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The S&P500 is up 94 per cent since it bottomed out in March 2009, but much of the return occurred in the first 14 months, notes to UBS strategist Jonathan Golub. Since then stocks have gained 8 per cent in an environment that has volleyed between risk-on and risk-off mode.
In his latest note titled ‘Investing through the Muddle‘ Golub points out six investment characteristics of stocks that are likely to outperform regardless of whether the market is in risk-on or risk-off mode.
He also identifies stocks with strong dividend payouts “tend to provide the most consistent alpha without the need for more tactical management.”
First the characteristics:
- Stocks have generally outperformed since 2010 if they are defensive, with above-average yields, growth rates and positive surprises.
- Companies able to beat estimates – especially top-lines have outperformed
- Investors also seek out stocks with stable prices and high return on equity (ROE)
- Companies that deliver above-average growth rates. Trailing growth has delivered better returns than forward growth during risk-on and risk-off periods.
- “Investors have preferred dividends to buybacks, and dividend payout to yield.”
- Three other qualities that investors look at are cheapness, foreign sales, and momentum.
Dividend payout stocks been strong performers especially during risk-off periods.
Here are the best two high dividend paying stocks from each major sector according to Golub:
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