Investing in companies returning cash to shareholders via a combination of buybacks and dividends has proven to be an effective long-term strategy relative to the market and other uses of cash.
Since 1991, a sector-neutral basket of the S&P 500 stocks with the highest trailing combined dividend and buyback yields has returned an annualized 15.7% versus 13.8% for the top capex + R&D spenders and 12.8% for S&P 500. It seems this could be a great way to invest.
What is a stock purchase?
A stock repurchase occurs when a company asks stockholders to tender their shares for repurchase by the company. This is an alternate way for a company to increase value for stockholders. First, a repurchase can be used to restructure the company's capital structure without increasing the company's debt load.
Additionally, rather than a company changing its dividend policy, it can offer value to its stockholders through stock repurchases, keeping in mind that capital gains taxes are lower than taxes on dividends.
Advantages of a Stock Repurchase
Many companies initiate a share repurchase at a price level that management deems a good entry point. This point tends to be when the stock is estimated to be undervalued. If a company knows its business and relative stock price well, would it purchase its stock price at a high level? The answer is no, leading investors to believe the management perceives its stock price to be at a low level.
Unlike a cash dividend, a stock repurchase gives the decision to the investor. A stockholder can choose to tender his shares for repurchase, accept the payment and pay the taxes. With a cash dividend, a stockholder has no choice but to accept the dividend and pay the taxes.
At times, there may be a block of shares from one or more large shareholders that could come into the market, but the timing may be unknown. This problem may actually keep potential stockholders away since they may be worried about a flood of shares coming onto the market and lessening the stock's value. A stock repurchase can be quite useful in this situation.
However, let's come back to the real facts from the market. Attached you will find 10 stocks with the highest buyback yield of the past twelve months. The yield starts at 14.9% and ends at nearly 40%. Great values.
Here they are sorted by yield...
The Dividend Aristocrats are a group S&P 500 that have each paid increasing dividends for 25+ consecutive years.
We are talking a lot of the best dividend paying stocks and trying to find the best investment ideas for the years to come.
But what kind of investments worked in the past? For sure, each of the Dividend Aristocrats have shown a great performance in recent years but if you put your chips on those stocks in 2009, which of them generated the best performance, better than the overall market and better than other long-term dividend growth stocks.
I will tell you the answer in this short article.
There are currently only 50 Dividend Aristocrats. What's important about the Dividend Aristocrats is how well they have performed. Not all Dividend Aristocrats are good investments, especially in today's overvalued market. Low interest rates have pushed up real asset values, especially dividend stocks. This makes finding high quality dividend growth stocks trading at reasonable prices more difficult.
Here are 12 stocks of the S&P Dividend Aristocrats Index with more than 400% return ranked by the higehest price development since 2009.
These are the results...
Warren Buffett has 19 dividend stocks with a 2.0% or better yield in his portfolio, but which are the best? I've used a systematic approach to find the seven best -- and rank them, from "worst" to best.
Warren Buffett's investment style is a culmination of value, growth, and quality.
He looks for:
- Great business (quality)
- Trading at fair or better prices (value)
- That will compound his money far into the future (growth)
This approach leads Buffet to invest primarily in dividend stocks. Dividend stocks make up around 92% of Buffett's portfolio.
His top four holdings have an average position weighted dividend yield of 3.2% and make up 63% of his portfolio. High quality dividend growth stocks are the cornerstone of Buffett's portfolio.
Attached you will find 7 of his best dividend bets you should consider for the next years. Each of the results is a high quality stock with room to grow in the future.
Here are the results...
Despite the almost constant chatter on whether the Federal Reserve raises rates this week, many top strategists on Wall Street are convinced the Fed holds off until at least December, and maybe until 2017.
While Fed Chair Janet Yellen and members of the Federal Open Market Committee may start to ramp up a more hawkish tone at the end of the year, any interest rate increases will be very patient and deliberate.
The 2016 S&P 500 Dividend Aristocrats list includes 51 companies that have increased dividends (not just remained the same) for 25 years straight. Keep in mind that just because they are on this list now doesn’t mean in the future they will be forced to reduce their dividend.
Today we screened the list for cheap stocks with a Buy rating. Six stocks from the index matched our criteria.
Here are the results...
It's no secret that dividend-yielding stocks are the cornerstones of a solid retirement portfolio. Usually, such stocks represent ownership in stalwart businesses that pay shareholders on a quarterly basis.
Those payments not only offer downside protection, but they can also compound returns over time. Still, one of the dangers of dividend investing is chasing after high yields.
Case in point: The 10 stocks listed below have the highest yields of all the companies in the S&P 500, but not all of them are worth your investing dollars. In many cases, there's a good reason such stocks have high yields -- because there's a lot of risk involved.
If you're a dividend investor, there's nothing more important than free cash flow (FCF).
This represents the amount of money a company was able to put in its pocket at the end of the year, minus capital expenditures.
It is from FCF that dividends are paid, and investors should generally aim for companies that use less than 85% of their FCF to pay dividends.
Attached you will find a couple of stocks with a low price multiple in relation to its free cash flow. Each of the listed stocks has a dividend yield over 4 percent, a market capitalization over 2 billion and a debt-to-equity ratio below 1.
These are the results...
