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Arie Goren, Portfolio123 (470 clicks)
Long only, value, research analyst, dividend investing
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In my previous post, I decided to rank all the energy stocks, which are traded in U.S. markets, by the sum of their dividend and earnings yield. In this article, I have done the same for all technology stocks, which are traded in U.S. markets.

I used the Portfolio123's powerful ranking system to grade all technology stocks based on this theme. Only stocks with a market cap greater than $100 million and price greater than $1.00 were taken into account. All the data for this article were taken from Portfolio123.

The ranking system that I built searched for the best 20 technology stocks by the sum of their dividend and earnings yield. For the earnings yield, I used the average of the inverse of the trailing P/E ratio and the inverse of the forward P/E ratio.

After running the ranking system on July 03, 2013, after the market close, I discovered the following twenty stocks:

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The table below presents the trailing earnings yield, the forward earnings yield, the average earnings yield, the dividend yield and the sum of the average earnings yield and the dividend yield for the twenty companies.

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SouFun Holdings Ltd (SFUN)

SouFun Holdings Limited operates a real estate Internet portal, and a home furnishing and improvement Website in the People's Republic of China. SouFun Holdings Limited was founded in 1999 and is headquartered in Beijing, the People's Republic of China.

On May 08, SouFun Holdings reported its first-quarter 2013 financial results.

First Quarter 2013 Highlights

  • Revenue in the first quarter of 2013 was $91.0 million, a 55.6% increase from the corresponding period in 2012.
  • Operating income in the first quarter of 2013 was $37.2 million, a 161.9% increase from the corresponding period in 2012. Non-GAAP operating income in the first quarter of 2013 was $39.0 million, a 151.9% increase from the corresponding period in 2012.
  • Net income attributable to SouFun Holdings Limited's shareholders was $28.4 million, or $0.34 per fully diluted share, which was a year-over-year increase of 95.5%.
  • Non-GAAP net income attributable to SouFun Holdings Limited's shareholders was $33.2 million, or $0.40 per fully diluted share, which was a year-over-year increase of 134.3%.

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Chart: finviz.com

Seagate Technology Plc (STX)

Seagate Technology Public Limited Company designs, manufactures, markets, and sells hard disk drives for enterprise storage, client compute, and client non-compute market applications worldwide.

STX will report its latest quarterly financial results on July 23. STX is expected to post a profit of $1.18 a share, a 51% decline from the company's actual earnings for the same quarter a year ago. The reported results will probably affect the stock price in the short term.

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Chart: finviz.com

Giant Interactive Group Inc. (GA)

Giant Interactive Group Inc. develops and operates online games in the People's Republic of China. Giant Interactive Group Inc. was founded in 2004 and is based in Shanghai, the People's Republic of China.

GA will report its latest quarterly financial results on August 02. GA is expected to post a profit of $0.22 a share, a 10% rise from the company's actual earnings for the same quarter a year ago.

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Chart: finviz.com

Brooks Automation Inc. (BRKS)

Brooks Automation, Inc. provides automation, vacuum, and instrumentation solutions for semiconductor manufacturing, life sciences, and technology device manufacturing markets worldwide.

BRKS will report its latest quarterly financial results on August 01. BRKS is expected to post a profit of $0.04 a share, a $0.10 less than the company's actual earnings for the same quarter a year ago.

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Chart: finviz.com

Silicon Motion Technology Corp (SIMO)

Silicon Motion Technology Corporation, a fabless semiconductor company, designs, develops, and markets semiconductor solutions for the multimedia consumer electronics market. Silicon Motion Technology Corporation is headquartered in Jhubei, Taiwan.

SIMO will report its latest quarterly financial results on July 28. SIMO is expected to post a profit of $0.26 a share, a 38% decline from the company's actual earnings for the same quarter a year ago.

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Chart: finviz.com

Western Digital Corp (WDC)

Western Digital Corporation, through its subsidiaries, engages in the development, manufacture, and sale of storage products and solutions that enable people to create, manage, experience and preserve digital content.

WDC will report its latest quarterly financial results on July 23. WDC is expected to post a profit of $1.79 a share, a 47% decline from the company's actual earnings for the same quarter a year ago.

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Chart: finviz.com

Xerox Corp (XRX)

Xerox Corporation provides business process and document management services worldwide.

XRX will report its latest quarterly financial results on July 24. XRX is expected to post a profit of $0.24 a share, a 7.7% decline from the company's actual earnings for the same quarter a year ago.

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Chart: finviz.com

Apple Inc (AAPL)

Apple Inc., together with subsidiaries, designs, manufactures, and markets mobile communication and media devices, personal computing products, and portable digital music players worldwide.

AAPL will report its latest quarterly financial results on July 22. AAPL is expected to post a profit of $7.33 a share, a 21% decline from the company's actual earnings for the same quarter a year ago.

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Chart: finviz.com

Himax Technologies Inc (HIMX)

Himax Technologies, Inc. designs, develops, and markets semiconductors for flat panel displays. The company was founded in 2001 and is headquartered in Tainan, Taiwan.

HIMX will report its latest quarterly financial results on August 05. HIMX is expected to post a profit of $0.11 a share, a 22% rise from the company's actual earnings for the same quarter a year ago.

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Chart: finviz.com

SAIC Inc (SAI)

SAIC, Inc. provides scientific, engineering, systems integration, and technical services and solutions in the areas of defense, health, energy, infrastructure, intelligence, surveillance, reconnaissance, and cybersecurity to agencies of the U.S. Department of Defense, the intelligence community, the U.S. Department of Homeland Security, and other U.S. Government civil agencies, state and local government agencies, foreign governments, and customers in commercial markets.

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Chart: finviz.com

Back-testing

In order to find out how a portfolio based on this ranking system would have performed during the last year, last 5 years and last 14 years, I ran back-tests, which are available by the Portfolio123's screener, on a portfolio of the first ten ranked stocks.

The back-test takes into account running the screen every four weeks and replacing the stocks that no longer comply with the screening requirement with other stocks that comply with the requirement. The theoretical return is calculated in comparison to the benchmark (S&P 500), considering 0.25% slippage for each trade and 1.5% annual carry cost (broker cost). The back-tests results are shown in the charts and the tables below.

One year back-test

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Five years back-test

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Fourteen years back-test

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Summary

The best technology stocks in terms of the sum of dividend and earnings yield has given much better returns during the last year, the last five years, and the last 14 years than the S&P 500 benchmark. The Sharpe Ratio, which measures the ratio of reward to risk, was also much better in all three tests. The one-year return of the screen was exceptionally high at 54.46% while the return of the S&P 500 during the same period was 18.06%. The difference between the best technology stocks screen to the S&P 500 benchmark was even more noticeable in the 14 years back-test. The 14-year average annual return of the screen was at 14.20% while the average annual return of the S&P 500 index during the same period was only 1.90%. Although this ranking system has given superior results, I recommend readers use this list of stocks as a basis for further research.

Source: Ranking Technology Stocks By Dividend And Earnings Yield