There is always something to buy in the stock market. On Tuesday, I put out a list of the stocks that I covered and showed what stock might be a good deal based on dividend yield. Now I am trying to categorize what sorts of stocks may be a good deal based on dividend yield.
The advantages to using dividend yield to judge how cheap or expensive a stock is, is that you are not using estimates or old data (like last reported quarter's data). You are using today's stock price and today's dividend yield.
For other testing, like using P/E Ratios and Price/Graham Price Ratios, you use EPS estimates or from the last reported financial quarter. When using P/S Ratios, P/CF Ratios or P/BV Ratios you are using data from the last reported financial quarter.
However, no system is perfect. But if you are interested in buy a stock a list of stocks cheap or reasonable using dividend yield data might be a good place to start.
Categorizing stocks is not as simple as it might seem. Every site you go to has categorized stocks a bit differently. I try to keep this as simple as possible. See my spreadsheet here to see what stocks are showing whether a stock is relatively cheap based on historical high dividend yields (P/Hi), historical average dividend yields (P/Ave), historical median dividend yields (P/Med) or on 5 year median dividend yields (P/5Yr). As in other spreadsheets, you can highlight a line or a number of lines for better viewing.
In the following notes I am only going to list stocks showing as cheap using the historical high dividend yields (P/Hi) and historical median dividend yields (P/Med).
I follow 18 stocks in the consumer discretionary category. Of these stocks, only Dorel Industries (TSX-DII.B) is showing as cheap by the historically high dividend yield. Seven (or 39%) are showing cheap by historical median dividend yield. They are Canadian Tire Corporation (TSX-CTC.A); Dorel Industries (TSX-DII.B), High Liner Foods (TSX-HLF); Leon's Furniture (TSX-LNF); Magna International Inc. (TSX-MG), Reitmans (Canada) Ltd. (TSX-RET.A) and Thomson Reuters Corp (TSX-TRI). Nothing has changed from last month.
I used to have 19 consumer discretionary stocks. However, Chesswood Group (TSX-CHW, OTC-CHWWF) has been reclassified from a consumer discretionary company to a Financial Services company. It has completed the sale of its Acura Sherway new car dealership and has been transformed into a focused North-American specialty finance company.
I follow 10 Consumer Staples stocks. None are showing as cheap by the historically high dividend yield. Two stocks (or 20%) are showing cheap by historical median dividend yield. These are Jean Coutu Group Inc. (TSX-PJC.A) and Loblaw Companies (TSX-L). This is the same as for last month.
I only follow two Health Care stocks and both are US stocks. They are both cheap by the historical median dividend yield. The stocks are Johnson and Johnson (NYSE-JNJ) and Medtronic Inc. (NYSE-MDT). This is the same as for last month.
I follow 12 Real Estate stocks. Melcor Developments Inc. (TSX-MRD) is showing as cheap by the historically high dividend yield. Five stocks (or 42%) are showing cheap by historical median dividend yield. They are Artis REIT (TSX-AX.UN); FirstService Corp (TSX-FSV), Granite Real Estate (TSX-GRT.UN) H & R Real Estate Inv. Trust (TSX-HR.UN) and Melcor Developments Inc. (TSX-MRD). H & R is new to this list for January.
I follow 6 Bank stocks. None are showing as cheap by the historically high dividend yield. Four stocks (or .67%) are showing cheap by the historical median dividend yield. These stocks are Bank of Nova Scotia (TSX-BNS); National Bank of Canada (TSX-NA); Royal Bank (TSX-RY) and Toronto Dominion Bank (TSX-TD).
I follow 13 Financial Service stocks. See comments above about Chesswood Group. One is showing as cheap by the historically high dividend yield and that is Home Capital Group. Nine (or 69%) stocks are showing cheap by the historical median dividend yield. These stocks are AGF Management Ltd (TSX-AGF.B); CI Financial (TSX-CIX); DirectCash Payments Inc. (TSX-DCI); Equitable Group Inc. (TSX-EQB), Gluskin Sheff + Associates Inc. (TSX-GS); Home Capital Group (TSX-HCG); IGM Financial (TSX-IGM); Power Corp (TSX-POW) and TMX Group Ltd. (TSX-X). Equitable Group has been added to this group.
I follow 5 Insurance stocks. None are showing as cheap by the historically high dividend yield. Four stocks (or 80%) are showing cheap by historical median dividend yield. These stocks are Great-West Lifeco Inc. (TSX-GWO); Manulife Financial Corp (TSX-MFC); Power Financial Corp (TSX-PWF) and Sun Life Financial (TSX-SLF). There is no change from last month.
I follow 34 Industrial stocks. One (or 3%) is now showing as cheap by the historically high dividend yield. This stock is Hammond Power Solutions Inc. (TSX-HPS.A). Finning International Inc. (TSX-FTT) is no longer showing cheap.
Fourteen Industrial stocks (or 41%) are showing cheap by historical median dividend yield. These stocks are Ag Growth International (TSX-AFN); Bird Construction Inc. (TSX-BTD), Canadian National Railway (TSX-CNR); Finning International Inc. (TSX-FTT); Hammond Power Solutions Inc. (TSX-HPS.A); HNZ Group Inc. (TSX-HNZ.A); Methanex Corp. (TSX-MX), Mullen Group (TSX-MTL); Pason Systems Inc. (TSX-PSI); Pulse Seismic Inc. (TSX-PSD). Russel Metals (TSX-RUS); SNC-Lavalin (TSX-SNC); Toromont Industries Ltd. (TSX-TIH) and Transcontinental Inc. (TSX-TCL.A). Changes are because I am now following Bird Construction and for Methanex I was reporting the dividends in US$ not in CDN$ as I should have.
I follow 8 Tech stocks. None are showing as cheap by historical median dividend yield. Four stocks (or 50%) are showing cheap by historical median dividend yield. They are Absolute Software Corporation (TSX-ABT); Calian Technologies Ltd (TSX-CTY), Computer Modelling Group Ltd. (TSX-CMG) and Evertz Technologies (TSX-ET). Computer Modelling is new to this group.
I follow 10 Energy stocks. Five Stocks or (50%) are showing as cheap by the historical high dividend yield. They are Canadian Natural Resources (TSX-CNQ); Encana Corp. (TSX-ECA), Ensign Energy Services (TSX-ESI); Husky Energy (TSX-HSE) and Suncor Energy (TSX-SU). Encana is new to this group.
There are six stocks (or 60%) showing cheap by historical median dividend yield. They are the five above and Cenovus Energy Inc. (TSX-CVE). This has not changed from last month.
I follow 2 Material stocks. None are showing as cheap by the historically high dividend yield. One is cheap by historical median dividend yield and that is Teck Resources Ltd. (TSX-TCK.B). This has not changed from last month.
I follow 8 of the infrastructure type utility companies. None are showing as cheap by historical high dividend yield. Four stocks (or 50%) are showing cheap by historical median dividend yield. They are AltaGas Ltd (TSX-ALA); Enbridge Inc. (TSX- ENB) TransCanada Corp (TSX-TRP) and Veresen Inc. (TSX-VSN). Last month I had TransCanada in twice instead of inserting Enbridge and TransCanada.
I follow 12 of the power type utility companies. One is showing as cheap by the historically high dividend yield and that is TransAlta Corp. Three stock (or 25%) are showing cheap by historical median dividend yield. These stocks are the one above plus ATCO Ltd (TSX-ACO.X) and Fortis Inc. (TSX-FTS). This has not changed since last month.
I follow 5 of the Telecom Service type utility companies. One stock is showing cheap by the historical high dividend yield and that is Shaw Communications Inc. (TSX-SJR.B). Four stocks (or 80%) are showing cheap by historical median dividend yield. These stocks are BCE (TSX-BCE); Shaw Communications Inc. (TSX-SJR.B); Telus Corp. (TSX-T) and WiLan Inc. (TSX-WIN). Telus has been added to the list this month.
This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. I do research for my own edification and I am willing to share. I write what I think and I may or may not be correct.
See my site for an index to these blog entries and for stocks followed. Follow me on Twitter.
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