David Tepper has a net worth of $20.6 billion. As a hedge fund manager, he does not prioritize earning income because he does not rely on it.
Tepper’s Appaloosa hedge fund occasionally holds stocks that may appeal to income investors. In the second quarter of 2024, the billionaire acquired a high-yield dividend stock and divested another. Would it be wise to mimic his actions?
Two stocks with high dividends that Tepper purchased and offloaded in the second quarter.
Tepper purchased 5,000 shares. UPS ( UPS 0.73% ) In the second quarter, Appaloosa raised its ownership in the package delivery and logistics company by 0.83%.
The hedge fund began investing in UPS in the last quarter of 2023 by acquiring 500,000 shares. Tepper then purchased an additional 100,000 shares in the first quarter of 2024, increasing Appaloosa’s ownership by 20%.
On the other hand, he was not very optimistic about a different high-yield dividend stock– Transfer of energy ( ET ) During the second quarter, Tepper reduced Appaloosa’s investment in the midstream energy company by almost 10.9%.
The hedge fund sold 1.14 million shares of Energy Transfer in the first quarter, leading to this action. However, Appaloosa’s investment in the company has fluctuated several times since Tepper initially purchased it in the second quarter of 2017.
Tepper’s possible rationale
Tepper’s decision to purchase UPS and divest from Energy Transfer is shrouded in mystery, leaving us to speculate on the possible motivations behind these moves.
There is one aspect we can confidently eliminate. Tepper has no reason to complain about the dividends from either of these stocks, including UPS. Dividend yield going forward Energy Transfer’s distribution yield is close to 8%, while Tops’ yield is around 5%. Both stocks had appealing yields during the second quarter as well.
Tepper might have seen UPS as a promising opportunity for a comeback. The company’s stock has dropped by over 44% from its highest point in early 2022. Nonetheless, UPS experienced an increase in its U.S. shipping activities during the second quarter, following a period of decline lasting over two years. CEO Carol Tomé anticipates that the company will start to see profit growth again in the latter half of 2024.
When it comes to Energy Transfer, Tepper may have decided to cash in some gains. The stock had increased by approximately 17% since the beginning of the year in early May, which is similar to its current level. Energy Transfer’s value has surged by 70% in the past three years.
Is it a good idea to purchase UPS stock and also consider selling Energy Transfer stock?
I believe Tepper’s choice to purchase UPS appears wise. I also recently invested in the stock and consider it to be a strong choice, particularly for investors looking for income.
As stated earlier, UPS provides an attractive dividend yield. The company has raised its dividend payout for 15 consecutive years. It seems that the management is dedicated to expanding the dividend in the upcoming years.
I am optimistic about the positive direction UPS’ business appears to be heading. The company’s profitability is expected to increase as it progresses beyond the elevated initial expenses linked to its union agreement reached in 2023.
In my opinion, I believe investors should hold onto their shares of Energy Transfer as it is currently priced at an attractive value. The valuation metric based on future earnings. With a team of about 10 employees, the company is expanding through internal growth and purchasing other companies. The high distribution yield of Energy Transfer allows it to provide impressive overall returns. In my view, Energy Transfer is currently a stock worth purchasing, rather than selling.
