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Chartered financial analyst, portfolio manager at Wickham Investment Counsel Inc.

What are we looking for?

We have had a wild ride over the past pandemic year or so, with markets reaching new highs and the tech sector leading the way. We have also seen a lot of big market moves (up and down), soaring home prices, hype and speculation in areas such as cryptocurrencies, cannabis, Reddit traders and much more. My team member Allan Meyer and I thought we would take a contrarian and conservative approach and analyze low-volatility, high-dividend-paying stocks using our investment philosophy focused on safety and value.

The Screen

We started with U.S. companies in the S&P 500, which is comprised of large-cap names, a safety factor as they tend to offer more stability and trading liquidity. We used beta to identify our low-volatility stocks – it measures how much the stock moves in relation to the general market. We limited the list to companies that have a beta of less than one – this implies they are less volatile than the market. We sorted on this metric from least to most volatile. Dividend yield is the projected annualized dividend divided by the recent share price. We focused on high-yielding names of 3 per cent or more, as we love to get paid while we wait for share price appreciation. Dividend payout is the dividend payment divided by earnings. A lower number is preferred and may hint that there is room for future increases. We’ve capped payout at 100 as we wanted to focus on reliable dividends, and anything above could signal the potential for a cut. Debt/equity is our final safety measure. It is the debt outstanding divided by shareholders equity. A smaller ratio indicates a company has lower levels of debt or leverage. Price/earnings is a valuation metric, the lower the number the better the value. All companies on the list are projected to have positive earnings or “make money.” Earnings momentum is the change in annual earnings over the past quarter. A positive number implies earnings are increasing, while the opposite is true for a negative number. Lastly, we’ve provided the 52-week total return to track recent performance.

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What we found

Verizon Communications Inc., Omnicom Group Inc., Amcor PLC and Philip Morris International Inc. score well for safety and value. Philip Morris also has no debt. Consolidated Edison Inc. is the least volatile while PPL Corp. is the highest yielding and Southern Co. has the best earnings momentum. NRG Energy Inc. boasts the best value but also has the most debt and worst earnings momentum. With the lowest payout on the list, one wonders if General Mills Inc. may bump its dividend.

Investors should contact an investment professional or conduct further research before buying any of the securities listed here.

U.S. large-cap stocks 

Company TickerPrice Close ($USD)Market Cap ($B USD)BetaDiv. yield (%)Div. Payout (%)Debt/Equity (%)P/EEarnings Momentum (%)52wk Total Rtn (%)
Consolidated Edison IncED-N75.3225.80.14.192.9128.517.4-2.8-10.9
FirstEnergy CorpFE-N34.6918.90.24.584.3338.213.6-8.8-18.5
American Electric Power Company IncAEP-N86.0042.70.23.465.4164.318.16.53.0
Pinnacle West Capital CorpPNW-N82.559.30.34.171.6115.116.5-13.23.6
Evergy IncEVRG-N60.9313.80.33.574.2118.718.2-1.3-0.1
Southern CoSO-N62.8966.50.44.186.2174.018.66.68.7
Merck & Co IncMRK-N76.22192.90.43.488.8125.611.32.8-4.5
Exelon CorpEXC-Q44.7443.70.43.476.0120.715.5-2.119.1
Verizon Communications IncVZ-N57.54238.10.54.457.5190.211.31.74.5
Entergy CorpETR-N101.9720.50.53.853.9215.216.90.52.1
Public Service Enterprise Group IncPEG-N61.2931.00.53.351.9107.917.70.319.9
General Mills IncGIS-N60.9737.20.63.448.2168.016.41.38.3
Coca-Cola CoKO-N53.35229.90.63.290.4221.724.31.612.2
Sempra EnergySRE-N133.2940.30.63.362.5103.516.34.66.5
Kellogg CoK-N63.4121.60.73.660.9240.215.7-1.23.5
PPL CorpPPL-N28.7322.10.85.886.8185.411.40.813.8
Equity ResidentialEQR-N71.7826.70.83.497.076.677.0-3.57.5
Philip Morris International IncPM-N91.39142.40.85.391.30.014.90.828.3
NRG Energy IncNRG-N38.579.40.93.457.9517.49.6-35.130.4
Amcor PLCAMCR-N11.7218.30.94.093.6134.815.42.333.5
Omnicom Group IncOMC-N79.2817.00.93.659.4192.413.40.242.9

Source: Refinitiv Eikon & Wickham Investment Counsel Inc. 

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