Part one of last week’s article, Modified Sharpe Ratio, sought stocks with higher dividend yields and lower share price volatility. The goal was to find stocks with dependable income potential and lesser price volatility.
The flaw in that approach is that dividends and price change, not just dividends, make up an investor’s total performance return. Part 2 of this scan seeks companies with the ratios of dividend yields and upside price potential as a ratio of their price volatility.
We used each stock’s trailing twelve-month PE (PE TTM) and two years forward PE (PEf) to solve for the expected price change. Then, we added the annualized expected price change to the annual dividend yield and divided the total expected return by annualized volatility.
MO and VZ are the only stocks in both scans to make the top five.
The only criterion in this and the prior scan is that the stocks are among the top fifty holdings of Vanguard’s high dividend-yielding ETF VYM.
Company Summaries
Pfizer (PFE)
Exxon (XOM)
Abbvie (ABBV)
Verizon (VZ)
Altria (MO)
Five for Friday
Five for Friday uses stock screens to produce five stocks that we expect will outperform if a particular investment theme plays out in the future. Investment themes may be relevant to the current or expected market, industry and/or economic trends. Investment themes may not always represent our current forecast.
Disclosure
This report is not a recommendation to buy or sell the named securities. We intend to elicit ideas about stocks meeting specific criteria and investment themes. Please read our disclosures carefully and do your own research before investing.
Michael Lebowitz, CFA is an Investment Analyst and Portfolio Manager for RIA Advisors. specializing in macroeconomic research, valuations, asset allocation, and risk management. RIA Contributing Editor and Research Director. CFA is an Investment Analyst and Portfolio Manager; Co-founder of 720 Global Research.
Follow Michael on Twitter or go to 720global.com for more research and analysis.
Customer Relationship Summary (Form CRS)