Top 10 Net Payout Yield Stocks For January 2014

by: Stone Fox Capital

This article is a continuation of a monthly series highlighting the top net payout yield (NPY) stocks that was started back in June, 2012 (see article) and explained in August, 2012 (see article). The series highlights the best NPY stocks for the upcoming month. Please review the original articles for more information on the NPY concept.

December Returns

Below are two charts highlighting the monthly returns of the top ten stocks from October (see list here - note the report wasn't updated the last 2 months we). Due to limitations with YCharts, the chart was broken into the Top 5 and Next 5 lists.

The Top 5 stocks had a very strong December. Seagate Technology (NASDAQ:STX) led the strength with a strong 14.5% gain followed by big gains from DirecTV (DTV), CenturyLink (NYSE:CTL), and American International Group (NYSE:AIG). AT&T (NYSE:T) had the only negative return and only return below the 2.5% gain for the benchmark S&P 500.

T Total Return Price Chart

T Total Return Price data by YCharts

The Next 5 stocks performed well during December with St. Jude Medical (NYSE:STJ) and Ameriprise Financial (NYSE:AMP) beating the market with gains of over 6% each. Kohl's (NYSE:KSS), O'Reilly Automotive (NASDAQ:ORLY) and Motorola Solutions (NYSE:MSI) had positive returns that slightly outperformed the S&P 500 index.

^SPXTR Chart

^SPXTR data by YCharts

In all, the top ten stocks handily outperformed the S&P 500 with nine of them beating the market. The huge gain by Seagate more than offset the small loss by AT&T. Typically this more conservative group of stocks performs better during the weak months, but in some times, like during December, the model will outperform during a strong month in the market.

The list is full of companies that most investors wouldn't touch when the month began, including several left for the dead such as CenturyLink that most investors won't touch.

January List

The list encountered several changes since the October report, with Annaly Capital (NYSE:NLY) jumping to the top of the list after not being included a couple of months ago. Other additions were Halliburton (NYSE:HAL), Pfizer (NYSE:PFE), Marathon Petroleum (NYSE:MPC), and Dollar Tree (NASDAQ:DLTR). Halliburton jumped all the way to the fourth position on the back of a substantial buyback of $3.3 billion during Q313.

Naturally several stocks fell off the top 10 list with the most meaningful being American International Group that didn't continue a substantial buyback from 2012. The other four stocks to drop off the list were the last four from October. These stocks were replaced by higher yielding stocks.

The average yields actually jumped from October despite market gains continuing to pressure yields overall. With the significant dividend yield of Annaly added to the list, the dividend yield jumped up to 3.6% while the NPY increased to 12.2%.

Click to enlarge


Surprisingly, the stronger market didn't push the average yields lower. While most of the stocks held over from October have lower yields, several of the new additions have higher yields due to implementing significant buyback plans. These moves further highlight the importance of making slight adjustments to the portfolio on a monthly basis.

Again, investors in this concept should be comforted knowing that a sell off will allow these financially strong companies to utilize the significant buyback programs to an even greater extent. This portfolio actually welcomes a 5 to 10% correction n the stock market.

Disclosure: I am long AMP, CTL, DTV, KSS, HAL, MSI, T. 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.