Boeing, Corning Are Winning in My Dividend Plus Buyback Portfolio

 | Jul 19, 2017 | 11:15 AM EDT
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Three months in, it's time to check in on the progress (or lack thereof) of my Growing Dividends with Stock Buybacks Portfolio. While it is way too soon to make a call as to the efficacy of this screen, it is important to monitor. The premise was that the combination of stock buybacks and growing dividends could be a powerful one, under the right circumstances.

To be included, companies had to meet the following criteria:

  • Minimum Market Cap: $2 billion
  • Minimum dividend yield: 2%
  • Reduction in shares outstanding 3-year average of 5% or more
  • Minimum 5-year dividend growth of 5% or more

After three months, the fourteen names that made the cut are up an average of 6.4%, just marginally better than the S&P 500's 5.1% return during the same period. Obviously, this performance has been observed in an up market, and I am usually skeptical about any screens I've developed until they've been through a flat or, down market. That's the true test, in my view.

All but two names in the tracking portfolio are in positive territory over the past three months. The winners include Boeing (BA) (+17.1%), Corning (GLW) (+16.8%), and Wyndham Worldwide Corp (WYN) (+16.7%).

Restaurant name Brinker International (EAT) (-16.1%), which is the parent company of Chili's, On the Border, and Maggiano's, is the worst performer. Restaurant stocks are coming under increasing pressure following solid performance overall coming out of the 2008 market meltdown. Some of the damage done to Brinker recently was in the form of a downgrade by JP Morgan (from overweight to neutral) on June 15, which sent shares down 10%. EAT remains one of the cheaper names in the sector, trading at 11x next year's consensus earnings estimates. It is also one of the highest yielding, at 3.7%.

Despite EAT's rough treatment, shares of Wendy's (WEN) are up 14%, and now trade near a 13-year high. Admittedly, I've never been able to figure this one out. I owned it for several years after the merger with Triarc (then parent of Arby's) in 2008, but finally gave up. Arby's was a disaster, and was ultimately jettisoned. Wendy's, which yields 1.8%, does not appear cheap at 27x next year's consensus estimates. Unfortunately, as much as I've been unable to figure the stock out, I can't seem to get enough of their overpriced, but delicious, Dave's Double cheeseburgers.

Harley Davidson (HOG) (-14%) has also had a rough run, with some of the damage occurring yesterday after the company announced second-quarter earnings. While earnings beat expectations by $0.10 ($1.48 versus $1.38), revenue ($1.58 billion) narrowly missed by $10 million. What upset investors, however, was softness in motorcycle sales and lowered guidance on full-year motorcycle shipments. Shares ended the day down 6%. HOG currently trades at 12x next year's consensus estimates, and yields 2.81%.

Rounding out performance:

  • Travelers (TRV) , +4%
  • Valero Energy (VLO) , +5.2%
  • Ameriprise Financial (AMP) , +6.3%
  • Motorola Solutions (MSI) , +7%
  • Kohl's (KSS) , +2.3%
  • Assurant (AIZ) , +11.7%
  • Legg Mason (LM) , +6.9%
  • Timken (TKR) , +12%

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