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, Portfolio123 (1,582 clicks)
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In my articles, I show many dividend portfolios that can outperform the market by a big margin; unfortunately I can't invest my own money in all of them. However, in this article I will show a good-yielding portfolio that I use for my own investments.

The screen's method that I use to build this portfolio requires all stocks to comply with all following demands:

  1. The stock does not trade over-the-counter (OTC).
  2. Price is greater than 1.00.
  3. Market cap is greater than $50 million.
  4. Average daily total dollar amount traded for the past 10 days is greater than 200,000.
  5. Dividend yield is greater than 3.5%.
  6. The payout ratio is less than 100%.
  7. Last dividend declared is greater or equal to the last dividend paid.
  8. Total debt to equity is less than 1.0.
  9. The nine stocks with the lowest payout ratio among all the stocks that complied with the first eight demands.

I used the Portfolio123's powerful screener to perform the search and to run back-tests. Nonetheless, the screening method should only serve as a basis for further research. All the data for this article were taken from Portfolio123.

After running this screen on October 24, 2013, before the market open, I discovered the following nine stocks:

Rank

Ticker

Name

Last Price

Market Cap $million

Industry

1

(NTE)

Nam Tai Electronics

7.97

361

Electronic Equipment, Instruments & Components

2

(NYSE:COP)

ConocoPhillips

73.26

89,597

Oil, Gas & Consumable Fuels

3

(NYSE:SLF)

Sun Life Financial

33.78

20,464

Insurance

4

(NYSE:DCM)

Ntt Docomo Inc.

16.09

66,721

Wireless Telecommunication Services

5

(NYSE:UVE)

Universal Insurance Holdings

7.56

267

Insurance

6

(NYSE:NJR)

New Jersey Resources Corp.

45.54

1,884

Gas Utilities

7

(NASDAQ:AROW)

Arrow Financial

26.37

325

Commercial Banks

8

(NYSE:MAIN)

Main Street Capital

29.90

1,047

Capital Markets

9

(NYSE:LEG)

Leggett & Platt Inc.

29.67

4,210

Household Durables

The table below presents the dividend yield, the payout ratio, the last dividend declared, and the total debt to equity for the nine companies.


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Nam Tai Electronics Inc.

Nam Tai Electronics, Inc. provides electronics manufacturing and design services to the original equipment manufacturers of telecommunication and consumer electronic products. The company was founded in 1975 and is based in Shenzhen, the People's Republic of China.

Nam Tai Electronics has no debt at all, and it has an extremely low trailing P/E of 4.80. The PEG ratio is exceptionally low at 0.38, and the average annual earnings growth estimates for the next five years is quite high at 12.50%. The price to free cash flow for the trailing 12 months is very low at 5.34, and the price-to-book-value ratio is at 1.05. The price-to-sales ratio is very low at 0.30, and the price-to-cash ratio is extremely low at 1.59. The forward annual dividend yield is very high at 7.53%, and the payout ratio is only 26.6%.

On August 5, Nam Tai Electronics reported its second-quarter results. Net sales in the second quarter of 2013 were $167.9 million, excluding the discontinued LCMs for tablets business of $30.7 million, an increase of 64.1%, compared to the net sales of $102.3 million, excluding the discontinued businesses of $113.7 million, for the same quarter of 2012. Gross profit in the second quarter of 2013 was $15.7 million, an increase of 2.7%, compared to $15.3 million in the second quarter of last year. Gross profit margin for the second quarter of 2013 was 9.4%, a decrease of 5.6%, compared to 15.0% in the second quarter of last year. Operating income for the second quarter of 2013 was $8.4 million, a decrease of 14.3%, compared to $9.8 million in the second quarter of last year. Net loss in the second quarter of 2013 was $31.9 million, or negative $0.71 per diluted share, compared to net income of $9.4 million, or $0.21 per diluted share, in the second quarter of last year.

Although Nam Tai's valuation metrics are excellent, and it is rich in cash ($4.95 a share) and has no debt, NTE stock is very volatile and quite dangerous.


(Click to enlarge)

Chart: finviz.com

ConocoPhillips

ConocoPhillips explores for, produces, transports, and markets crude oil, bitumen, natural gas, liquefied natural gas, and natural gas liquids on a worldwide basis.


(Click to enlarge)

Source: Company presentation

ConocoPhillips has a low debt (total debt to equity is 0.51), and it has a very low trailing P/E of 11.73 and a very low forward P/E of 11.45. The price-to-sales ratio is at 1.49, and the average annual earnings growth estimates for the next five years is at 4.73%. The forward annual dividend yield is at 3.77%, and the payout ratio is only 42.6%. The annual rate of dividend growth over the past five years was high at 9.99%.

The COP stock price is 2.11% above its 20-day simple moving average, 5.35% above its 50-day simple moving average and 17.43% above its 200-day simple moving average. That indicates a short-term, mid-term and long-term uptrend.

ConocoPhillips has recorded strong EPS and dividend growth and negative revenue growth during the last three, as shown in the table below.

Most of ConocoPhillips' stock valuation parameters have been better than its industry median, sector median and the S&P 500 median, as shown in the table below.


(Click to enlarge)

Source: Portfolio123

ConocoPhillips' dividend yield is among the highest in the industry, as shown in the chart below.


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Source: Company presentation

ConocoPhillips will report its latest quarterly financial results on October 30. COP is expected to post a profit of $1.30 a share, the same as the company's actual earnings for the same quarter a year ago.

ConocoPhillips has compelling valuation metrics, and solid earnings growth prospects, and considering the fact that the stock is in an uptrend, COP stock still has room to go up. Furthermore, the rich growing dividend represents a gratifying income.

Risks to the expected capital gain and to the dividend payment include a downturn in the U.S. economy, and a decline in the price of oil and natural gas.


(Click to enlarge)

Chart: finviz.com

Sun Life Financial Inc.

Sun Life Financial Inc., an international financial services organization, provides a range of protection and wealth accumulation products and services to individuals and corporate customers.

Sun Life Financial has a low debt (total debt to equity is only 0.35) and it has a low trailing P/E of 13.54 and a very low forward P/E of 12.57. The PEG ratio is at 1.35, and the price-to-cash ratio is very low at 3.40. The price to book value is at 1.37, and the average annual earnings growth estimates for the next five years is quite high at 10%. The forward annual dividend yield is high at 4.14%, and the payout ratio is only 43%. The annual rate of dividend growth over the past five years was at 3.05%.

The SLF stock price is 2.99% above its 20-day simple moving average, 4.05% above its 50-day simple moving average and 12.31% above its 200-day simple moving average. That indicates a short-term, mid-term and long-term uptrend.

Sun Life Financial will report its latest quarterly financial results in November. SLF is expected to post a profit of $0.60 a share, a $0.08 decline from the company's actual earnings for the same quarter a year ago.

On August 07, Sun Life Financial reported its second-quarter financial results.

Second Quarter 2013 Financial Highlights

  • Operating net income from Continuing Operations of $431 million, compared to $250 million in the second quarter of 2012. Reported net income from Continuing Operations of $391 million, compared to $244 million in the same period last year. Results reflect strong insurance and wealth sales, product and pricing improvements and positive interest rate and credit experience
  • Operating earnings per share ("EPS") from Continuing Operations of $0.71, compared to $0.42 in the second quarter of 2012. Reported EPS from Continuing Operations of $0.64, compared to $0.41 in the same period last year
  • Operating return on equity ("ROE") (Combined Operations) of 12.8%, compared to 2.9% in the second quarter of 2012. Reported ROE (Combined Operations) of 10.7%, compared to 2.7% in the same period last year
  • Quarterly dividend of $0.36 per share
  • MCCSR ratio for Sun Life Assurance of 217%
  • The Board of Directors of Sun Life Financial Inc. today declared a quarterly shareholder dividend of $0.36 per common share, maintaining the current quarterly dividend.

Sun Life Financial has compelling valuation metrics, and good earnings growth prospects, and considering the fact that the stock is in an uptrend, SLF stock still has room to go up. Furthermore, the rich growing dividend represents a gratifying income.


(Click to enlarge)

Chart: finviz.com

Back-testing

In order to find out how such a screening formula would have performed during the last year, last 5 years and last 15 years, I ran the back-tests, which are available by the Portfolio123's screener.

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.

Since some readers could not get the same results that I got in some of my previous posts, I am giving, in the charts below, the Portfolio123 exact codes which I used for building this screen and the back-tests. The number of stocks left after each demand can also be seen in the chart.


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One year back-test


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Five years back-test


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Fifteen years back-test


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Summary

The good-yielding screen has given much better returns during the last year, the last five years and the last 15 years than the S&P 500 benchmark. The Sharpe ratio, which measures the ratio of reward to risk, was also much better in all the three tests.

One-year return of the screen was very high at 58.76%, while the return of the S&P 500 index during the same period was at 21.70%.

The difference between the good-yielding screen to the benchmark was even more noticeable in the 15 years back-test. The 15-year average annual return of the screen was very high at 26.15%, while the average annual return of the S&P 500 index during the same period was only 2.39%. The maximum drawdown of the screen was at 55.81%, while that of the S&P 500 was at 57%.

Although this screening system has given superior results, I recommend readers use this list of stocks as a basis for further research.

Source: My Good-Yielding Dividend Portfolio