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.
Read the full article at Seeking Alpha.
Disclosure: Long AMP, COP, DTV, GPS, GS, KSS, and TWX. Please review the disclaimer page for more details.