This article is a continuation of a monthly series highlighting the top net payout yield 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 net payout yield concept.
Below are two charts highlighting the monthly returns of the top 10 stocks from June (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 June following up a strong May. St. Jude Medical (NYSE:STJ) and Seagate Technology (NASDAQ:STX) had strong gains for the month of 6% and 4%, respectively. The other three stocks had gains that easily beat the loss from the S&P 500. AT&T (NYSE:T), DirecTV (NYSE:DTV), and American International Group (NYSE:AIG) had only marginally positive returns for the month; they easily surpassed the 1.3% loss of the S&P 500.
STX Total Return Price data by YCharts
The Next 5 stocks performed nearly as well with WellPoint (WLP) smashing the market with nearly 7% gains. All of the other stocks beat the S&P 500 index as well led by over 3% gains from Xerox (NYSE:XRX) and O'Reilly Automotive (NASDAQ:ORLY). Both Ameriprise Financial (NYSE:AMP) and Kohl's (NYSE:KSS) beat the market even with small losses for June.
XRX Total Return Price data by YCharts
This month marked the unusual situation where all 10 stocks beat the S&P 500. The list smashed the market with an average 2.5% gain versus the 1.3% loss by the index. The group had an amazing month with only two stocks having negative returns for June.
The list is full of companies that most investors wouldn't touch when the month began including several left for the dead such as Xerox.
The list encountered only minor changes since the June report as WellPoint slipped out of the top 10. The other stocks in the list had some minor shifts with Ameriprise Financial jumping up to the seventh position from number 10, as it increased the buyback program even with the stock up strong for the year. The only addition was Sallie Mae (NYSE:SLM) joining the list with a 10.7% yield due mostly to strong stock buybacks.
The average yields increased from June as both the buyback and dividend portions increased 0.1%. The dividend part increased slightly to 2.1% as the focus remains more towards buyback stocks with the attractiveness of dividend stocks. The NPY increased by 200 basis points to a very solid 13.4%.
Even after strong gains in the first half of the year, the leading stocks on the Top 10 list continue to support yields exceeding 10.5% each. The yields continue to substantially exceed the low 3-4% yields of the top large-cap dividend stocks chased by everybody in the market.
As the Top 10 stocks average buyback yields maintain levels above 11%, the recent market pullback and volatility in June provide these companies the opportunity to buy stocks at cheaper levels. A perfect scenario for any long-term investors concerned that the market is extended after hitting record highs.
Disclosure: I am long AMP, DTV, KSS, WLP. 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.