Out Fox The $treet

Going into this earnings release, investors appeared a lot more bullish on Capital One Financial (COF) than Goldman Sachs (GS). Capital One's stock was trading at 6 month highs and Goldman was near the lows. All the media could focus on was how bad the investment banking and brokerage business was for Goldman Sachs. Management, though, was telling a different story to anybody paying attention. All year Goldman Sachs has been busy buying back stock while Captial One was focused on repaying debt, either signaling that the stock wasn't that cheap or maybe the future wasn't that bright. In our Net Payout Yields Model, these signals were used to switch out of Capital One at the end of December and into Goldman Sachs at the beginning of January. Contrary to the typical opinion in the market about stock buybacks, large caps with strong earnings profiles tend to benefit from buybacks. The media tends to focus on the failures such as Netflix (NFLX) while the winners go unnoticed...

December was yet another solid month on a absolute basis, with a 0.53% gain for this portfolio, but on a relative basis the portfolio underperformed the benchmark S&P 500 that was up 0.85%. For 2011, the portfolio was up 6.82% versus 0.0% for the benchmark. Despite all the volatility in the markets, the Net Payout Yields Model had a good absolute and relative performance for the year. 2012 Outlook  Since this portfolio is not dependent on fundamental analysis or economic forecasts, it isn't always prudent to focus on the prognosis for the stock market and economy. The whole goal is to find high net payout yielding stocks and then harvest the benefits of huge dividends and stock buybacks. In a way, let the management teams earn their money while investors enjoy the spoils. Naturally as an investment advisor with other active portfolios, I definitely have opinions on the market and economy but it just doesn't seem prudent to focus on them here. Anybody interested can vi...

September was another decent month for the Net Payout Yields model with a return vs. benchmark of 3.46% - the portfolio was down 3.72% while the S&P500 fell 7.18%. Naturally on an absolute basis the results are disappointing, but this model is not designed to time the markets. The goal remains to outperform on the way down and remain even on the way up, in the effort to produce superior returns over time. For 2011, the model remains roughly 7.0% higher than the benchmark. As of the end of September, year to date the model was down 2.92% while the S&P500 fell 10.04%. Trades The model was inactive for the second month during September as the weak market increased the yields and hence the valuation attractiveness of most of the equities in the model. A few stocks though have recently reached new 52 weeks highs causing the yields to decline. For example, Bristol-Myers Squibb (BMY) has seen the dividend yield drop to 4% and without a buyback the Net Payout Yield (NPY) has reac...

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, ...

Pre financial crisis, banks provided some of the most consistent dividends, but the crisis for the most part wiped out the money returned to shareholders. Even the better banking stocks like JPMorgan ( JPM ) only maintained small dividends of $0.20 or 0.4% on an annual basis. Basically just enough to claim they pay a dividend and not much more. Buybacks were all but outlawed by the regulators. On Friday, the market got news from some of the large banks that the government will allow them to start returning capital to shareholders. Considering our focus on Net Payout Yields (combination of dividends and net stock buybacks) we wanted to analyze the forecasted payouts of the top banks to see which ones will now be at attractive yields.  See the rest of the article at Seeking Alpha .