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Summary

  • Net Payout Yield stocks outperformed the market in March.
  • The Top 10 Net Payout Yield stocks averaged 11.9% yields.
  • Dollar Tree joined the list for April and Halliburton dropped off.

This article is a continuation of a monthly series highlighting the top net payout yield (NYSE: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.

March Returns

Below are two charts highlighting the monthly returns of the top ten stocks from March (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 strong March after a very rough February. CenturyLink (NYSE:CTL), AT&T (NYSE:T), and Seagate Technology (NASDAQ:STX) had substantial gains of around 7% or more for the month. More importantly, the nearly 10% gain by AT&T wasn't offset by any losses. Marathon Petroleum (NYSE:MPC) and Annaly Capital Management (NYSE:NLY) had small gains that matched or exceeded the 0.8% gain for the benchmark S&P 500.

(click to enlarge)

CTL Total Return Price data by YCharts

The Next 5 stocks had a mixed month in March after an extraordinarily performance during February. Halliburton (NYSE:HAL) and Northrop Grumman (NYSE:NOC) generated small gains that exceeded the market. Motorola Solutions (NYSE:MSI) and SeaDrill (NYSE:SDRL) underperformed the market with losses of nearly 2.5% each. Only Pfizer (NYSE:PFE) performed inline with the 0.8% gain of the S&P 500 index.

(click to enlarge)

MSI Total Return Price data by YCharts

In all, the top ten stocks outperformed the market with an average gain of 3.0% based on the top few stocks performing exceptionally combined with limited losses. Clearly, the large gains by AT&T and Seagate Technology more than offset the small losses by Motorola Solutions and SeaDrill. Not surprisingly, this more conservative group of stocks performs well during the flat markets, even though in recent months the model has included more volatile stocks such as CenturyLink and SeaDrill.

April List

The list encountered only a few minor changes since the March list with Marathon Petroleum jumping into the second position. Only Dollar Tree (NASDAQ:DLTR) was added to the list after the stock plunged during the month. Halliburton dropped off the list in April due to the large stock gains in the prior month.

The average yields were relatively flat with the NPY declining slightly to 11.9%. The smallest yield still sits comfortably over 10% providing a huge yield to investors compared to government bonds.

Conclusion

The flat market left yields virtually flat with the numbers from last month. The constant rotation of weak stocks joining the list and strong stocks falling off the list helps support the constantly high yields. The beauty of the concept is that investors constantly sell stocks at the top and buy on dips. With the majority of the stocks on the list supporting large buyback yields, the volatile market and fears of a sell off provide more opportunity for cheap buybacks.

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. Alert investors already know that Apple (NASDAQ:AAPL) will report a NPY north of 10% following the quarterly earnings report. Anybody following the drama with Carl Icahn knows the company bought at least $14 billion of stock following the Q114 earnings selloff.

A strict NPY investor can wait to purchase the stock after conformation in the quarterly release or front run that move based on public information from the company. Apple is a prime example of the stock coveted by this concept, but unloved by most dividend-focused strategies. The current 2.3% dividend yield isn't enough to get most investors excited, but the huge cash balance and strong buybacks support higher stock prices in the future.

Disclosure: I am long AAPL, CTL, HAL, MSI, NLY, NOC, SDRL, 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. 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.

Source: Top 10 Net Payout Yield Stocks For April 2014