Dividends and US growth strategy tailored for the cautiously optimistic

When you examine the stock market and hopefully you own some companies that benefit from COVID, you think the stocks have increased, is there more to go? If I buy, how much does it have to up to benefit and what if the market went down? Given no one knows what the market will do except for the situation does not look better, Ian Tam of Morningsie CPMS examined some companies for the cautiously optimistic:

The companies are in the S&P 500

5 year deviation of earnings and total return (measures the consistency of a company’s reported earnings, as well as the stock price lower figures preferred to target lower volatility)

5 year historical beta (measures the historical sensitivity of the stock against the index – lower numbers good)

5 year return on equity (the growth rate is higher than the other companies in their sector) Also only companies which exceed expectations from analysts.

Company Mkt Cap 5 yr earn 5y SD of 5 yr Hist Earnings Div Total Recent

($ Bil) Dev % Rtns % Beta Srpse % Yld Rtn Close

Clorox 27.884 2.4 21.2 0.2 4.4 2.0 38.1 221.42

AutoZone 26.568 3.6 28.0 0.9 17.7 0.0 1.3 1,137.38

Domino Pizza 15.060 8.2 30.8 0.4 1.6 0.8 58.6 385

S&P Global 82.151 4.9 27.9 1.1 5.7 0.8 40.2 341.0

AbbVie 174.490 6.5 30.2 0.8 2.2 4.8 53.8 99.10

MSCI 29.359 5.6 30.5 0.9 3.9 0.8 55.8 351.20

Masco 13.277 4.8 29.3 1.5 9.3 1.1 24.5 50.34

Eli Lilly 159.622 4.8 26.4 0.3 5.8 1.8 55.7 166.89

Sherwin-Wills 53.768 3.9 27.6 1.2 3.3 0.9 16.4 592.16

Lowe’s 102.499 3.1 30.9 1.4 16.2 1.6 35.5 135.76

Linking to dividend paying stocks, if you examine the earnings surprise as a percentage you see relatively low numbers. Most dividend paying stocks are well known by the analysts, they can generally predict how they are doing and just need affirming at the quarter. The surprise was Lowe’s because people staying home they went to Home Depot and Lowe’s, generally Home Depot is the better company. The issue with COVID stocks is how high do you believe they will go up, when a company has a 50% gain will it have another 50% gain in the next quarter? It is very difficult to know, but the chart does allow yo to examine some of the items which help you do your homework and pick the best companies you can no matter what happens to the stock market – Up, Down or Sideways. The dividends help on the Down and Sideways, it is good to have something come into the bank account besides hope.

There are more questions than answers, till the next time – to raising questions.

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