Top 10 Net Payout Yields For April 2016

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Includes: AAL, AIG, AMP, BBBY, M, MSI, NTAP, QCOM, STX, UTX
by: Stone Fox Capital

Summary

The top 10 net payout yields had a large gain that failed to match the large gain of the benchmark in March.

The top 10 net payout yield stocks average yields of 17.5% to start April.

Motorola Solutions regained the lead with the highest yield at 25.3%.

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.

March Returns

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

After a blowout month in February, the Top 5 stocks had a big return in March though failing to match the gains of the S&P 500 index. All 5 stocks in this group had positive returns again last month. Both Seagate Technology (NASDAQ:STX) and AIG (NYSE:AIG) produced gains in excess of 7.5%. The other stocks of Motorola Solutions (NYSE:MSI), Bed Bath & Beyond (NASDAQ:BBBY) and Qualcomm (NASDAQ:QCOM) had positive returns that failed to match the 6.6% gain of the benchmark index. In total, the Top 5 stocks generated a gain of 5.0% that was a slight disappointment in comparison to the big gain of the S&P 500.

STX Chart

STX data by YCharts

The Next 5 stocks had similar positive results for March that failed to keep pace with the benchmark index. In a similar manner, another three stocks had smaller gains than the index, including the minimal gain of American Airlines Group (NASDAQ:AAL). Both NetApp (NASDAQ:NTAP) and Ameriprise Financial (NYSE:AMP) had gains of around 10% or more. While United Technologies (NYSE:UTX) and Macy's (NYSE:M) produced gains in the 2 to 4% range. In total, the Next 5 stocks produced a large 5.5% gain that failed to match the big gain of the benchmark index.

M Chart

M data by YCharts

In all, the top 10 stocks produced a large 5.2% gain though unable to keep up with the big 6.6% gain of the benchmark S&P 500 index. Despite all 10 stocks generating gains and some very sizable, the NPY concept ended up returning some of the outperformance from February.

April List

The top 10 list saw minor shifts for April typical of the limited updates from the last month in a quarter. The main moves in the list take place as the quarterly stock buybacks are reported with quarterly earnings reports. Investors should expect some big shifts for the May report.

No stocks fell off the list with the biggest move coming from Bed Bath & Beyond reducing the stock buyback through the fiscal year that ended in February and was recently reported. In the process, the NPY fell over 700 basis points from the prior month.

The top yields again relented the push to unprecedented levels that left the starting February yield at an average of nearly 21%. Despite the reduced yields, the top four yielding stocks still exceed 18%.

The average yields were lower to start April, with the NPY decreasing to 17.5% from 19.1% in the prior month. The buyback yield again decreased, though, to a still elevated 14.5%. The dividend yield had a small decrease to 2.9% from the prior month at 3.0%.

Conclusion

The NPY stocks capped March with another big gain following the 7.4% gain in February. As highlighted in the prior months, the yields were incredibly high and the stocks would eventually benefit from the companies repurchasing large amounts of their own stock at ever lower prices.

Despite the recent rally, all ten stocks still spent an amount on stock buybacks over the last year equivalent to 10% of the current market value. Such large-scale buybacks are good for stock gains going forward due to the valuation proposition when a company has enough cash to spend that much on repurchasing stock. Not to mention, most of these companies are likely to keep buying stock at a fast clip until the associated stocks rise even further.

Disclosure: I am/we are long AAL, AMP, 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.