Seeking Alpha

Top Net Payout Yields - October 2019

|
Includes: C, CMA, CTL, EBAY, JCI, L, NTAP, NXPI, ORCL, QCOM, SYF, SYLD, WBA, WFC
by: Stone Fox Capital
Stone Fox Capital
Long/short equity, growth at reasonable price, research analyst, Deep Value
Summary

The top net payout yield stocks produced a 5.1% gain during September, out performing the 1.9% total return of the S&P 500 index.

The top net payout yield stocks averaged 18.4% yields to start October.

Qualcomm held onto the top spot with a yield of 26.7% to start October.

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.

September Returns

Below are two charts highlighting the returns of the top 10 stocks from September (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 (SYLD), which offers a fund for comparison purposes that is aligned with the NPY concept.

The Top 5 stocks had a strong snapback rally in September following a weak August. The performance of these stocks easily exceeded the benchmark S&P 500 index that was up a strong 1.9% in the month. Only Qualcomm (QCOM) saw the stock decline during the month with the remaining stocks all generating total returns in excess of 3.4%. NetApp (NTAP) topped the list with a 9.3% return while NXP Semiconductors (NXPI) was nearly as strong at a 7.2% total return for September. Oracle (ORCL) and Johnson Controls (JCI) had solid months with 5.7% and 3.4% total returns, respectively. The Cambria fund produced a very large 6.5% gain as the market fled to high-yielding stocks. In total, the Top 5 stocks gained 4.9% for September to vastly outperform the 1.9% gain of the benchmark S&P 500 index.

ChartData by YCharts

The five stocks were even stronger in September after a similarly weak August. The group had four of the stocks post a positive total return for the month in excess of the 1.9% gain of the benchmark index. Synchrony Financial (SYF), Loews (L), Walgreens Boots Alliance (WBA) and Wells Fargo (WFC) all generated gains above 6.3% in the month. Only eBay (EBAY) saw a negative total return with a 3.3% loss for September. In total, the five stocks gained a very large 5.3% for September, outperforming the 1.9% total gain of the S&P 500 index and slightly missing the 6.5% total return of the Shareholder Yield ETF.

ChartData by YCharts

In all, the top 10 stocks had a very strong month with only Qualcomm and eBay producing negative returns. The large total gains of six stocks exceeding nearly 6.0% in September led the strength for the NPY stocks. In total, the NPY stocks gained 5.1% in comparison to the small 1.9% gain of the benchmark index and the 6.5% gain of the comparable ETF.

October List

The top 10 list naturally saw minor shifts for October considering the majority of changes occur when companies report quarterly earnings during the first couple of months of each quarter. The top of the list remains heavily focused on tech stocks with Qualcomm, NXP Semi., Oracle and NetApp in the top 5 yielding stocks. All of these tech stocks still yield in excess of 17.0%, despite some of the large stock gains in September.

New Additions

The only addition to the list for October is Comerica (CMA). The financial has had a large NPY for a while, but the company just now maintained a market cap above $10 billion for inclusion on this list. The stock offers a large 4.0% dividend yield and a large buyback to generate the NPY of 22.8%. In the just reported Q3, Comerica repurchased 5.7 million shares for $370 million worth of stock. The solid amount was still a dip from the $500 million spent last Q3 which will push the NPY down for the November report.

Synchrony Financial fell off the list despite still yielding over 14.2% due to Comeica qualifying for the list. To keep costs low and trades down, investors are encouraged to keep a stock like this financial in the portfolio.

New Top 10

Despite some lower yields from the top stocks, the list maintained an NPY of over 18% for September. The lowest yield is now back near 15%, providing yields far in excess of normal dividend yields and extremely low interest rates.

The average yield dipped to 18.4% to start October, down from 18.7% to start September. The buyback yield dipped slightly to 15.8% as some of the companies pulled back on buybacks during the last quarter. The dividend yield increased to 2.6% as the relatively higher 4.0% dividend yield of Comerica was added to the list.

As mentioned before, anybody looking for more dividend yield can leave the large dividend yield of CenturyLink (CTL) in their portfolio or keep higher dividend paying stocks like Synchrony Financial or Citigroup (C) in the portfolio versus adding a low dividend paying stock like Loews.

Over the course of the next year, investors will need to keep an eye on plans promoted by presidential candidate Bernie Sanders to ban stock buybacks. The NPY model would lose all benefit under such a plan, but Mr. Sanders is unlikely to win the election or get these socialist type proposals approved.

Conclusion

The yields of the NPY stocks continue to maintain massive yields. The average stock on the list has substantial buybacks of nearly 16% to take advantage of any weakness and volatility in the market including one in which Sanders is elected and unable to ban stock buybacks.

The NPY concept continues to offer one of the few investment opportunities where weakness can be bought with confidence similar to the rebound in September from the weakness in August.

Disclosure: I am/we are long QCOM, NXPI, EBAY, C, WFC. 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.