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Approximately once per month I run a high-yield momentum screen using the free service on Finviz and post the results. Last month's list is here. Returns for the last month were 3.31% including dividends (2.52% before dividends) versus 3.23% for SPY and 0.19% for SDY, the S&P Dividend ETF. Once again the top performing stock from last month's list was Qwest Communications (NYSE:Q) returning 7.95% excluding its $.08 dividend while Pepco Holdings (NYSE:POM) was the worst performing at -3.45% (excluding its $.27 dividend). The strategy has done well this year and is one I continue to track because of its promise. In recent months I have also done a variation of this strategy with the Dividend Champions list in which I only search stocks that have had a history of raising dividends for 25+ years.

The screen looks for high yielding high momentum stocks. I screen the S&P 500 for stocks yielding greater than 4% and then ranked them by 6 month returns. There were 54 results (versus 55 last month) and per a previous article (see below for explanation), the highest momentum, high yield stocks have historically been the best performing so I have listed the top 20% based on 6 month returns, or 11 stocks.

The article in reference was a study done by Charles Schwab in which they studied the 1500 largest stocks by market capitalization from 1990-2009 and divided yielding stocks into 4 quadrants. They ranked the highest yielding stocks by 6 month price momentum, divided them into 5 segments, and found that highest yield stocks with the highest 6 month price momentum outperformed a) all other momentum segments (in other words, those high yield stocks with lower price momentum) and b) the annual return of the other yield quadrants.

As I have previously mentioned the screen is more of a trading strategy and less of an income strategy (unlike some of my dividend aristocrat screens and dividend champion screens which emphasize stocks that have a history of raising dividends), although the dividends do play an essential component in the overall returns. Thus, turnover could be high and the strategy is not for everyone. However, some months have shown relatively low turnover from month to month but this could change in the future. Second, it is a screen and not a recommended or comprehensive portfolio. In other words, there could be sector imbalances so for investors looking to have exposure across different sectors and asset classes, this screen could potentially serve as a starting point for further research or one small piece to a much larger picture.

Ticker Company Industry Retirement Portfolios Dividend Yield Performance (Half Year) 200-Day SMA Price
(Q) Qwest Communications International Inc. Telecom Services - Domestic Here 4.37% 43.16% 31.00% 7.33
(NYSE:CTL) CenturyLink, Inc. Telecom Services - Domestic Here 6.50% 35.20% 25.37% 44.63
(NYSE:PM) Philip Morris International, Inc. Cigarettes Here 4.34% 32.61% 14.74% 59
(NASDAQ:WIN) Windstream Corporation Telecom Services - Domestic Here 7.14% 30.96% 23.46% 14
(NYSE:CMS) CMS Energy Corp. Diversified Utilities Here 4.48% 28.14% 14.75% 18.76
(NYSE:RAI) Reynolds American Inc. Cigarettes Here 6.08% 27.91% 16.98% 32.22
(NYSE:MO) Altria Group Inc. Cigarettes Here 6.12% 26.98% 11.68% 24.85
(NASDAQ:FTR) Frontier Communications Corporation Telecom Services - Domestic Here 8.00% 23.29% 22.80% 9.37
(NYSE:VZ) Verizon Communications Inc. Telecom Services - Domestic Here 5.73% 22.84% 15.38% 34.04
(NYSE:CNP) CenterPoint Energy, Inc. Diversified Utilities Here 4.92% 21.75% 9.84% 15.84
(NYSE:SE) Spectra Energy Corp. Oil & Gas Pipelines Here 4.08% 21.26% 12.66% 24.53

Disclosure: No positions

Source: 11 High Yield Stocks to Consider Now