Monday, August 24, 2009

Net Payout Yield Focus: General

In general, net payout yields are starting to drop as most companies haven't bought back stock in the first 2 quarters this year. Remember that net payout yields are the combination of dividends + buybacks over the past 12 months and most of the higher yields come from buybacks. In most cases companies like Caterpillar (CAT) and CSX were under extreme pressure and it was only prudent to conserve cash and curtailing a buyback has always been viewed with less disdane then cutting a dividend. Heck even cash rich companies like Microsoft (MSFT) bought basically no stock in the last 6 months. It was a huge mistake as they could've bought stock at a huge discount to the current price but the markets were very shaky.

Our Net Payout Yield Portfolio and the general concept held up well during this turbulent environment regardless. Our portfolio has averaged beating the SP500 by 6% a year including last year. Over the next couple of weeks we'll begin to focus more on the individual names in this portfolio. Try to glean some insight into whether buybacks will start back up. Stay tuned as this is a great portfolio for somebody wanting market risk, but with consistent returns greater then an index.

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