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Approximately once per month I run a high-yield momentum screen and post the results. Last month's list is here. Returns for the last month were flat, returning -.02% including dividends (-.44% before dividends) versus 1.54% for SPY and -.04% for SPY, the S&P Dividend ETF. The top performing stock from last month's list was Verizon (NYSE:VZ) returning 4.81% excluding its $.488 dividend. The strategy did relatively well in 2010 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 rank them by 6 month returns. There were 53 results (versus 54 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, 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 Dividend Yield Performance (Quarter) Half Year Year 200-Day SMA
FTR Frontier Communications Corporation 7.89% 12.81% 38.23% 38.23% 20.55%
Q Qwest Communications International Inc. 4.34% 17.89% 37.43% 66.97% 25.35%
VZ Verizon Communications Inc. 5.43% 10.18% 37.31% 19.77% 20.48%
CTL CenturyLink, Inc. 6.45% 14.99% 33.77% 38.21% 21.70%
KIM Kimco Realty Corporation 4.04% 7.34% 28.92% 31.49% 15.32%
PFE Pfizer Inc. 4.38% 5.06% 24.81% 0.00% 11.92%
RAI Reynolds American Inc. 5.90% 15.34% 23.81% 32.87% 17.50%
WIN Windstream Corporation 7.52% 10.20% 22.26% 32.90% 15.22%
CMS CMS Energy Corp. 4.48% 0.16% 20.75% 25.44% 12.08%
CINF Cincinnati Financial Corp. 5.02% 9.29% 18.52% 25.62% 13.37%
SE Spectra Energy Corp. 4.21% 6.64% 17.66% 22.74% 11.76%
Disclosure: No positions
Source: 11 High Yield Stocks to Consider Now