Out Fox The $treet

Most investors continue to focus on high dividend yielding stocks paying very little attention to stock buybacks. Unless you're a retiree living completely on fixed income, it's a mistake to not focus on the complete picture of returns of capital to shareholders. The combination of stock buybacks and dividends or Net Payout Yields (NPY) has offered higher returns in the past. Buybacks can be a more efficient return of capital to shareholders as it reduces the tax burden of investors..... Read the rest of the article at SeekingAlpha .  Disclosure: Long WLP, GPS, and MHS. Please review the disclaimer statement. 

WellPoint (WLP) continues to repurchase it's own shares like they won't be this cheap much longer. For the first 9 months of 2010, WLP has bought $3.3B worth of shares or 13% of the outstanding shares as of the start of this year.  Wouldn't it be nice to own a stock with that much support from the company? As it turns out, an investor can purchase this stock at prices 20% lower then the year started. Over the last 12 months, WLP has bought back roughly 18% of the company based on the current value of $22B. Management has already announced at least $700M in expected purchases in Q4. Since they don't pay a dividend which turns some investors off the Net Payout Yield is just the 18%. One of the highest yields in the market. WLP easily beat estimates of $1.57 probably partially because analysts are slow to raise EPS estimates as share counts drop. WLP is an extremely cheap stock only trading at 8.5x next years estimates. On top of that, those estimates will likely rise ...

The Net Payout Yield Portfolio added Texas Instruments (TXN) and WellPoint (WLP) Both stocks have had huge buybacks in recent quarters providing a big boost to earnings going forward. The annualized yields would be easily over 10% so we used the weakness at the opening to add to positions in both stocks. TXN was added around $24.20. Position size now 4.6% WLP was added a round $52.00. Position size now 3.7%.