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What are we looking for?

U.S.-listed stocks with decent valuations and dividend yields that are above the broad market average and supported by a strong track record of dividend growth.

North American equity markets remain volatile as interest rates continue to rise around the globe in order to tame inflation. Looking at U.S. sector exchange-traded funds over the past week, the Materials Select Sector SPDR Fund XLB is the top performer with a gain of about 3 per cent, followed by its financials XLF and utilities XLU counterparts, both gaining 2.3 per cent, and consumer discretionary (XLY), up 2 per cent.

This week we search for U.S.-listed companies in these four sectors, which historically have provided stable income during times of market instability, and have recently outperformed relative to the S&P 500 index.

The screen

We used Trading Central Strategy Builder in our search of the materials, financials, utilities and consumer discretionary sectors. We began by setting a minimum market capitalization threshold of US$5-billion in order to focus on larger, more established companies in the U.S. market owing to their inherent quality and stability amid a volatile market.

Next, we applied two dividend-related criteria to our screen.

  • The dividend yield must be at or above 2.5 per cent, which tops the 2.1-per-cent yield currently indicated for the S&P 500 index;
  • In order to find companies with a track record of raising their dividend payments over time, we screened for stocks indicating a five-year average dividend growth rate above 15 per cent;

Finally, in order to find stocks that are not overvalued when compared with the benchmark, we filtered for stocks that are indicating a price-to-earnings ratio that is at or below the average of the S&P 500 index, which is currently indicating 19.2.

We have also included year-to-date and one-year price performance for your reference.

More about Trading Central

Trading Central is a global leader in financial market research and investment analytics for retail online brokers and institutions. Its product suite provides actionable trading ideas based on technical and fundamental research covering stocks, exchange-traded funds, indexes, forex, options and commodities.

What we found

U.S.-listed large cap dividend payers

RANK COMPANYTICKERMKT. CAP. (US$ Bil.) DIV. YLD. (%)5Y DIV. GRTH. RATE (%)P/EYTD PRICE PERF. (%)1Y PRICE PERF. (%)RECENT PRICE (US$)
1NRG Energy Inc.NRG-N9.83.475.62.9-3.0-8.042.02
2Jefferies Financial GroupJEF-N7.63.732.97.4-17.6-11.332.84
3Southern Copper Corp.SCCO-N35.48.847.612.1-25.5-23.846.45
4Goldman Sachs GroupGS-N112.83.021.57.5-16.4-18.4331.82
5Morgan StanleyMS-N149.13.622.211.7-13.3-16.187.47
6Barrick Gold Corp.GOLD-N27.15.231.113.6-17.2-22.715.33
7Anglogold Ashanti Ltd.AU-N5.63.329.510.2-32.7-14.813.45
8Best Buy Co. Inc.BBY-N16.54.817.79.8-28.3-34.073.52
9Houlihan Lokey Inc.HLI-N5.42.717.712.6-25.4-12.876.95
10Home Depot Inc.HD-N304.52.616.018.3-27.2-10.3296.19

Source: Trading Central

Our screener ranks the list based on all performance and revenue criteria.

Topping our list is NRG Energy Inc. NRG-N The electrical utility has the lowest P/E on our list at 2.9. The company is indicating a dividend yield of 3.4 per cent with the highest dividend growth rate at 75.6 per cent. As with all names on the list, NRG’s stock-price performance is negative on a year-to-date and one-year basis, but its shares have declined the least.

Home Depot Inc. HD-N, the home improvement retailer, has the largest market cap on our list at US$304.5-billion. The stock has the highest P/E on our list at 18.3 but remains below the S&P 500 average of 19.2. The company is indicating a dividend yield of 2.6 per cent with a five-year average dividend growth rate of 16 per cent.

Southern Copper Corp. SCCO-N, an integrated producer of the red metal and other minerals in Peru and Mexico, has the highest dividend yield and dividend growth rate on our list at 8.8 per cent and 47.6 per cent, respectively.

The investment ideas presented here are for information only. They do not constitute advice or a recommendation by Trading Central in respect of the investment in financial instruments. Investors should conduct further research before investing.

Gary Christie is head of North American research at Trading Central in Ottawa.