…Analysts at Bank of America use a ranking system to try and uncover the best income stocks in the Russell 1000 as follows:
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Each month the bank’s quant analysts calculate the trailing 12-month dividend yield for each company in the Russell 1000. This dataset is then ranked in Quintiles [see chart below]. The best-performing of these is Quintile 2, which has produced a 5-year annualized return of 15.1% since inception at the end of September 2010. [Rebalancing and performance calculations are conducted each month, and the performance of each quintile is computed on the basis of equal-weighted total return. Dividends are not reinvested.]
Going back to 1984, as far as BoA’s analysts have backtested the model, Quintile 2 has produced an average 12-month rolling return for investors of around 16%, with a probability of loss of less than 15%.
Currently, companies ranking in Quintile 2 yield between 3.22% and 2.32%. Some of the companies highlighted [see table below for the complete list] include:
- Phillips 66,
- Principal Financial Group, Inc.,
- Air Products and Chemicals, Inc.,
- Kellogg Company,
- Sabre Corp.,
- Carnival Corporation and
- Foot Locker, Inc.
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