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Number Cruncher

Stock screens for investment ideas from professional investors. Exclusive to subscribers of Globe Unlimited.

In this Jan. 24, 2011 photo, Johnson & Johnson Band-Aid products are displayed, in Montpelier, Vt. (Toby Talbot/AP)
In this Jan. 24, 2011 photo, Johnson & Johnson Band-Aid products are displayed, in Montpelier, Vt. (Toby Talbot/AP)

Number Cruncher

U.S. stocks to soothe the jittery investor Add to ...

What are we looking for?

Stocks that will pay you to hold on during these volatile times. Last week we examined Canadian candidates; today we scour the U.S. for possibilities.

Our screen highlights equities that are steadier than the general market and that also pay dividends, with growing cash flow to support those distributions. Stocks like these are not too exciting, but they can be ideal for investors nervous about the economic outlook.

More about today’s screen

Craig McGee, senior consultant at CPMS Morningstar Canada, created today’s offering. He filtered the CPMS database of U.S. companies to select stocks that:

  • Were in the lowest 10 per cent of the S&P 500 based on price volatility (based on standard deviation of daily returns over the past year);
  • Had an expected payout ratio of less than 50 per cent (payout ratio is dividends divided by cash flow);
  • Had seen a positive change in the analysts’ earnings estimates over the past 90 days.

 

More about CPMS

CPMS, a division of Morningstar Canada, provides quantitative North American equity research and portfolio analysis to institutional clients and financial advisers through software and Web-based tools. It covers more than 700 Canadian and 2,200 U.S. stocks, and adjusts for unusual accounting items in each company’s quarterly results to make sure screens can perform correctly.

What did we find?

A selection of stocks packed with household names such as Wal-Mart, Johnson & Johnson and Coca-Cola.

Investors who want income but not volatility will find a lot to like about this potential portfolio. An equally weighted combination of the stocks on the CPMS list has an expected yield of 3.5 per cent, well above the 2.3 per cent average for the S&P 500.

Note, though, that several of these stocks have moved up nicely since the start of the year, suggesting that they may be fully valued. You should do your own research before buying.

 

U.S. dividend stocks with lower volatility and growing cash flows

Company Symbol Price $ (June 14/12) Market cap ($ mil.) Price volatility * Expected yield Expected payout ratio EPS estimate revision Total return YTD
AT&T Inc. T-N 35.69 209,250 A+ 4.9% 28.7% 2.1% 20.9%
Lockheed Martin Corp. LMT-N 83.33 27,052 A- 4.8% 34.8% 0.9% 5.5%
Eli Lilly & Co. LLY-N 41.81 48,517 A+ 4.7% 37.9% 2.8% 3.0%
Duke Energy Corp. DUK-N 23.14 30,964 A+ 4.3% 33.6% 0.4% 7.5%
Pinnacle West Capital PNW-N 51.58 5,647 A+ 4.1% 20.1% 0.6% 9.2%
Bristol-Myers Squibb BMY-N 34.55 58,358 A+ 3.9% 43.9% 0.3% 0.0%
Johnson & Johnson JNJ-N 65.45 179,750 A+ 3.7% 49.3% 0.4% 1.6%
Kimberly-Clark Corp. KMB-N 82.57 32,377 A+ 3.6% 40.0% 1.1% 14.3%
NextEra Energy Inc. NEE-N 67.51 28,157 A+ 3.6% 22.3% 0.2% 12.9%
Abbott Laboratories ABT-N 62.14 97,770 A+ 3.3% 33.5% 0.8% 12.3%

All dollars U.S.
*Grades relative to all stocks in the S&P 500 index

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