Top Net Payout Yields For February 2016

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Includes: AAL, AIG, BBBY, CBS, CTL, GM, KSS, M, MSI, NTAP, QCOM, STX, UTX
by: Stone Fox Capital

Summary

The top 10 net payout yields had a larger loss than the benchmark index in January. .

The top 10 net payout yield stocks average yields of 20.8% to start February. .

Motorola Solutions continues to hold the highest yields at 38.6%. .

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 utilized in part to make investment decisions for the Covestor model that is now beating the S&P 500 for five out of the last six years. Please review the original articles for more information on the NPY concept.

January Returns

Below are two charts highlighting the monthly returns of the top ten stocks from January (see list here). For presentation reasons, the chart is broken into the Top 5 and Next 5 lists.

The Top 5 stocks had a miserable month to start 2016 after finishing a generally bad year in 2015. Though the S&P 500 index had a large 5.1% loss during the month, three stocks in the group had larger losses that were in excess of 9.2%. Bed Bath & Beyond (NASDAQ:BBBY), Qualcomm (NASDAQ:QCOM), and Seagate Tech (NASDAQ:STX) had the large losses as technology stocks saw a disappointing holiday season. On flip side, Macy's (NYSE:M) rebounded from a weak year end to produce a 15.5% bounce off the bottom and Motorola Solutions (NYSE:MSI) had a minor loss in comparison to the benchmark. In total, the Top 5 stocks generated a loss of 5.5% that was slightly worse than the 5.1% of the S&P 500.

MSI Chart

MSI data by YCharts

The next 5 stocks had another dreary month following similar results in December. In this case, three stocks had large losses in excess of 8%, including a massive 17.3% loss by NetApp (NASDAQ:NTAP). Both General Motors (NYSE:GM) and American Airlines Group (NASDAQ:AAL) had losses over 7% while CBS (NYSE:CBS) and Kohl's (NYSE:KSS) outperformed the benchmark with gains. In total, the Next 5 stocks produced a massive 6.6% loss due mainly to the large loss from NetApp.

GM Chart

GM data by YCharts

In all, the top 10 stocks produced a worse loss than the 5.1% loss of the benchmark S&P 500 index. With six stocks generating sizable losses, the NPY concept started the new year on a low note.

February List

The top 10 list saw several changes on the list for February though the largest yielding stocks saw losses that only pushed the yields higher. The main move in the list were some of the bottom yielding stocks sliding off the list.

Kohl's, General Motors, and CBS all fell off the list despite maintaining yields in excess of 12%. In general, the stocks repurchased fewer shares in the reported Q4 period.

The new additions are United Technologies (NYSE:UTX), CenturyLink (NYSE:CTL), and American International Group (NYSE:AIG). United Tech is the only stock not previously on the list with the other two bouncing in and out of the list over the last year or so. United Tech made the list by offering a 3% dividend yield and completing a $6 billion accelerated share repurchase program during Q4.

The top yields keep squeezing higher as lower stock prices pushed the top three yielding stocks above 24%. Even the 6th largest yield for NetApp sat at an incredibly high 18.0%.

The average yields were significantly higher to start February, with the NPY increasing to 20.8% from 19.2% in the prior month. The buyback yield increased further to an extremely elevated 17.2%. The dividend yield had a big increase to 3.7% from the prior month at 3.1% due to the inclusion of the large dividend from CenturyLink.

Conclusion

The NPY stocks started 2016 on a low note due in part to the weak stock market. Ultimately, though, stocks repurchasing large amounts of their own stock will eventually benefit from the even lower stock prices. In fact, the ever increasing yields continue to suggest these stocks are even more attractive on the dips with several bouncing to start February.

Disclosure: I am/we are long AAL, CTL, GM, KSS, M, MSI, NTAP, QCOM.

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.

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.