This article is a continuation of a monthly series highlighting the top net payout yield (NYSE:NPY) stocks that was started back in June 2012 and explained in August 2012. The series highlights the best stocks for the upcoming month, utilized in part to make investment decisions for the Interactive Advisors. Please review the original articles for more information on the NPY concept.
Below are two charts highlighting the returns of the top 10 stocks from August (see list here). For presentation reasons, the chart is broken into the Top 5 and Next 5 lists and compared to the S&P 500 benchmark index along with the Cambria Shareholder Yield ETF (NYSEARCA:SYLD), which offers a fund for comparison purposes that is aligned with the NPY concept.
The Top 5 stocks had a weak August following an incredible start to the year. The performance far under performed the benchmark S&P 500 index that was only down 1.6% in the month. Only Qualcomm (QCOM) generated a positive total return in the month with NetApp (NTAP) tanking 17.8% following weak results. Other technology stocks likes Oracle (ORCL) and NXP Semiconductors (NXPI) had weak months along Walgreens Boots Alliance (WBA) dipping 5.2%. The Cambria fund produced an equally large 6.1% yield as the market fled high-yielding stocks. In total, the Top 5 stocks lost 5.1% for August to vastly underperform the benchmark S&P 500 index and slightly beat the Shareholder Yield ETF.
The Next 5 stocks were nearly equally weak in August after a strong start to the year. The group had all five stocks post a loss for the month in excess of the 1.6% dip of the benchmark index. Both Synchrony Financial (SYF) and Loews (L) had crushing 10.1% losses for the month. With the 8.9% loss from Citigroup (C) thrown into the mix, the limited loses from eBay (EBAY) and Wells Fargo (WFC) were easily swamped in producing a 5.9% total loss in the month. In total, the Next 5 stocks lost a rather large 5.9% for August, under performing the 1.6% total loss of the S&P 500 index and slightly beating the 6.1% total loss of the Shareholder Yield ETF.
In all, the top 10 stocks had a very weak month with only Qualcomm producing a positive return. The large total losses of five or six stocks that exceeded 7.5% in August led the weakness for the NPY stocks. In total, the NPY stocks lost 5.9% in comparison to the small 1.6% loss of the benchmark index and the 6.1% loss of the comparable ETF.
The top 10 list naturally saw minor shifts for September considering the majority of changes occur when companies report quarterly earnings. The top of the list remains heavily focused on tech stocks with Qualcomm, NXP Semi., Oracle and NetApp topping the list. All of these tech stocks yield in excess of nearly 19.0% due to stock weakness in August.
The only addition to the list for September is Johnson Controls (JCI). The infrastructure and energy solutions company completed a share buyback of 105 million shares for $4.1 billion during the last quarter bringing the total share buybacks to 135 million shares for $5.1 billion for the year. In addition, the stock offers a 2.4% dividend yield to generate the NPY of 17.7%.
Citigroup fell off the list despite yielding over 15.0%. To keep costs low and trades down, investors are encouraged to keep a stock like Citigroup in the portfolio.
New Top 10
Despite some lower yields from the top stocks, the list maintained an NPY of nearly 19% for September. The lowest yield is now back above 15%, providing yields far in excess of normal dividend yields and extremely low interest rates.
The average yield dipped to 18.7% to start September, down from 19.2% to start August. The buyback yield dipped slightly to 16.3% as some of the buybacks pulled back. The dividend yield dipped further to 2.4% as the group lacks a large dividend focused stock.
As mentioned before, anybody looking for more dividend yield can leave the large dividend yield of CenturyLink (CTL) in their portfolio. The stock only slightly misses the cut on most months it isn't included.
Overall, the market is seeing weakness in total share buybacks. The Q2'19 levels were only $164.5 billion, down substantially from the Q4'18 peak of $223.0 billion. Stocks like Qualcomm and NXP Semi. spent a substantial amount on share buybacks at the end of 2018 that will rolloff the list later this year.
The yields of the NPY continue maintain the massive yields. The average stock on the list has substantial buybacks to take advantage of the recent weakness and volatility in the market.
The weakness of the NPY concept during August offers a proven opportunity to own the stocks of the companies continuing to buy shares. Stock buybacks provide benefits to the stock for the year following purchases via offering upside to EPS estimates from reduced share counts along with new buybacks providing downside protection for the related stock.
The NPY concept continues to offer one of the few investment opportunities where weakness can be bought with confidence.
Disclosure: I am/we are long QCOM, NXPI, EBAY, C, CTL. 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.