Recap from July’s Picks
Our Safest Dividend Yield Model Portfolio underperformed the S&P 500 last month. The Model Portfolio fell 2.6% on a price return basis and fell 2.4% on a total return basis. The S&P 500 fell 0.6% on a price return basis and total return basis. The best performing stocks in the portfolio were large cap stock GameStop Corporation (GME), which was up 4%, and small cap stock, TransAct Technologies (TACT), which was up 16%. Overall, 10 out of the 20 Safest Dividend Yield stocks outperformed the S&P in July.
Since inception, this Model Portfolio is up 9% on a price return basis (S&P +13) and 13% on a total return basis (S&P +15%).
This Model Portfolio highlights the value of our Robo-Analyst technology, which scales our forensic accounting expertise (featured in Barron’s) across thousands of stocks.
This Model Portfolio only includes stocks that earn an Attractive or Very Attractive rating, have positive free cash flow and economic earnings, and offer a dividend yield greater than 3%. Companies with strong free cash flow provide higher quality and safer dividend yields because we know they have the cash to support the dividend. We think this portfolio provides a uniquely well-screened group of stocks that can help clients outperform.
New Stock Feature for August: General Mills, Inc. (GIS: $54/share)
General Mills (GIS), a producer of consumer foods such as cereals and snacks, is one of the additions to our Safest Dividend Yield Model Portfolio in August.
Over the past decade, GIS has grown revenue by 2% compounded annually. Per Figure 1, after-tax profit (NOPAT) has grown 3% compounded annually over the same period. The firm’s ability to grow NOPAT faster than revenue can be credited to margin improvement. NOPAT margin has increased from 12% in 2007 to 13% in 2017. Return on invested capital (ROIC) has also been impressively consistent. Since 2007, GIS has averaged a 9% ROIC with a high of 11% and a low of 8%.