Out Fox The $treet

With dividends and high yields in vogue these days, investors need to be careful that they don’t overpay for these stocks. Some of the stocks have performed so well over the last couple of quarters that their share prices have surged 30-50% during that time period, which is odd for multi-billion dollar consumer goods and insurance stocks. This issue faces the investors in Campbell Soup (NYSE: CPB ) , Chubb (NYSE: CB   more » ) Disclosure: Long CB and TRV. Please review the disclaimer page for more details. 

Widely ignored by the market are the stocks that continuously reduce shares outstanding via buybacks. Buybacks routinely obtain a bad rap due to the focus on high profile failures such as Cisco Systems (CSCO) that have had stock blowups after buying at higher prices. Not focusing on the total population of stocks makes such analysis invalid. On balance, companies that reduce outstanding shares provide for higher earnings per share and stronger rewards to shareholders. Naturally the price paid is crucial, but any company that is actively buying back shares over multiple years will ultimately dollar cost average at attractive prices. When focusing on large, financially strong companies instead of the speculative growth stocks the results are typically better. Investors should look for stocks that year after year reduce the outstanding shares and in essence slowly take the company private. Without lifting a finger, shareholders own a much larger percentage of the earnings of the below st...

This model gained a solid 0.8% in April versus a 0.7% loss for the benchmark S&P 500. The model remained strong all month even as the SP500 fluctuated all month. Trade No trades were made in the month of April as existing positions continued to work well with high yields. Top Performers Considering the market was slightly down and the model was only slightly up, not many positions had outside moves. The biggest gainers were Gap (GPS), Travelers (TRV) , and Chubb (CB). All three companies had very strong earnings partially helped out by the large buyback programs over the last year. Bottom Performers Just as with the top performers, not many stocks had outside negative moves in the month. The biggest losers were Conoco Phillips (COP), Goldman Sachs (GS) and Wellpoint (WLP) with all three companies losing more than 5%. Conoco Phillips had disappointing earnings that naturally pushed down the stock. The other two had surprisingly good earnings eve...

Many experts claim that buybacks don't work. To the contrary, just about everybody pounds the table on dividend yields. Why don't investors look for a high buyback yield? When reading over the Lorillard (LO) earnings released on Monday, I was shocked to read that Q3 earnings were increased by $.18 due to the share buyback plan. Wow! That's real earnings for each remaining stockholder. And to top that off, stockholders aren't paying taxes on these earnings gains. Read the full article on Seeking Alpha. Disclosure: Long CB and LO. Please review the disclaimer page for more details. 

Below are a few updates on the net payout yields of companies in our model that just reported. Always interesting to see what a company did with stock buybacks during a very weak stock market. Chubb (CB) CB reported Q3 numbers after the close on Thursday. The company continues to reduce the outstanding shares as the count has dropped by 30M shares or roughly 10% in the last year. CB was active in the quarter buying roughly 2.5% of the outstanding shares and more impressively at prices over $5 below the current market value of $65.35. Also, the 8M shares repurchased was an increase from the average in the first six months of below 7M a quarter. With a buyback yield of roughly 10% combined with a 2.5% dividend yield, CB maintains a very appeals 12%+ net payout yield. During the third quarter, Chubb repurchased 8.0 million shares of its common stock at a total cost of $480 million (an average of $59.97 per share).  As of September 30, 2011 , there were 6.9 million sh...

June was a good month for the Net Payout Yields model on a relative basis. The model outperformed the SP500 by 0.67% with a loss of 1.16% versus the 1.83% loss for the benchmark. Naturally on a absolute basis the model had a disappointing month, but it performed as expected by being less volatile than the benchmark and holding up better during the worse parts of the big drop mid month. The model remains fully invested with an average weight of only 2% cash for June. The goal of the model is to let the companies themselves buyback stock at lower to take advantage of any market weakness rather then trying to time the market. Trades Only one trade was made during the month. Wells Fargo (WFC) was sold as the stock failed to keep the Net Payout Yield at acceptable levels. The stock was replaced in July with Travelers (TRV) that has an extremely high NPY of around 20% given its consistent large stock buybacks. Top Performers Even considering the nearly 2% loss in the SP500 for June, ...

This is the 4th in a series of articles on stock sectors that have struggled to recover from the levels prior to the financial crisis. (See the first three here:  1 ,  2 ,  3 ) This article focuses on the life insurance and retirement financial services sector. As in most sectors, these companies don't have the exact same business models making broad comparisons an initial step of research. Read the full article at Seeking Alpha . Disclosure: Long CB, HIG, LNC in client and personal accounts. Please review the disclaimer page. 

Chubb (CB) is a recent addition to the Net Payout Yields portfolio and provides one of the highest yields in the market these days. CB falls into the property and casualty insurance sector that continues to remain undervalued due to fears in the sector. With a PE of just 10, the stock remains cheap. Yesterday, CB announced the continuation of its dividend plus the a new share repurchase program of up to 30 million shares or roughly 10% of the outstanding shares. To this model, this provides the best of both worlds. First, investors get a solid 2.5% dividend providing a nice income stream and a solid return. Second, the huge stock repurchase provides a constant floor for the stock and the opportunity for a dramatic increase in earnings per share just from reducing the outstanding shares. It remains perplexing that such stocks remain this low with such support from the company. Regardless, the Net Payout Yields portfolio will happily take advantage fo declared a regular quarter...

Bought Chubb Corporation (CB) today for the Net Payout Yield Portfolio. CB has a current yield of 13.6% based on a 2.5% dividend yield and 11.1% buyback yield. More importantly CB has been more aggressive in the last 6 months on the buyback leading to an attractive investment potential. CB provides property and casualty insurance for both business and individuals. Interestingly insurance companies seem to have the best yields these days whether via Wellpoint (WLP) in health insurance, Medco Health Solutions (MHS) in pharmacy benefits, or CB in property and casualty insurance. CB is the only one of the three with a dividend that has the 10%+ yields in the insurance sector. Sold NYSE Euronext (NYX) to partly pay for this purchase, but mainly due to NYX no longer buying back stock leaving the yield low for this portfolio at just 4%. Also, for the new Covestor model it's a requirement for stocks to have a market cap of $10B leaving NYX short of that requirement so we've chosen ...