Bill Ackman, the founder and CEO of Pershing Square Capital Management hedge fund, is known for his eccentric investment strategies and market bets.
The Harvard University alum predicted the stock market collapse in March 2020 and made a 100-fold return in just a week as his investment of $27 million in credit protection securities reaped approximately $2.6 billion. More recently, Ackman made a $200 million profit when he closed his position in 30-year U.S. Treasuries in October.
While Ackman has earned millions by timing the markets perfectly, he also enjoys a steady inflow of dividend income. He has emphasized the benefit of investing in large-cap industry leaders, which are "simple, predictable, free-cash-flow generative, dominant companies with, as Warren Buffett would say, a moat around them."
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As of Dec. 2, he has eight companies in his portfolio that generate $97 million in dividend income. All of his dividend income comes from four stocks.
Take a closer look at the dividend-paying stocks Ackman has invested in.
Restaurant Brands International
Based in Canada, Restaurant Brands International Inc. QSR is one of the world's largest fast-food chain operators. Its brands include Tim Hortons Inc., Burger King Corp., Popeyes Louisiana Kitchen Inc. and Firehouse Subs.
Ackman owns 23.35 million shares of Restaurant Brands valued at approximately $1.56 billion. Restaurant Brands, which pays $2.20 per share in dividends annually, generates dividend income of $51.37 million for Ackman's portfolio. Income generated from Restaurant Brands' total dividend payouts accounts for over 52% of Ackman's portfolio dividend income.
Ackman touts Restaurant Brands' strong financials and balance sheet as key factors to consider before investing in a company. Restaurant Brands' consolidated systemwide sales rose 10.9% year over year to $11.2 billion for the third quarter that ended Sept. 30. The company also returned over $360 million of capital to shareholders in the last quarter, making it a top pick for income investors.
Lowe's
Ranked No. 39 on the Fortune 500 list, Lowe's Companies Inc. LOW is one of the most prominent home improvement retail chains operating in the U.S. It has more than 1,700 stores across the country.
Pershing Square owns 7.07 million shares of Lowe's, valued at over $1.4 billion. The company pays a dividend of $4.40 per share annually, generating nearly $31.1 million in dividend income for Ackman's portfolio. While Lowe's shares have risen by 4.5% year to date, lagging the benchmark S&P 500 index's 19.4% returns, its high dividend payout makes it an attractive investment option.
Hilton Worldwide
As the travel industry has delivered an impressive rebound in the post-pandemic era, Hilton Worldwide Holdings Inc. HLT has generated significant returns for Ackman.
His total investments in Hilton reaped $6.18 million in dividends, accounting for over 6% of his total dividend income. Ackman owns 10.31 million shares of Hilton, valued at over $1.5 billion.
Ackman's investment in Hilton has also boosted his total portfolio value, as the stock has risen by nearly 35% this year. Hilton's impressive financials and expansion plans are major drivers behind the bullish outlook.
In the third quarter, Hilton's revenue per available room (RevPAR) rose by 6.8% year over year. In addition, the company's adjusted earnings per share (EPS) amounted to $1.67 in the last quarter, reflecting a 27% rise from the same period last year. For the full year 2023, the company expects its comparable RevPAR to rise between 12% and 12.5%.
Canadian Pacific Kansas City
Canadian Pacific Kansas City Ltd. CP operates the first and only single-line transnational railway connecting the U.S., Canada and Mexico. Ackman owns 15.1 million shares of the company, with his total investment valued at over $1.1 million.
Canadian Pacific pays $0.56 in dividends annually. However, given Ackman's sizable investment in the railway company, his total dividend income from his stake in Canadian Pacific amounts to nearly $8.5 million.
"Despite CPKC's attractive long-term earnings outlook, the stock continues to trade at a discount to our view of intrinsic value and its closest peer, Canadian National. We believe the magnitude of synergies is larger and the path for realization is longer than investors originally anticipated, providing CPKC with profitable long-term growth and catalyzing share price appreciation in the years to come," Ackman said in Pershing Square's 2023 Interim Report.
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Image: Bill Ackman. Collage created using photo by Center For Jewish History, NYC on Wikimedia and engin akyurt on Unsplash
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