We have been providing several stocks lists on ValueExpectations.com lately - Hot Stocks in Asia, Dividend Payers, which can be used as a defensive strategy in the current economic environment of slow growth, weak currency and weak recovery. After taking the kinds of losses that occurred over the last 2 years, investors experiencing the “snake bit” (risk aversion) effect are less likely to gamble or exhibit risky behavior, and it is no surprise that dividend-paying stocks have been gaining increased popularity amongst the investment community and have performed quite well over the last year. Investors looking for a steady profit stream and a way to offset losses caused by fluctuations of stock prices have begun to seek refuge in consistent dividend paying companies.
Along with the stagnant economic picture and no outlook for a robust recovery in the near future, corporate bond yields have fallen to their lowest level in decades, making a move into the realm of fixed income more and more unattractive. Given the current economic outlook and the fact that investors have been shifting towards more risk-averse strategies, we will be focusing on providing stock lists that satisfy the “snake-bit” investors’ risk appetite such as US companies that focus on exports, energy companies, and some globally traded companies.
In our last dividend blog we focused exclusively on the dividend paying characteristic of the companies, as well as made sure they have relatively strong valuation and economic profitability, ignoring the dividend yield and market cap characteristics. Now we decided to take this idea a little bit further and present the back-test performance results of companies that pay a dividend yield over 3%, have a market cap greater than $1billion, and rank above the 70th percentile within their sector in valuation attractiveness. While the dividend payers and attractive valuation companies have both performed well respectively, investors who looked at both AFG value and yield in combination have been rewarded handsomely over the past decade
Below are the back-test results showing that dividend-paying companies with above 3% dividend yield and above $1 billion market cap, which also look attractive relative to sector peers according to AFG valuation, have done really well historically. The combination of solid dividend yield and an attractive AFG valuation has been a recipe for success over the past 12 years.
To meet the screen criteria companies must:
a) Have above $1 billion market cap
b) Pay a dividend yield of 3% or larger
c) Rank above the 70th percentile of companies within its sector in valuation attractiveness
Here are a few companies (24) from each major AFG sector that meet the screen criteria and look to be potentially attractive investment opportunities from a valuation perspective.
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