I’ve noticed an increasing perception of impending doom in the media and, in fact, I confess to being a little jittery about valuations myself. But avoiding the stock market because of valuation is like steering clear of San Francisco real estate because of the San Andreas Fault. One of these centuries there’ll be the Big One. But missing the gains can be more costly than the house getting shaken apart in a thousand years. Or even a hundred.
With that in mind, this screen looks for volatility with a beta of 1.5 or higher and earnings per share growth of 10% or more first. That gives us some possible big gainers. We won’t stop there, though. As Leigh Anne Tuohy said in the movie The Blind Side, “The first check you write is for the mortgage. But the second is for the insurance.” In this case, the “insurance” comes through a dividend yield higher than the 10 year Baa corporate bond (3.81%), a payout ratio of 60 percent or lower and dividend growth of at least the long term rate of inflation.
Just as a reminder, the reason “insurance” is in quotes is because dividends are not as secure cash flows as interest payments. There’s no guarantee these companies will continue to pay dividends.
Stock screen generated from www.MyStockProspector.com on January 27, 2020.
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Companies listed are for educational purposes only. No investment recommendations are intended.