Amid the 31 initial public offerings that took place in the first quarter, one key theme emerged: a new hunt for yield, according to a new report from Renaissance Capital.
There was an unusual mix shift toward yield plays, which accounted for nearly half of the quarters deals, while quintessential small-cap growth stories were few and far between, Renaissance Capital, which tracks IPOs, noted in its report.
Dividend-paying companies represented 45% of all IPOs (14 out of 31 offerings) in the first quarter of 2013, the highest percentage since the second quarter of 2008. The first three months of this year was the first quarter to have 14 dividend payers since the fourth quarter of 2007.
Of the 31 IPOs in the first quarter, by far the largest was Zoetis, the $2.2 billion spinoff of Pfizers animal health business, which accounted for about 30% of the $7.6 billion total. (CVR Refining was a distant second, raising $600 million.) Zoetis just announced a quarterly dividend that represents an annualized yield of around 0.8%.
Other dividend-paying IPOs included six REITs and four MLPs, vehicles known for distributing cash flow to investors. For example, Aviv REIT, which raised $264 million, is expected to distribute about 7% to investors from the nursing homes it owns. According to Renaissance Capital, eight of the ten largest IPOs paid dividends, with a 4.9% average yield at their offering, excluding CVR Refining, which pays a variable dividend. (Some commentators put the expected payout from CVR Refining at around 10%.)
Renaissance Capital also pointed out that three of the quarter's top-performing deals were leveraged buyouts. These were all $200 million-plus deals; Norwegian Cruise Line, Bright Horizons Family Solutions, and Boise Cascade each had post-IPO returns of 53% to 62%. Among the large IPOs expected to appear later in 2013 are leveraged buyouts of Bausch & Lomb, Taylor Morrison Homes, CDW, and SeaWorld Entertainment.
While contact lens supplier Bausch & Lomb could raise an estimated $1.5 billion with an IPO, Renaissance Capital also sees billion-dollar offerings from ING U.S., the American unit of the Dutch financial service giant, and from Empire State Realty, which operates 12 properties in the greater New York City area. The largest upcoming tech IPO ($750 million) will involve Intelsat S.A., the world's largest provider of satellite services to businesses.
Altogether, Renaissance Capital expects an uptick in activity from large, private-equity backed IPOs and high-growth, venture-backed companies, particularly in the technology sector. Though there were only eight VC-backed IPOs in the first quarter, half went public during the last two weeks of March, potentially foreshadowing a rebound in the coming months.