Below is a list of 12 stocks yielding more then 3% with a dividend payout ratio less than 70% as of the close on February 24th. In addition, I required the stocks have a recent history of rising dividends. I looked for
|Ticker||Name||Last||Trend||Yield||Div5Y Cgr%||Pay Ratio|
|CHL||China Mobile Ltd. (ADR)||49.45||Here||3.57||44.75||42.88|
|HCBK||Hudson City Bancorp, Inc.||13.31||Here||4.53||22.03||58.92|
|LLTC||Linear Technology Corporation||27.61||Here||3.4||25.16||62.1|
|LMT||Lockheed Martin Corporation||77.56||Here||3.28||20.79||30.03|
|LPHI||Life Partners Holdings, Inc.||20.15||Here||4.99||26.48||13.54|
|MSA||Mine Safety Appliances||24.74||Here||3.9||29.31||47.76|
|SAFT||Safety Insurance Group, Inc.||37.1||Here||4.35||36.31||37.03|
|TEF||Telefonica S.A. (ADR)||69.21||Here||6.48||31.95||61.22|
|TNP||Tsakos Energy Navigation Ltd.||14.83||Here||4.05||38.75||33.13|
Government debt is no longer just a problem for emerging countries. Portugal, Spain, France and Greece (as we have seen in recent weeks) are living in fear of credit default. Consequently, the value of their credit default swaps is skyrocketing.
The following is an excerpt from the February issue of Global Market Perspective. For a limited time, you can visit Elliott Wave International to download the rest of the 100+ page issue free.
High levels of global debt are both financially debilitating and deflationary because they commit scarce cash to servicing interest payments. Up until now, most sovereign credit defaults occurred in emerging-market countries, such as Argentina and Russia. The deflationary tide, however, is starting to lap up against more developed Eurozone economies.
The chart shows the value of credit default swaps — an instrument similar to an insurance contract that pays holders (if they are lucky) in the event of default — for Greece, Portugal, Spain and France. In recent weeks these contracts have soared, with credit-default swaps on Greece’s and Portugal’s debt already surpassing the January-March 2009 extremes established in the latter part of Primary degree 1 down.
Obviously, the market is growing more skeptical that Greece can pay its debts, so the cost of protecting against default is rising fast. Greece’s budget deficit is 12.7% of gross domestic product, and Portugal faces a budget shortfall that’s more than twice the European Union’s limit. Traders are now buying default protection on sovereign debt at a rate of more than five times that of specific company bonds. “Greece’s neighbors would ‘step in’ to prevent a debt default to avoid ‘a problem for the whole of Europe,’” a Tokyo-based bondsalesman says. Maybe so, but who will step in to bail out Portugal, Spain, the next sovereign default or the one thereafter?
The world is running out of money to service its mounting debts, and this chart simply depicts the front edge of the next great wave of credit contraction, which will sweep into more established countries throughout Europe and eventually to the United States.
I conducted a screen in January which looked for “
As I promised in the original article, here is how the original 8 performed since the open on January 28th. until the close February 24th. I have also added a link on my blog with the spreadsheet results. The list is not a blind buy and hold suggestion but I think an investor could find profits by further investigating the list or employing a disciplined trading strategy which includes stop losses, such as the one I detailed here. The original 8 outperformed the S&P 500 by a wide margin, but underperformed a common small cap value ETF.
No positions in stocks mentioned
|Symbol||Company||Trend Analysis||1/28/10 Open||2/24/10 Close||Return|
|LHCG||LHC Group, Inc.||Here||32.43||30.7||-5.33%|
|DECK||Deckers Outdoor Corporation||Here||103.23||102.03||-1.16%|
|PTI||Patni Computer Systems Limite||Here||19.7||21.12||7.21%|
|SPY||S&P 500 ETF||Here||110.19||110.82||0.57%|
|VBR||Small Cap Value ETF||Here||54.33||55.73||2.58%|
Running the same screen on February 24th using stockscreen123, I come up with the following list which I will update again in about a month. You can track the portfolio on the right hand side of my blog under the name ‘Low PEG High Momentum’:
|PTI||Patni Computer Systems Limite||Here|
|TSCO||Tractor Supply Company||Here|
|JOSB||Jos. A. Bank Clothiers, Inc.||Here|
|FCFS||First Cash Financial Services||Here|
|LHCG||LHC Group, Inc.||Here|
|DECK||Deckers Outdoor Corporation||Here|
|CMG||Chipotle Mexican Grill, Inc.||Here|
|GILD||Gilead Sciences, Inc.||Here|
|CPLA||Capella Education Company||Here|
|STRA||Strayer Education, Inc.||Here|
|WWW||Wolverine World Wide, Inc.||Here|
|NVO||Novo Nordisk A/S (ADR)||Here|
|CAGC||China Agritech Inc.||Here|
|DWA||DreamWorks Animation SKG, Inc||Here|
I featured an interesting piece yesterday by Tom McClellan regarding real yields and the dollar. His analysis indicated a dollar bottom later this year followed by a significant rally in 2011 followed by a further low.
Recently, the dollar and equity markets have shown a strong tendency to remain inversely correlated. As the dollar falls, equity markets rally and vice versa. If we assume McClellan’s long term projections hold true and the relationship between the dollar and equities holds, then we could project further equity strength this year, followed by a significant decline in 2011.
However, I personally wouldn’t bet my portfolio on the ‘carry trade’ continuing to predict future equity returns over the long term. When the Fed raise rates to more significant levels, the cost of borrowing dollars to bet on riskier assets such as equities will increase. This will discourage the carry trade as it becomes more expensive and could weaken the inverse relationship that has existed between the dollar and equities.
Perhaps the simplest option is to keep an eye on both the dollar and equities, watch the ‘tape’ and protect yourself with some basic trend analysis and stop losses such as those I featured in-depth here.
Below is a 1 year daily chart of the US Dollar Index and the S&P 500 Index with a 200 day moving average:
In the short run, it could still pay to watch the dollar and its relation to equities. Currently UUP (US Dollar Bullish Index ETF) has a perfect trend score of 100, meaning a strong uptrend is intact. Meanwhile, SPY also has a strong bullish trend score of 90. However, until SPY clears 115 in the short-term my money would be on the US Dollar.
No positions in equities mentioned
Interesting chart of the week from Tom McClellan which predicts a further dollar decline followed by a rally in 2011:
On Friday I detailed AAII’s Tiny Titans stock screen. Using the beta stockscreen123 I backtested the Tiny Titans portfolio only when the Russell 2000 was above its 200 day moving average. The goal is to reduce potential drawdowns by only investing in the strategy when the overall market is in a long term uptrend. By adding this simple rule, the Tiny Titans screen avoided some of the significant drawdowns in 2007 and 2008. Other potential trading strategies may work better on the individual companies in the Tiny Titans list, such as the one I detailed in-depth here which involves placing stop losses on individual positions.
The 8 year performance of the strategy results in a $100 investment turning into $349.70 versus $137.30 in the Russell 2000 (dividends excluded) when rebalanced every 4 weeks and excluding slippage/commissions:
A 5 year investment turned to $138.30 versus $100.20 in RUT.
A 3 year investment turned into $84.10 versus $77.30 in RUT. It suffered a large drawdown in August/September 2008 and October 2007 when the Russell 2000 was briefly above the 200 day moving average but suffered large negative months.
The current list of stocks matching the criteria are:
|Ticker||Name||Last||Free Trend Analysis||MktCap|
|VVTV||ValueVision Media, Inc.||3.93||Here||127.08|
|ROIAK||Radio One, Inc.||3.3||Here||180.6|
|LEE||Lee Enterprises, Incorporated||3.8||Here||170.51|
|ATSG||Air Transport Services Group||2.42||Here||153.57|
|LNET||LodgeNet Interactive Corp.||5.99||Here||135|
|CMRG||Casual Male Retail Group, Inc||3.17||Here||149.51|
|MGPI||MGP Ingredients, Inc.||7.6||Here||126.73|
|BIOF||BioFuel Energy Corp.||2.8||Here||95.29|
|SPCHA||Sport Chalet, Inc.||2.02||Here||28.53|
|SALM||Salem Communications Corp||4.92||Here||116.48|
|IHR||Interstate Hotels & Resorts,||2.25||Here||72.35|
|BONT||The Bon-Ton Stores, Inc.||8.44||Here||156.63|
|CVGI||Commercial Vehicle Group, Inc||4.99||Here||113.51|
|BELM||Bell Microproducts Inc.||4.57||Here||145.76|
|KV.A||K-V Pharmaceutical Company||3.08||Here||153.84|
|IEC||IEC Electronics Corp.||6.13||Here||54.8|
|TXIC||Tongxin International Ltd||8.15||Here||100.32|
|SBSA||Spanish Broadcasting System I||0.74||Here||48.06|
|KTCC||Key Tronic Corporation||5.62||Here||56.71|
|NXST||Nexstar Broadcasting Group, I||4.39||Here||124.81|
|WILC||G. Willi-Food International L||6.96||Here||71.46|