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 February (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 a mixed month after a great January. Seagate Technology (NASDAQ:STX) followed a strong January with a 5.4% loss in February. DirecTV (DTV) had another weak month with a substantial 5.8% loss compared to the 1.4% gain of the S&P 500. Amgen (NASDAQ:AMGN) and Motorola Solutions (NYSE:MSI) had strong gains of over 6.5% while Kohl's (NYSE:KSS) continues to struggle.
The Next 5 stocks had a good month with only WellPoint (WLP) underperforming the market with a 4% loss. The other four stocks beat the market led by 4% gains by Annaly Capital Management (NYSE:NLY), Ameriprise Financial (NYSE:AMP) and AmerisourceBergen (NYSE:ABC). Only Northrop Grumman (NYSE:NOC) slightly beat the market.
Even with 6 out of 10 stocks beating the S&P 500, the list fractionally underperformed the market. Several stocks had material negative returns causing the big gains to not shine.
The list is full of defense, 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 those stocks continue to have wild swings defeating the conservative nature of this concept.
The list encountered a major change since February as the fifth highest yield dropped off the list due to a one-time buyback by Amgen from last year rolling off. The only other change was Northrop Grumman dropping from the list as the yield dropped from 12.2% to 10.3% after a reduction in the level of stock buybacks.
Only Viacom, Inc (NASDAQ:VIAB) joined the list with a yield of 10.8%. Both Annaly Capital and Ameriprise Capital tied for the last spot in February with a 12% yield, hence only one new stock while two stocks dropped off the list.
Even after strong market gains for the first two months of the year, the stocks on the Top Ten list continue to support yields mostly exceeding 11%. 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.
With the stock market hitting record highs, the top net payout yield stocks naturally went along for the ride.
With the Top Ten stocks average buyback yields of nearly 12%, any market pullback in March allows the companies to purchase shares on the cheap. A perfect scenario for any long-term investors concerned that the market is extended after hitting record highs.
Disclosure: I am long AMP, DTV, KSS, MSI, NLY, NOC, 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.
Additional disclosure: The information contained herein is for informational purposes only. Nothing in this article should be taken as a solicitation to purchase or sell securities. Before buying or selling any stock you should do your own research and reach your own conclusion or consult a financial advisor. Investing includes risks, including loss of principal.