This article is a continuation of a monthly series highlighting the top net payout yield stocks that was started in June, 2012 (see article). The series highlights the best stocks for the upcoming month. Please review the original article for more information on the net payout yield concept.
Below are two charts highlighting the monthly returns of the top ten stocks from January (see list here). Due to limitations with YCharts, the chart was broken into the Top 5 and Next 5 lists.
The Top 5 stocks had another strong month after a great December. Seagate Technology (NASDAQ:STX) followed a strong December with an 11.7% gain in January. All of the other stocks had positive months with Kohl's Corporation (NYSE:KSS) and ConocoPhillips (NYSE:COP) exceeding the S&P 500 gain of 5.2%. Both Motorola Solutions (NYSE:MSI) and DirecTV (DTV) underperformed the benchmark gains.
The Next 5 stocks had a good month with a big gain by Applied Materials (NASDAQ:AMAT) that approached 13%. In addition, Annaly Capital Management (NYSE:NLY), Ameriprise Financial (NYSE:AMP) and WellPoint (WLP) had solidly positive months that exceeded the S&P 500. Unfortunately, Amgen (NASDAQ:AMGN) had a negative return for the month.
With 8 out of 10 stocks beating the S&P 500, the list substantially outperformed the market. Only 1 stock had a small negative return allowing for the big gains to shine.
The list is full of retailers, financials, and tech companies that most investors wouldn't touch when the month began. These results continue to highlight the concerns over the influx of tech companies in the top yielding stocks, as the two top gainers saw returns in excess of 10%. Even in the large cap sector those stocks tend to be more volatile.
The list encountered a major change since January as the third highest yield dropped off the list. ConocoPhillips has dramatically reduced the stock buyback over the last two quarters, substantially reducing the yield. While the yield still sits above 11%, it will continue to plunge unless the company aggressively returns to buying stock. The only other change was Applied Materials dropping from the last position, as the yield dropped from 12.4% to 11.2% after the huge gains in January.
AmerisourceBergen (NYSE:ABC), CA Technologies (NASDAQ:CA), and Northrop Grumman (NYSE:NOC) joined the list with yields above 12%. Both Annaly Capital and Ameriprise Capital tied for the last spot with a 12% yield, hence the three new stocks and only two stocks dropping off the list.
Top Ten Net Payout Yield Stocks For February
Even after strong market gains in January, the stocks on the Top Ten list continue to support yields exceeding 12%. In fact, the average stock maintains a yield exceeding 15%. These yields substantially exceed the 4-5% yields of the top large cap dividend stocks.
While December was volatile as expected, the markets soared in January as the fiscal cliff issues were avoided. The agreement was far less impacting than expected that the dividend paying stocks could easily have another strong year.
With the Top Ten stocks average buyback yields of nearly 12%, any market pullback in February allows the companies to purchase shares on the cheap. A perfect scenario for any long-term investors concerned that the market is extended after a 5% gain to start the year.
Disclosure: I am long AMP, COP, DTV, KSS, MSI, NLY, WLP. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
Disclaimer: Please consult your financial advisor before making any investment decisions.