Smarter Way to Pick High Yield Stocks? 5 comments
by: Scott's Investments October 05, 2009 | about: EQR / GE / HCP / LEG / MAT / MWV / NI / NYX / PLD / PM / RRD / TEG / VTR
I was reading Charles Schwab Investing Insights (Volume 8, 2009) and came across a strategy for picking high-yield stocks. The article studied the 1500 largest stocks by market capitalization from 1990-2009 and divided yielding stocks into 4 quadrants. The highest yielding quadrant underperformed the preceding two quadrants. The highest yield group had 12-month returns of 10.04%, versus 10.73% for the next highest and 10.21% for the 3rd highest yield group. The lowest yield group returned 9.58% and stocks that paid no dividends returned 9.85%. In other words, the highest yield stocks did not equate to the highest return.
However, the Schwab study offered an alternative strategy for picking the likely winners among the highest yielding stocks. They ranked the highest yielding stocks by 6 month price momentum, divided them into 5 segments, and found that highest yield stocks with the highest 6 month price momentum outperformed a) all other momentum segments (in other words, those high yield stocks with lower price momentum) and b) the annual return of every quadrant mentioned in paragraph one.
In other words, by applying a 6 month price momentum screen to the highest yielding stocks among the largest 1500 stocks, an investor would have had superior returns from 1990-2009. The average 12 month return was 11.5% for the highest yield, highest 6 month price momentum stocks. The lower momentum highest yield stocks returned, starting with the lowest momentum stocks, 7%, 9.7%, 10%, and 10%.
The Schwab study defined the highest yielding group as historically having a yield of at least 1.5 times the average yield of the S&P 500. I used a dividend screen of 4% or greater to identify highest yielding stocks. Next, we can rank those stocks by 6 month return. Finally, I have screened for stocks in the S&P 500 to make the list more manageable for an individual investor. This gives us a list of 65 stocks as of today. If we pick the top 20% of this list based on 6 month returns, it gives us 13 stocks.
Below is the full list of stocks with a break after the top 13 stocks:
No disclosures.
Ticker Company Trend Analysis Dividend Yield Performance (Half Year) Price
RRD R.R. Donnelley & Sons Company Here 5.14% 146.59% 20.22
MWV MeadWestvaco Corporation Here 4.27% 66.05% 21.57
VTR Ventas Inc. Here 5.53% 46.60% 37.06
GE General Electric Co. Here 5.34% 42.35% 15.36
PLD ProLogis Here 5.47% 40.82% 10.97
HCP HCP, Inc. Here 6.76% 40.36% 27.23
MAT Mattel Inc. Here 4.18% 38.61% 17.95
NI Nisource Inc. Here 6.84% 38.23% 13.45
TEG Integrys Energy Group, Inc. Here 7.78% 37.03% 34.97
PM Philip Morris International, Inc. Here 4.80% 36.92% 48.36
EQR Equity Residential Here 4.72% 36.22% 28.62
NYX NYSE Euronext, Inc. Here 4.39% 35.20% 27.31
LEG Leggett & Platt, Incorporated Here 5.69% 31.61% 18.28
TOP 20% By Momentum
The rest of the list:
AVB Avalonbay Communities Inc. Here 5.25% 30.62% 67.99
MTB M&T Bank Corp. Here 4.66% 30.46% 60.14
SLE Sara Lee Corp. Here 4.10% 29.78% 10.72
SE Spectra Energy Corp. Here 5.43% 27.56% 18.42
HCN Health Care REIT Inc. Here 6.57% 27.32% 41.38
TE TECO Energy Inc. Here 5.89% 26.54% 13.59
DTE DTE Energy Co. Here 6.23% 23.11% 34.04
MRK Merck & Co. Inc. Here 4.80% 22.77% 31.65
KMB Kimberly-Clark Corporation Here 4.08% 22.75% 58.87
LO Lorillard, Inc. Here 5.36% 22.55% 74.61
CTL Centurytel, Inc. Here 8.58% 22.45% 32.62
WIN Windstream Corporation Here 10.22% 21.34% 9.78
DD EI DuPont de Nemours & Co. Here 5.37% 20.85% 30.54
RAI Reynolds American Inc. Here 7.70% 19.97% 44.16
CNP Centerpoint Energy Inc. Here 6.22% 19.69% 12.22
POM Pepco Holdings, Inc. Here 7.53% 19.00% 14.34
PNW Pinnacle West Capital Corp. Here 6.63% 18.87% 31.68
AEP American Electric Power Co., Inc. Here 5.40% 18.86% 30.37
GPC Genuine Parts Co. Here 4.34% 17.05% 36.87
FE FirstEnergy Corp. Here 4.91% 16.58% 44.79
KFT Kraft Foods Inc. Here 4.47% 15.38% 25.95
HNZ HJ Heinz Co. Here 4.32% 15.18% 38.85
SCG SCANA Corp. Here 5.51% 14.74% 34.09
BMY Bristol-Myers Squibb Co. Here 5.57% 13.63% 22.26
D Dominion Resources, Inc. Here 5.23% 13.03% 33.49
COP ConocoPhillips Here 4.02% 12.80% 46.8
MO Altria Group Inc. Here 7.78% 12.20% 17.47
MCHP Microchip Technology Inc. Here 5.42% 12.11% 25
DUK Duke Energy Corporation Here 6.24% 11.94% 15.38
NU Northeast Utilities Here 4.12% 11.78% 23.06
PGN Progress Energy Inc. Here 6.50% 10.22% 38.17
PCG PG & E Corp. Here 4.20% 9.89% 40
AEE Ameren Corporation Here 6.28% 8.64% 24.52
GAS Nicor Inc. Here 5.25% 8.58% 35.44
XEL Xcel Energy Inc. Here 5.10% 8.47% 19.2
HCBK Hudson City Bancorp, Inc. Here 4.64% 7.76% 12.92
CINF Cincinnati Financial Corp. Here 6.19% 6.92% 25.51
ED Consolidated Edison Inc. Here 5.85% 5.99% 40.35
SO Southern Company Here 5.52% 5.07% 31.73
PAYX Paychex Inc. Here 4.42% 5.01% 28.06
PPL PPL Corporation Here 4.73% 3.99% 29.16
T AT&T, Inc. Here 6.18% 2.12% 26.52
FTR Frontier Communications Corporation Here 13.76% 1.82% 7.27
LLY Eli Lilly & Co. Here 6.03% 1.31% 32.51
EXC Exelon Corp. Here 4.38% 0.80% 47.98
PBI Pitney Bowes Inc. Here 6.05% 0.13% 23.82
PEG Public Service Enterprise Group Inc. Here 4.38% -0.10% 30.35
SVU SUPERVALU Inc. Here 4.84% -1.30% 14.47
PCL Plum Creek Timber Co. Inc. Here 5.70% -1.80% 29.46
SUN Sunoco Inc. Here 4.42% -2.90% 27.13
Q Qwest Communications International Inc. Here 8.96% -5.05% 3.57
VZ Verizon Communications Inc. Here 6.36% -6.09% 29.89
seekingalpha.com |
