Big investors bet on Verizon

Scheduled regulatory filings rarely cause too much of a ruckus in the markets, but this time, investors got excited about a stock that doesn't often get a lot of buzz. Shares of telecommunications giant Verizon got an uncharacteristic pop in trading because of some notable investor activity.

Every quarter, America's biggest money managers have to disclose their stock holdings to the public. It's something called an SEC Form 13-F. It sounds complicated, but in essence, it's just a list of holdings that each manager has at the end of each calendar quarter. The report must be filed within 45 days of the end of the quarter, and the latest filings show that some big-name investors got into Verizon stock in a big way.

Among the biggest names getting involved: Warren Buffett. His Berkshire Hathaway disclosed a new 11-million-share stake in Verizon. At current market prices, the stake is worth somewhere around $539 million. Of course, when it comes to any new stake that Berkshire takes, one of the immediate questions is whether or not Buffett actually made the call, or if it was one of his top lieutenants, Todd Combs or Ted Weschler. Berkshire's stake in Verizon is large, but whether or not this is a "Buffett pick" is still a question for investors.

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Warren Buffett
Adam Jeffery | CNBC
Warren Buffett

If Buffett weren't enough, hedge fund titan John Paulson also put a big bet on Verizon. The man who made a small fortune betting against the housing market just before the financial crisis made his own statement with the stock, disclosing a new 8.7 million share stake that's worth around $426 million at current prices.

Then there's another hedge fund heavyweight, Dan Loeb. His Third Point LLC also put on a new 3.5-million-share position in Verizon worth about $172 million.

That's three marquee money managers all placing bets on the future of one of America's biggest and well-known telecom companies.

Why the sudden bullishness?

One of the big reasons may lie with the dividend. Verizon has a 53-cent quarterly dividend per share. That equates to $2.12 for each Verizon share each year, good enough for a 4.3 percent dividend yield. Just to put that in perspective, $2.12 per year would mean that Berkshire Hathaway would receive approximately $23 million a year in dividend payments, Paulson would get $18.4 million a year, and Third Point would get $7.4 million. Many investment professionals are still touting the benefits to owning dividend-paying stocks.

John Paulson
David Grogan | CNBC
John Paulson

"Dividend-paying stocks are the sweet spot," said Kristina Hooper, who heads up U.S. investment strategy at Allianz Global Investors. "Among those are some really good telecom names that offer what baby boomers need today, which is income in retirement as well as capital appreciation."

The majority of Wall Street analysts who cover Verizon stock tend to view the company as one of those higher-quality names. According to data compiled by Factset, around 70 percent of analysts have the equivalent of a buy rating on shares, with around a quarter of them rating it as a hold. The rest have a sell rating. On average, the target price for shares stands at $53.38, which implies a possible 9 percent upside from current levels.

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The stock itself hasn't been anything to write home about in recent months. So far this year, shares are just about flat—up just 6 percent in the last 12 months. While that far outpaces the minus 3 percent performance of the S&P 500 telecom sector in that same time frame, it still underperformed the broader S&P 500's 14 percent gain.

What's impressive is what happened to the stock in aftermarket trading on Thursday. Usually, we don't tend to see lots of market moves on the heels of 13-F reports, especially when stocks being mentioned are as large as Verizon, which is worth around $200 billion and is the largest component of the S&P 500 telecom sector. However, as soon as these reports emerged, the stock moved higher by nearly 2 percent. It extended those gains into regular trading the following day—all of this on holdings information that was already 45 days old.

Dan Loeb
Justin Solomon | CNBC
Dan Loeb

The dividend yield may be one of many reasons why investors like Buffett, Loeb and Paulson are getting in. There could also be a slew of other reasons, but the large, new positions seem to at least echo what many financial advisors are still reiterating to their clients: That dividend payers like telecoms, utilities and consumer staples stocks can still play an important role in a portfolio. Telecom, Hooper said, is a sector that has sound fundamentals, typically a solid cash flow, low valuations and a high dividend yield. "There's a real need for income today and it can be found in this space."

There's one thing to keep in mind when it comes to these 13-F filings. Aside from the fact that they're reporting older data, they also fail to put the full picture of an investment manager's methodology into view. Managers are required to show what they hold at the end of each quarter, but they aren't required to disclose how they traded to get to that position. In other words, they could have bought or sold a number of times between quarterly reporting periods. In that way, these filings are more like a balance sheet than an income statement. They're more of a snapshot in time, rather than an account of what happened throughout the quarter.

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Managers are also not required to disclose short positions, so hypothetically, some long positions can be matched off against short sales, sometimes even in the same industry or sector.

It does, however, at least provide a glimpse into how the biggest investment managers are positioning themselves, and in this case, the market appears to want in on the action in Verizon. Whether these new stakes represent longer-term investments, or just shorter-term trades, one thing is clear. Dividend-paying stocks have already been getting a lot of attention and will only get more as Wall Street heavyweights put more money to work in them.