In the filter created this week for The Globe and Mail, we screened for Defensive and Dividend-paying US-listed stocks.
The defensive nature of value investing makes it a go-to strategy during an economic or market downturn. Today, I screened Quality U.S. listed stocks that also pay a solid dividend, using similar guidelines as those in our article two weeks ago that focused on the Canadian market.
- Market capitalization greater than US$1-billion;
- Positive three-month and 12-month change in the economic value-added (EVA) metric – a positive figure shows us that the company’s profits are increasing at a faster and greater pace than the costs of capital. The EVA is the economic profit generated by the company and is calculated as the net operating profit after tax minus capital expenses;
- Positive 12-month change in the economic performance index (EPI) and a current EPI greater than one – this ratio is return on capital to cost of capital;
- Average annualized five-year return on capital (ROC) must be greater than 10 per cent;
- Future-growth-value-to-market-value ratio (FGV/MV) is between 40 per cent and minus 70 per cent. The range was selected to eliminate stocks that are at an exaggerated premium or discount as that would increase risk. This ratio represents the proportion of the market value of the company that is made up of future growth expectations rather than the actual profit generated. The higher the percentage, the higher the baked-in premium for expected growth and the higher the risk;
- Dividend yield greater than 2 per cent.
Read more in this article written by Noor Hussain, Analyst & Account Executive at Inovestor Inc.