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 stocks for the upcoming month. Please review the original articles for more information on the NPY 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 a very rough January despite the strong gains of Annaly Capital Management (NYSE:NLY). The 8% gain by Annaly Capital was quickly offset by the losses of CenturyLink (NYSE:CTL), AT&T (NYSE:T), and Halliburton (NYSE:HAL). DirecTV (DTV) was the only stock with minimal movements for the month. In total, the group performed better than the 3.5% loss for the benchmark S&P 500.
The Next 5 stocks performed horribly during January with Dollar Tree Stores (NASDAQ:DLTR) down more than 10%. Seagate Technology (NASDAQ:STX), Motorola Solutions (NYSE:MSI), and Marathon Petroleum (NYSE:MPC) underperformed the market with losses of over 5% each. Only Pfizer (NYSE:PFE) beat the 3.5% loss of the S&P 500 index, though it still had a slight loss for the month.
In all, the top ten stocks performed equal to the 3.5% loss of the S&P 500 even with seven of the stocks underperforming the market for the month. Clearly the large gain by Annaly Capital helped offset the losses by most of the group. Typically this more conservative group of stocks performs better during the weak months, but in recent months the model has included more volatile stocks such as CenturyLink and Dollar Tree that lost nearly 10% in January.
The list encountered several changes since the January report with CenturyLink and Seagate Technology climbing towards the top of the list right behind Annaly Capital. In addition, Marathon Petroleum joined the top five and Dollar Tree reached the sixth position after the stock plunged during January.
The average yields jumped partially helped by the market losses and additional buybacks. Even with the market declines, the dividend yield remained at 3.6% while the NPY increased to 12.7%.
The weak market helped support the higher yields. With the majority of the stocks on the list supporting large buybacks, the losses are a welcome addition to a market that hadn't taken a pause in months.
Either way, paying attention to the stock buybacks can be an important signal of where management expects the company to go in the next 12 months. As the market struggles through emerging market weakness and concerns of slow domestic growth, 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.
Disclosure: I am long CTL, DLTR, DTV, HAL, MSI, NLY, 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.
Disclaimer: 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.