Out Fox The $treet

The New Dogs of the Dow had a solid Q1 gain that surpassed the benchmark Dow. The average stock in the Net Payout Yields based list had a yield of 9.2% to start Q2. Due to a large buyback, United Technologies overtook the lead with the highest yield at 13.1%. This article will focus on the quarterly returns and changes in the new "Dogs of the Dow" strategy originally introduced (see  The New Dogs Of The Dow - 2015 ) last January. The goal of the series is to highlight that the old theory of buying the Dow stocks with the highest dividend yields is outdated. The more modern version involves using the Net Payout Yield (NPY) that adds the net stock buyback yield to the dividend yield. This yield more accurately reflects the modern corporate structure that utilizes a large amount of stock buybacks. Read the full article on Seeking Alpha.  Disclosure: Long AAPL, CAT, IBM, TRV. Please read the disclaimer page for more details.

The top ten net payout yields outperformed the market in July due to several stocks with monthly gains in excess of 9%. The top ten net payout yield stocks average yields of 14.7% to start August. Motorola Solutions continues to hold the highest yield now at 25.7%. 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 (see article ) and explained in August 2012 (see article ). The series highlights the best stocks for the upcoming month utilized in part to make investment decisions for the Covestor model that has beaten the S&P 500 for four consecutive years. Please review the original articles for more information on the NPY concept. Read the full article at Seeking Alpha. Disclosure: Long GM, HIG, MSI, NLY, NOC, NTAP, TRV, VIAB. Please review the disclaimer page for more details. 

Summary The New Dogs of the Dow had Q2 returns that exceeded the gains of the DJIA, but it failed to match the rebound of the Dogs of Dow theory. The average stock in the Net Payout Yields based list has a yield of 8.3% starting Q3. After a large loss in Q2, Travelers tops the list with a 12.3% yield.    This article will focus on the quarterly returns and changes in the new "Dogs of the Dow" strategy originally introduced (see The New Dogs Of The Dow - 2015 ) back in January. The goal of the series is to highlight that the old theory of buying the Dow stocks with the highest dividend yields is outdated. The more modern version involves using the Net Payout Yield (NPY) that adds the net stock buyback yield to the dividend yield. This yield more accurately reflects the modern corporate structure that utilizes a large amount of stock buybacks. Read the full article on Seeking Alpha .   Disclosure: Long AAPL, CAT, IBM, T...

The top ten net payout yields underperformed the market in June due to several stocks with larger losses than the S&P 500 index. The top ten net payout yield stocks average yields of 14.0% to start July. Motorola Solutions continues to hold the highest yield now at 27.0%. 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 (see article ) and explained in August 2012 (see article ). The series highlights the best stocks for the upcoming month utilized in part to make investment decisions for the Covestor model that has beaten the S&P 500 for four consecutive years. Please review the original articles for more information on the NPY concept. Read the full article on Seeking Alpha. Disclosure: Long HIG, MSI, NLY, NOC, NTAP, TRV, VIAB. Please review the disclaimer page for more details. 

The top ten net payout yields underperformed the market in April due to a couple of weak individual stocks. The top ten net payout yield stocks averaged yields of 13.6% to start May. Motorola Solutions continues to hold the highest yield now at 25.8%. 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 (see article ) and explained in August 2012 (see article ). The series highlights the best stocks for the upcoming month utilized in part to make investment decisions for the Covestor model that has beaten the S&P 500 for four consecutive years. Please review the original articles for more information on the NPY concept. Read the full article on Seeking Alpha. Disclosure: Long HIG, MSI, NLY, NOC, NTAP, TRV, VIAB.

The top ten net payout yield stocks underperformed the market in March due to a couple of weak individual stocks. The top ten net payout yield stocks averaged yields of 13.3% to start April. Motorola Solutions continues to hold the highest yield now at 18.7%. 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 (see article ) and explained in August 2012 (see article ). The series highlights the best stocks for the upcoming month utilized in part to make investment decisions for the Covestor model that has beaten the S&P 500 for four consecutive years. Please review the original articles for more information on the NPY concept. Read the full article on Seeking Alpha. Disclosure: Long HIG, IBM, MSI, NLY, NTAP, TRV, VIAB. Please review the disclaimer page for more details. 

Summary Top net payout yield stocks outperformed the market in August. The top ten net payout yield stocks average 12.6% yields to start August. CF Industries and Illinois Tool Works jumped to the top of the list with massive stock buybacks.  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 (see article ) and explained in August, 2012 (see article ). The series highlights the best stocks for the upcoming month. Please review the original articles for more information on the NPY concept. Read the full article at Seeking Alpha. Disclosure: Long CTL, KSS, NLY, NOC, SDRL, TRV, WLP. Please review the disclaimer page for more details.

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...

Hewlett-Packard (HPQ) spent the first half of 2011 buying back a ton of stock amounting to a decent percentage of the outstanding shares. A signal typically that a company has a lot more free cash flow and cash on hand than the market is giving the company credit for having. Unfortunately, this buyback pace didn't last even though the stock steadily declined in the 2nd half of 2011. So why did the buyback dwindle if the stock didn't gain in value? Nothing worse than a company that buys high and doesn't buy low. It can be argued that with a new management team coming in that it was just a change of strategy not a signal of a change in fundamentals. This is possible as Meg Whitman became CEO in September 2011, but she was a board member since January 2011. Read the full article at Seeking Alpha. Disclosure: Long TRV and WLP. Please read the disclaimer page for more details. 

Investors continue to focus on dividends as the best and in some minds the only way to return capital to shareholders. That remains a big mistake as the population of stocks with a high dividend payout ratio, not to mention ones that even pay dividends has been shrinking just about every decade. Several key factors have influenced these decisions. First, the historical tax disadvantage of dividends versus long term capital gains has worked to weaken the focus on dividends. Second, the SEC instituting rule 10b-18 back in 1982 made it easier for firms to implement buybacks without stock manipulation charges. Third, market participants place such a great emphasis on maintaining steadily increasing dividends that corporate boards prefer the flexibility of buyback programs over the negativity of reducing a dividend. Read the full article on Seeking Alpha. Disclosure: Long COP, GPS, KSS, TRV. Please review the disclaimer page for more details. 

After the close last night, Paulson & Co filed a 13D disclosing a presentation to the BOD and a letter sent to the CEO. The goal being for Hartford Financial (HIG) to begin the process of a spin-off of it's Property & Casualty business. Simply Paulson believes that Hartford has an industry low valuation due to the combination of both the P&C and Life business lines that competitors all spun-off long ago. He makes a compelling pitch that the ultra low valuation for the company is based on the thesis that analysts just don't follow or understand it due to the combined business lines. A Travelers (TRV) that focuses on P&C or a Lincoln Financial (LNC) that focuses on Life have higher multiples since the analysts follow either business line, but not both. Without doing all that research I could've told them that Hartford was incredibly cheap trading at close to 40% of book value. Paulson though has an army of analysts that did some incredible research. Ho...

After about 14 months of running a Net Payout Yields Model on Covestor, I'm still stunned how few people understand the concept or even incorporate it into investing. Net Payout Yields are the combination of the ever popular dividend yield and the always controversial net stock buyback yield. Or another way, the yield a company pays out to shareholders. No preference is given to whether the yield is obtained via dividends or buybacks. It seems that most investors are in love with the dividend paying stocks, but hardly anybody can get behind stock buybacks. Oddly though, very few investors take advantage of the combination. Read the full article at Seeking Alpha.  Disclosure: Long DTV, LMT, TRV, LO, WLP. Please read the disclaimer page for more details. 

October was an excellent month with a 9.41% gain for this model, but the relative performance was lacking with the benchmark up 10.77%. This was the reverse of the results during the summer swoon, but mostly inline with what would be expected in this large cap model. Stocks with market caps over $10B typically underperform when the market soars. Trades The model had three trades in October. FirstEnergy (FE) was sold as the stock saw decent gains during the summer months hence reducing the net payout yield below normal levels in the model. Typically the model looks to sell when a stock hits 52 weeks high and either buybacks tail off and/or the dividend yield slumps if the company doesn't raise the rate. The other sell was Microsoft (MSFT) since it has reduced buybacks over the year making the stock less attractive. Possibly this was due to the Skype purchase or other potential deals that could be in the pipeline. Regardless the yield dropped to an unappealing level for a cons...

Similar to Travelers (TRV) profiled earlier today, WellPoint (WLP) had one of the largest stock repurchase plans over the past year or so making them a top Net Payout Yield (NPY) stock. Until the recent selloff, WLP was hitting levels that apparently made management slow down on purchases. Now that the stock has slumped it will be interesting to see how management reacted. Sill with the new yet small 1.6% dividend yield, the stock had a roughly 10% annualized yield using Q2 numbers. Very solid numbers, but also highlighting how if the stock hits $80 again it might be time to take profits based on the NPY model. For now, WLP will remain a solid fixture of the Net Payout Yields model . Disclosure: Long WLP and TRV in client and personal accounts. Please review the disclaimer page for more details. 

Since a picture is worth a thousand words, thought we'd start throwing in some graphs on the Net Payout Yield stocks. Travelers (TRV) has had one of the highest NPY's over the last year with the massive buyout they've undertaken. The below chart shows the quarterly combined dividends and buyback percentages based on the current market cap of $21.7B. Note the Q2 2011 buyback dropped substantially due to the tornado related losses in the US. Add up the last four quarters gives a NPY of roughly 17%. Incredible how little attention the NPYs obtain these days. All the focus is on dividends. Imagine a SP500 stock with a 7% quarterly dividend like TRV posted in Q4 and than again almost in Q2 2010 as well. Disclosure: Long TRV in client and personal accounts. Please review the disclaimer page for more information. 

July was a negative month for the Net Payout Yields model on a relative basis. The model underperformed the S&P 500 by 0.36%, with a loss of 2.5% versus the 2.15% loss for the benchmark (Covestor calculations). On a three month basis, the model has outperformed nicely during a very weak period in the market. It outperformed the S&P 500 by 1.45%, with a loss of 3.78% versus the 5.23% loss for the benchmark (Covestor calculations).  Trades The model sold Boeing (BA) and bought Travelers (TRV) and Campbell Soup (CPB). As always, the moves are triggered by the decreases or increases in the Net Payout Yield of each stock with a bias towards limiting trades so stocks are not immediately removed or added based on a top 20 yielding list.  BA has a decent 2.7% dividend yield, but recently has eliminated buybacks. With normal yields in the model consistently adding up to greater than 10%, BA no longer fits into the requirements.  TRV has a solid 3.2% dividend y...

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.