Carl Icahn ranks as one of the most famous activist investors in the world — and one of the most successful. His net worth currently totals close to $5.8 billion.
Although Icahn has money in dozens of stocks, his top position, by far, is in his own Icahn Enterprises LP (NASDAQ: IEP). He owns nearly 86% of the holding company, which generates close to two-thirds of its revenue from investments and energy.
Two things especially stand out about Icahn Enterprises right now. First, it offers a mind-boggling dividend yield of 22%. Second, Wall Street thinks the stock will skyrocket 45% over the next 12 months.
What’s behind Icahn Enterprises’ sky-high yield?
You won’t find many stocks with dividend yields of 22%. What’s behind Icahn Enterprises’ sky-high yield?
The limited partnership has consistently paid distributions of $1 per unit each quarter. These distributions are funded, in part, from dividends and distributions that Icahn Enterprises receives from its subsidiaries, including CVR Energy.
While the distribution payouts have remained steady, Icahn Enterprises’ share price hasn’t. Over the last 12 months, the stock has plunged more than 65%. The company’s yield was already high before this decline but moved even higher the more the stock fell.
This dismal stock performance is due largely to IEP’s short-selling. Carl Icahn acknowledged to unitholders in a letter written in August 2023 that the company had “strayed over the past several years from our activist methodology and shorted (hedged) far more than was necessary.” He added, “While we made money on the long side through our activism efforts, our returns have been overwhelmed by our overly bearish view of the market and related oversized short (hedge) positions.”
Short-selling also hurt the company in another way. Hindenberg Research published a report in May alleging that Icahn Enterprises’ net asset value was inflated and the holding company wasn’t generating enough cash flow to support its distributions.
Story continues
Unsurprisingly, Hindenberg Research also revealed that it had shorted the company’s stock….
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