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 July (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 strong July following a weak June. All five stocks generated gains in excess of 3% led by the outsized 8.4% gain of CenturyLink (NYSE:CTL). If that wasn't enough, Marathon Petroleum (NYSE:MPC) backed it up with a 6.9% gain followed by a 5.7% positive return from IBM (NYSE:IBM). Possibly the most impressive part was the roughly 3% gains from the laggards of the group in Northrop Grumman (NYSE:NOC) and Seagate Technology (NASDAQ:STX). The gains were all the more impressive considering the 1.4% loss of the benchmark S&P 500 index.
MPC Total Return Price data by YCharts
While the Top 5 stocks crushed the benchmark, the Next 5 stocks had a nearly equally disappointing month in July on the back of a loss over 9% by Seadrill (NYSE:SDRL). In addition, Travelers (NYSE:TRV), Pfizer (NYSE:PFE) and Annaly Capital Management (NYSE:NLY) had losses in excess of the 1.4% loss of the S&P 500. Of the group, Kohl's (NYSE:KSS) was the only stock to outperform the benchmark index with a gain of 1.6%.
TRV Total Return Price data by YCharts
In all, the top ten stocks easily outperformed the market with an average 1.8% gain due to the substantial gains of Marathon Petroleum and CenturyLink. The monthly returns were impressive for the high-yielding stocks during a period of weakness for the overall stock market.
The rebound in Marathon Petroleum highlights how stock buybacks can signal that the fears over regulations were overblown. Remember that these large-cap stocks have management teams with better knowledge of the industry and pending regulation changes than the general market.
The list encountered several major changes since the last update. A couple of stocks reduced stock buyback plans in the last quarter, causing the yields to drop. Both CenturyLink and Pfizer reduced the amounts of buybacks enough to significantly shift the spots on the list. CenturyLink dropped from second to eighth on the list, with Pfizer dropping completely off it. The only stock added to the list was WellPoint (NYSE:WLP), which saw a meaningful change in the yield with a jump to 9.9% with a ramped up buyback during Q2. Even with the stock surging over the last year, the company was able to increase the stock buyback enough for the yield to reach the top list..
The average yields during August were slightly higher than the NPY from July gaining to 11.6%. The main cause was a general increase in the yields in the majority of the stocks on the list with the buyback yield gaining to 7.2%, compared to 7.0% in July.
With the main indexes in the stock market sitting close to all-time highs and fears over a collapse due violence in Ukraine and Iraq, the top NPY stocks provide a safe place to invest. The large group of stocks buying nearly 10% of the outstanding stock in the last year would almost certainly welcome a sell-off in the stock market to buy stock cheaper.
Disclosure: The author is long CTL, KSS, NLY, NOC, SDRL, TRV, WLP. The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has 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.