After a big selloff, the advantages of Net Payout Yield stocks really comes into focus. These companies benefit from the strategic ability to repurchase shares and issue dividends. The market is currently enamored with dividend stocks, but those stocks don't exactly benefit investors when the stock drops.
Investors are stuck with capital losses while collecting dividends, but the company can't do anything with the lower stock price to benefit shareholders. Companies that participate in large buybacks though have the ability to repurchase shares at much cheaper levels now.
This benefit has largely been ignored by the markets over the years with the general sentiment that share repurchases aren't effective. The key though is that most investors don't focus on net share repurchases. Companies that greatly reduce the stock float provide more earnings for shareholders.
Every stock in the list provides a recent history of huge buybacks. Some such as ConocoPhillips (COP) and Northrop Grumman (NOC) provide solid 4-5% dividends. Others such as DirectTV (DTV) provides no dividend while Goldman Sachs (GS) and Gap (GPS), provide small dividends of less than 2%. The remaining stocks including Kohls (KSS), Limited Brands (LTD), Time Warner (TWX), Amgen (AMGN), and Ameriprise Financial (AMP) have decent 2-3% dividend yields.
Basically investors can get any range of dividend yield they'd like to go along with a buyback yield exceeding 13%.
Below is a list of the top Net Payout Yield stocks for June.
Figure - Top Ten Net Payout Yield Stocks For June
|Company||Buyback Yield (%)||Dividend Yield (%)||NPY (%)|
The real interesting part is that investors can get sector diversification with financial, retail, energy, and biotech represented on the list. While buying all ten stocks would make a great portfolio, investors can also pick and chose stocks based on yields and sector to supplement existing portfolios. Either way, these large yields provide a level of protection in this weak market.
Additional disclosure: Please consult your financial advisor before making any investment decisions. All financial data was sourced from SmartMoney.com.