholders without paying tax at the entity level.
Ares is managed by Ares Management, LLC. The company has more than $3 billion of equity capital, and it is able to borrow up to 1 times its equity to fund its investment portfolio. It must pay out most of its earnings in dividends to shareholders, in accordance with Investment Company and IRS regulations.
Ares is one of the largest BDCs in the United States. It substantially increased its size during 2010 by acquiring Allied Capital, a seasoned internally managed BDC that had a portfolio with a cost basis in excess of $3.5 billion, for approximately $1.8 billion. Since acquiring the Allied portfolio, Ares has disposed of a significant portion of the assets at prices above the Ares purchase price, though well below Allied's original cost.
Ares dividend payments are a function of its skill in making attractive yielding loans that are repaid at maturity. A modest degree of capital growth may be achieved if Ares can sell new equity above book value or sell investments at a profit. Book value erosion is also possible if Ares sells new shares at a discount to book value, or suffers losses on investments.
Invesco Mortgage Capital is a real estate investment trust ("REIT") which invests in mortgage securities issued by U.S. Government sponsored entities Fannie Mae and Freddie Mac, other residential mortgage loans, commercial mortgages, and other entities that primarily make these investments. Invesco can pass through income earned from portfolio investments directly to shareholders without paying tax at the entity level, provided it continues to qualify as a REIT.
Invesco Mortgage Capital is managed by Louisville-based Advisers, Inc. The company leverages its equity capital to support its investment portfolio. It must pay out most of its earnings in dividends to shareholders, in accordance with IRS regulations.
Invesco executed its initial public offering during 2009, although its manager has a longer record of managing mortgage securities portfolios. It has substantially increased its size since becoming a public company by repeatedly issuing new shares. Invesco earns spread income on the difference between its yield on mortgage securities and its cost of borrowing. It assumes varying degrees of interest rate risk associated with owning investments that generally have longer maturities than the financings employed to fund these. It takes credit risk on portions of its portfolio that are invested in private mortgage securities and whole loans. Invesco's earnings increase when short maturity interest rates are lower than intermediate and longer maturity rates, and vice-versa. The extremely low short-term interest rate environment in place since Invesco's initial public offering has supported very attractive spread earnings, and dividends. Invesco's book value and dividend could be expected to decline significantly during an environment of relatively high short-term interest rates, such as that experienced in the middle of the last decade.
Invesco's dividend payments are a function of its skill earning spread income, in managing portfolio interest rate risk, and in managing credit risk. A modest degree of capital growth may be achieved if Invesco can sell new equity above book value or sell investments at a profit. Book value erosion is also possible if Invesco sells new shares at a discount to book value, or suffers losses on investments.
Apollo Investment Corporation is a closed-end, non-diversified management investment company that invests in debt and equity securities to provide current income and capital appreciation. Apollo holds several types of securities to pursue the objective, including mezzanine loans and senior secured loans for private middle-market companies, direct equity investments, and thinly traded public companies. Apollo's investment portfolio totals more than $2.5 billion, making it one of the largest business development companies in the United States. Apollo is registered with the SEC as a business development company for tax and public liquidity advantages.
Apollo dividend payments are a function of its skill in making attractive yielding loans that are repaid at maturity. A modest degree of capital growth may be achieved if Apollo can sell new equity above book value or sell investments at a profit. Book value erosion is also possible if Apollo sells new shares at a discount to book value, or suffers losses on investments.
LyondellBasell is a worldwide producer of olefins, including ethylene and propylene, polyolefins, polypropylene, and polypropylene compounds. Ethylene is the most significant petrochemical in terms of worldwide production volume and is the key building block for polyethylene and a large number of other chemicals, plastics, and synthetics. Ethylene and its co-products are fundamental to many segments of the economy, including the production of consumer products, packaging, housing, automotive components, and other durable and non-durable goods.
LyondellBasell's US petrochemical operations use ethane as a feedstock in the production of ethylene. Ethane pricing is based upon a floor price that is a slight premium to natural gas feedstocks and a ceiling price that is equal to oil equivalent feedstocks. It is a beneficiary of a high oil-to-gas ratio.
Virgina-based Dominion Resources, founded in 1909, produces and transports electricity and natural gas, serving retail and commercial energy customers in 15 states in the Mid-Atlantic, Northeast, and Midwest. The portfolio of assets includes approximately 28,000 megawatts of generation (primarily coal, nuclear, and gas), 6,000 miles of electric transmission lines, 11,000 miles of natural gas transmission pipeline, 28,000 miles of gas distribution pipeline, and the largest underground natural gas storage system in the U.S.
The company reports its results through three segments including DominionVirginia Power, Dominion Energy, and Dominion Generation. The latter segment has non-regulated electrical power generation assets that complement Dominion’s regulated gas and electric utility businesses.
Dominion’s dividend to shareholders has grown at a 10 year average rate of more than 5%.
AT&T is one of the largest telecommunications companies in the world, providing fixed line and wireless services to residential and business customers, primarily in the U.S. Today's AT&T has been formed over time by combinations of former Regional Bell Operating Companies, including Southwestern Bell (the controlling entity), Pacific Telesis, Ameritech, and BellSouth. AT&T has also incorporated the legacy AT&T Corporate assets including an international long haul fiber network.
AT&T Wireless is one of the largest wireless service providers in the U.S. claiming more than 90 million subscribers. While certain operating metrics continue to trail Verizon Wireless, AT&T has improved its operation meaningfully over the last few years. Revenue growth has been driven by subscriber additions, declining churn (a measure of lost customers) and impressive growth in data usage by AT&T's customers. Smart-phones (like the iPhone) are used by a growing portion of AT&T's wireless user base; growing wireless data revenues have become a meaningful component of AT&T's wireless revenues.
AT&T's traditional wireline division has experienced declining revenues over the last few years. Consumers and businesses have decreased the number of traditional access lines utilized for voice services, as consumers either drop their home phones or use competitive offerings (from cable providers, for example) and as businesses switch from traditional ATM/Frame Relay services to newer Internet Protocol (IP) based services. Offsetting some of these declines has been growth in DSL and fiber optic cable lines into homes, and growing IP services to businesses.
AT&T has shown an ability and willingness to return capital to shareholders through both dividends and share buybacks. AT&T has increased its dividend at an average note of approximately 4% in recent years.
Solar Capital is closed-end, externally managed investment company that is structured as a business development company (BDC) with more than $1.2 billion in assets. The company invests predominantly in debt and to a lesser extent the equity of privately held companies. The primary goal of Solar Capital is to provide current income and capital appreciation. Due to tax purposes the typical BDC distributes approximately 90% of its income to shareholders.
Numerous types of securities are utilized to meet the objective including mezzanine loans, senior secured loans, and direct equity investments to the middle market companies.
Chimera Investment Corporation is a real estate investment trust (REIT) that invests in several areas of the mortgage bond market. Its objective is to use dividends as the primary source of return to investors with a secondary objective of capital appreciation. The company invests in residential mortgage loans, residential mortgage-backed securities, and real estate-related securities to try to meet this goal. Chimera's long-term strategy is to take advantage of the interest rate and credit environment, buy assets at attractive prices, and employ leverage to increase returns.
Chimera stock performed poorly through most of 2008 and 2009, as well as in 2011. In the fourth quarter 2008, the company raised additional capital, and adjusted to a lower leverage strategy to continue operating in turbulent market conditions. In 2010 its assets totaled more than $8 billion, up more than five times from 2008.
The company is externally managed by Fixed Income Discount Advisory Company (FIDAC), a registered investment advisor and wholly-owned subsidiary of Annaly Capital Management. FIDAC is a fixed-income investment management company that focuses on managing interest rate and credit-sensitive fixed-income strategies.
Entergy is an integrated energy company operating primarily in electric power production and retail electric distribution. Entergy provides regulated electricity to Louisiana, parts of Arkansas, Mississippi, and Eastern Texas.
Entergy operates through two business segments: Utility and Wholesale Commodities. The Utility segment generates, transmits, distributes, and sells electric power to primarily retail, but also wholesale customers. It generates the majority of the company's earnings. The Wholesale Commodities segment owns and operates six nuclear power plants, five of which are located in the Northeast United States, with the sixth located in Michigan. It also provides services to other nuclear power plan owners. This segment sells electric power primarily to wholesale customers.
The sale of electricity from Entergy Wholesale Commodities, unless otherwise contracted, is subject to the fluctuation of market power prices. For 2011 and 2012, Entergy has locked in significant percentages of its planned generation from this division's assets. Thereafter, the percentage of energy sold forward drops sharply, exposing Entergy to both upside potential and downside risk, depending upon future electricity prices.
Risk factors for the company include changes in utility regulation, changes in the regulation of nuclear generating facilities, the approval of pending licenses, future prices of electricity, natural gas, and other energy-related commodities, and variations in weather. Between 2001 and the present, Entergy's dividend grew from $1.28 per year to more than $3.20 per share per year.
Microsoft is the world's largest software company with annual revenues exceeding $60 billion. The company's major business segments include: (1) "Client," comprising essentially of the "Windows" notebook/desktop PC operating system; (2) "Server and Tools, "which develops and markets software server products, software developer tools, services, and solutions; (3) "Online Services Business," comprised of online advertising platforms, online information offerings (such as Bing and MSN portals), and communications services; (4) "Microsoft Business Division," which contains products for business solutions; (5) "Entertainment and Devices Division," which develops, produces, and markets gaming systems (such as Xbox).
Microsoft sees growth opportunities in cloud computing and software plus services, natural user interfaces, new scenario innovation, and intelligent computing. Recently, Microsoft has attempted to make inroads into the market for mobile communications software. This effort has had only limited success, though the acquisition of Skype and a joint venture with Nokia may be helpful to future results. To the extent that Microsoft does not succeed in its wireless software effort, it is probable that the recent sluggishness in its PC software business will persist.
Microsoft remains a visible target for litigation relating to anticompetitive behavior. Other threats include piracy of its content, the ongoing development of open source software like Linux, and strong competition in home entertainment and mobile communications software.
Among technology firms, Microsoft's dividend is above average and it has grown by more than 10% annually over the last 5 years. With better capital discipline, Microsoft's dividend could be significantly better.
China Mobile is the incumbent wireless provider in China and is the world's largest wireless telecom operator with over 760 million mobile subscribers. The company holds licenses to operate nationwide 2G (GSM) and 3G (TD-SCDMA) services. China Mobile's dominant 2G network covers over 98% of the population. In its 3G network China Mobile continues to gain market share, having added over 100 million customers in 2013.
Towards the end of 2013, China Mobile was the first wireless telecom carrier in China to receive a 4G (TD-LTE) network license. The company is focused on building the infrastructure to support the 4G (TD-LTE) technology and have half a million base stations around China that will deliver continuous coverage to all cities and urban areas by the end of 2014. China Mobile may grow revenue and operating profit through driving higher data usage and 4G penetration, increasing minutes of use, managing churn, and continuing to add subscribers.
As the incumbent telecom, China Mobile benefits from significant economies of scale and a mature, cash generative, core franchise. Over the next few years capital expenditure should decrease and free cash flow generation should ramp up in a company that already pays an attractive dividend.
Headquartered in Switzerland, global pharmaceutical company Roche has been in operation for over a century. Roche is the world leader in oncology and virology, and its annual revenues exceed 45 CHF billion (Swiss Francs). Its main products include treatments for anemia (CERA), arthritis (Rituxin), cancer (Herceptin, Tarceva and Avastin) and Hepatitis C and HIV. The company also operates a diagnostics business, which specializes in disease monitoring, prevention and genetics testing. Roche owns a sizeable stake in U.S.-based Genentech and Japan-based Chugai.
Roche's solid cancer franchise largely originates from Genentech. In addition, a strong relationship with Chugai allows for penetration of the difficult to enter Japanese market. Collectively, the companies lead the oncology industry with popular cancer drugs like Rituxan (which also treats rheumatoid arthritis) and Herceptin, the latter of which has shown especially promising potential in combination with Avastin in certain cancers. Avastin is also in studies for additional cancers. Roche's diagnostics division has grown through products focusing on diabetes, molecular diagnostics, and immunochemistry. An improved product mix, with high barriers to entry given the biologic nature of many of its products, should serve to support Roche's sales and earnings over time.
Roche has an intriguing dividend yield. It has increased per share dividends by more than 15% annually over the last 5 years.
Paris-based Vinci is one of the largest integrated construction/concession firms in the world, with annual revenues of approximately 40 billion euros from operations in approximately 100 countries.
The group's business is divided into two main areas. Concessions provide approximately 60% of operating profit, including toll motorways in France, parking lots, airport operations, and a portfolio of other infrastructure assets. Contracting operations provide almost 40% of operating profit, including large infrastructure construction projects, technical installation & maintenance, road building, and real estate development.
Vinci's revenue and profits have fluctuated with economic cycles, as one might expect from its collection of businesses. Profits declined in the aftermath of the 2008 global financial crisis, before recovering since 2012. Notwithstanding the cyclical volatility, Vinci's profits and dividends have generally grown on a secular basis. Per share dividends have increased by more than 10% since the year 2000, though dividend growth has slowed from this pace in recent years.
Atlantia SpA is a holding company which engages in the infrastructures and mobility networks sectors. It operates through the following business segments: Italian Motorways, Italian Airports, Overseas Motorways, Technology, Design and Construction, and Atlantia. The Italian Motorways segment consists of the management, maintenance, construction, and widening of the Italian motorway operators under concession. The Italian Airports segment operates and develops the Rome Fiumicino and Rome Ciampino airports. The Overseas Motorways includes the holders of motorways concessions in Chile, Poland, and Brazil, and the companies that provide operational support for these overseas activities and the related foreign registered holding companies. The Technology segment includes the subsidiaries that produce and operate free-flow tolling systems, traffic, and transport management systems, public information, and electronic payment systems. The Design and Construction segment covers the companies related to the design, construction, and maintenance of road infrastructure. The Atlantia segment performs parent company functions for its subsidiaries and associates whose business is the construction and operation of motorways, airports and transport infrastructure, parking areas and intermodal systems, and management of motorway or airport traffic. The company was founded in 1950 and is headquartered in Rome, Italy.
Source – FactSet
Shell is one of the world's largest independent oil and gas companies in terms of market capitalization and oil & gas production. In recent years, Shell's daily production of oil & gas has exceeded 3 million barrels of oil equivalent, and its upstream production activities have accounted for more than 75% of net income. Shell converts natural gas to liquids and markets and trades liquefied natural gas (LNG) in support of its upstream businesses. Shell operates in more than 90 countries, and produces oil & gas in Australia, Brunei, Canada, Denmark, Malaysia, the Netherlands, Nigeria, Norway, Oman, Qatar, Russia, the UK, and the United States.
Shell's proved reserves (developed and undeveloped) exceed 14 billion barrels of oil equivalent. Approximately 70% of these are natural gas reserves; therefore, Shell's ability to convert gas resources into transportable fuels is a key strategic skill in regions where stranded gas can sell at significant discounts to its energy equivalent in oil. Shell invested more than $85 billion in capital expenditures between 2008-10, with a significant portion allocated to improving its ability to develop gas resources, and obtain global prices for these.
Shell's per share dividend growth has been restrained in recent years by its significant capital expenditures. Going forward, its modest debt/equity ratio and production increases from material new projects could permit faster dividend growth, though this will depend upon market prices for oil & gas as well as the company's quarter to quarter execution.
Swisscom is Switzerland's market leader in the field of mobile and fixed line telecommunications. The Group also owns Fastweb, a provider of broadband communications services in Italy. In Switzerland, Swisscom serves its customers via over 2.5 million fixed access lines, 1.7 million broadband access lines, and more than 6 million mobile access numbers. The company also has a growing pay television business. In Italy, Fastweb's broadband customer base totals more than 1.9 million customers.
As is the case with most incumbent telecommunications services providers, Swisscom is working through a transition from a business led by metered PSTN fixed line and mobile voice services to a business led by high speed data communications. In recent years, growth of high speed data service revenues has not fully offset revenue declines from the legacy businesses. Elevated levels of investment have been required to support improvements to the firmâ€™s high speed data infrastructure network.
Swisscom dividends have been flat in the recent past, and they are expected to remain flat in the near future. Nevertheless, Swisscom's dividends are attractive in Swiss Franc terms, and its strong market position increases the possibility that its dividend can be maintained or increased over time.
Swiss-based Novartis manufactures and sells pharmaceutical and nutrition products worldwide. Novartis was formed from the 1996 merger of Sandoz and Ciba-Geigy, and is the world's fifth largest producer of non-prescription over-the-counter drugs. Novartis also holds nearly one-third of the voting stock of Roche, Europe's fifth largest drug company. Novartis also has a strong generic franchise, mostly marketed under the Sandoz name. The company is currently the number two global generics manufacturer after Teva. The acquisition of Alcon in 2010 has helped Novartis gain a leading position in the global eye-care market.
A solid balance sheet enables Novartis to pay a strong and growing dividend.
Vodafone is one of the world's largest providers of mobile telecommunications services, with presence in more than 25 countries. The company has stakes in large carriers in Germany, Italy, and Spain. After a period of heavy spending on strategic acquisitions and 3G licenses, Vodafone's cape requirements have decreased relative to operating revenues. The company has developed positive, growing cash flows in most markets as a result.
Vodafone has put this cash to work largely by making acquisitions, including Hutchison Essay which gives the company exposure to the fast growing cellular market in India. With sales of certain non-strategic holdings, and in the absence of further large acquisitions, Vodafone should be able to continue increasing its dividend in the coming years, as well as buy back shares.
TDC is the leading provider of communications services in Denmark, holding market leading positions in landline telephony, terrestrial broadband, mobile communications, and pay-TV services. Outside Denmark, TDC has significant presence in the pan-Nordic business communications market, utilizing a comprehensive fiber network in Sweden, Norway, and Finland. Denmark's telecommunications market is characterized by strong competition and strict regulation, and TDC has been continually challenged to increase efficiency in order to compete effectively on price while still maintaining solid profitability.
Since TDC's privatization from government ownership more than 20 years ago, it has had strategic shareholders that included U.S. regional telecommunications firms Ameritech and SBC, as well as private equity firms. At present, most of TDC's shares are freely floated.
As is the case with most incumbent telecommunications services providers, TDC is working through a transition from a business led by metered PSTN fixed line and mobile voice services to a business led by high speed data communications. In recent years, growth of high speed data service revenues has not fully offset revenue declines from the legacy businesses. Elevated levels of investment have been required to support improvements to the firm's high speed data infrastructure networks.
TDC dividends have been flat in the recent past, and they are expected to remain flat in the near future. Nevertheless, TDC's dividends are attractive in Danish kroner terms, and its strong market position increases the possibility that its dividend can be maintained or increased over time.
Nestle is a Switzerland-based global food and beverage company. The largest food and beverage company in the world, Nestle products principally include chocolate, infant nutrition, pet care and frozen foods. Some familiar Nestle brands include Nescafe, Stouffers, Purina, Powerbar and Nespresso. Nestle has nearly 500 manufacturing sites worldwide.
Nestle has demonstrated cost discipline, improving margins and return on capital through effective asset utilization. Organic growth drivers include the growing influence of nutrition and health businesses in their product mix, and management's focus on their top 21 brands. The company is generating substantial cash flow that can be directed toward share buybacks and increasing dividend payouts.
Singapore Telecom, or SingTel, is a telecommunications company located in Singapore but through its subsidiaries, investments, and joint ventures has locations in more than 25 countries and nearly 400 million subscribers. Its investments include Optus, the second largest telecom operator in Australia, and Bharti Airtel, the largest teleco in India. The largest publicly listed investments include Advanced Info Services in Thailand (19% share of company), Bharti Group in India (16%), Globe Telecom in the Philippines (47%), and Singapore Post (26%). Although Optus in Australia is SingTel's largest investment outside Singapore it is a wholly owned subsidiary of SingTel, thus not publicly listed. Temasek, the Singapore government's investment arm holds a 54.4% stake in SingTel.
The company faces numerous opportunities and threats across its many markets, but management has seemingly been proven adept at navigating most markets as witnessed through the company's value creation over the long term.
As of 2011, the intermediate-term guidance is for mid-single digit revenue and EBITDA growth (earnings before interest, taxes, depreciation, and amortization) with operating leverage potentially delivering higher net income growth. The company targets a flexible dividend payout ratio of 45-60% of net income depending on investment and capital expenditure needs.
Taiwan Semiconductor is the largest independent semiconductor foundry in the world. The industry is characterized by process orientation and scale, and TSM leads in both. It is the only company in its industry with the financial resources to continue to invest in both R&D and capital equipment/process technologies throughout the business cycle. TSM has manufactured chips for over 500 different customers globally, with a huge array of end market applications, including automotive, cell phones, video games, DVD players, digital camera, medical devices, etc.
Although margins are very volatile, cash flow generation has been robust, and TSM continues to gain share over time. Since being founded in 1987, TSM has been at the leading edge of technology manufacturing.
Headquartered in France, Total is an integrated international oil and gas company with key assets in Canada, Russia, Qatar, Angola, Nigeria, and Kazakhstan. Business lines include upstream (oil and gas exploration, development, and production), downstream (refining, marketing, trading, and shipping of crude oil and petroleum products), and chemicals (fertilizers and petrochemicals). Upstream operations have the highest margin, contributing the majority of operating income.
Output from many of the world's existing oilfields is declining, and the rate of developable new resources continues to slow. While developed OECD countries have recently curbed demand for oil, oil demand continues to increase in non-OECD nations. Although the majority of incremental energy supply is expected to come from renewable, nuclear, and gas, oil is expected to remain the largest source of transportation energy for decades.
Compared to other oil majors, Total has potential for an above-average growth profile, with exposure to the LNG (Liquid Natural Gas) market and lower-than-average depletion rates in existing oil fields. Total has approximately 40 years of proved and probable resources. Production setbacks in recent years have been disappointing, however, and the company has been criticized for under-investing in exploration. Total has been focused on improving its yield from producing assets.
Total's dividend appears to be fully covered by cash flow in the oil price ranges we have seen over the last 5 years. The firm's strong balance sheet and operating cash flow have enabled it to increase the dividend at an annual rate of approximately 7% over the last 5 years.
GFJ went public in December 2010 at a price of NOK 58.75 (Norwegian Krone). It is a general insurer with a market-leading position in Norway and an international geographic footprint in Denmark, Sweden and the Baltics. GFJ first went outside Norway in 2006 growing its gross premiums written from 2.6% to 24.3% in just 4 years (primarily through acquisition). GFJ is currently very highly capitalized, appears to be well managed, and has initiatives underway to further improve operations.
As a property and casualty insurer most of its investment risk lies in shorter duration investments such as highly rated corporate and sovereign notes. Traditionally, more than two-thirds of its investments in bonds are held in credits rated A or above. Remaining investments are dispersed among lower-quality credits as well as minor investments in equities and alternative investments.
The company pays an annual dividend with a targeted ratio of 50-80% of reported net profits.
Formerly known as Macquarie Airports, Sydney Airport owns a material equity interest in Sydney Airport (85% interest) and manages operations there.
Sydney Airport makes money via aircraft and passenger fees, rental of retail and passenger services company space, ground handling operations, parking operations, sales of advertising, and real estate development. Generally speaking, Sydney has succeeded in increasing "non-aeronautical" revenues as a percentage of total revenues by improving the retail and service offering available to passengers, their greeters, and airport employees.
In 2009 Sydney terminated its management agreements with Macquarie. The company's dividend fell in 2008 and 2009 as it sought to reduce leverage at its operating subsidiaries. Special cash dividends in 2010 and 2011 reversed this trend, and Sydney Airport goes forward as a much simplified single country operator.
Industrial and Commercial Bank of China (ICBC) is the largest commercial bank in China in terms of total assets, loans and deposits. ICBC primarily operates in China and provide an extensive range of commercial banking products and services through over 18,000 branches and outlets.
ICBC was converted from a state-owned commercial bank to a joint-stock limited company in 2005, with the Ministry of Finance (MOF) and Huijin Investment as the promoters as well as international strategic investors including Goldman Sachs, Allianz and American Express. Since then, ICBC has been a key player in China's modern banking history. While ICBC remains primarily a corporate lender, the retail banking franchise is growing fast, accounting for one third of revenue.
ICBC competes primarily with other commercial banks in China. The company may face increasing competition from foreign commercial banks as restrictions on geographical presence, customer base and operating licenses in China have been removed pursuant to China's WTO commitments.
Founded in 1861, Liechtensteinische Landesbank (LLB) is the oldest bank located in the Principality of Liechtenstein, wedged between Switzerland and Austria. LLB's business is split between supplying traditional deposit and lending services in Liechtenstein and Eastern Switzerland and private banking services for clients around the world. Balance sheet assets total over 18 billion Swiss francs, supported by 1.5 billion of equity. The Principality owns slightly more than 50% of LLB's stock, with the rest widely held by residents of Liechtenstein and institutional investors.
LLB administers more than 40 billion Swiss francs in customer financial assets. These are invested in stocks, bonds, funds, and money market securities. This total declined in 2008 was primarily due to falling equity values and the strength of the Swiss franc relative to other currencies, though it has recovered since. Negligible Swiss interest rates have reduced the value of LLB's significant deposit endowment in the last two years, and that situation continues to pressure interest margins.
LLB's dividend yield is attractive relative to investment alternatives in the Swiss financial arena. Like other banks with more deposits than loans, LLB's earnings have been pressured in recent years by declining net interest margins, with sluggish customer trading activity unable to offset this.
It is probable that buying or selling in the Fund portfolio will have occurred since this list was last updated. As a result of this buying or selling, the fund may own more, fewer, or no shares of the stock of any company listed. In addition, the fund may have purchased shares of companies that are not yet included in the above list.
This list of holdings is published with a one month lag on the first business day of each month. Holdings can and do vary over time.