A few subscribers asked me how I found the quality, high yield tobacco stocks I bought so this article shows you exactly how.
You can of course use the screener of your choice but in this example I used the Quant Investing stock screener, the one I use to invest my own money.
Select the sector
I started by selecting the industry sector, in this case Tobacco to get a list of companies.
You can select one or more sectors depending on the type of companies you are looking for.
Select the output columns
As I was looking for high yield ideas, I selected the following output columns:
- Shareholder Yield - Much better than Dividend Yield if you are looking for high yield ideas
- FCF Yield – To see if the high yield can be maintained over time
- Dividend Yield – To see how much cash you get back now
- Country – This is important to see how much withholding taxes you have to pay. For example, the UK and Hong Kong has no withholding taxes.
(Shareholder Yield is also the ratio we use to get ideas for the Shareholder Yield Letter)
The screener output
This is what the output, sorted by Shareholder Yield, looks like:
Source: Quant Investing stock screener
A few comments on the list:
- The highest yielding company is the South Korea. Even though it only paid out a 6% dividend it bought back more than 6% of its shares outstanding to give it a Shareholder Yield of over 12%.
- British American Tobacco looks attractive with a Dividend Yield of over 8%. It looks sustainable, and can possibly be increased, as its FCF Yield is higher than that at over 9%!
- Altria’s FCF Yield is below its Dividend Yield which means it must take on debt to pay a part of its dividend. This may become a problem if it continues.
- Imperial’s high FCF Yield looks attractive even if its dividend yield is lower as this means the dividend can be increased. Most likely the company is using the cash to repay debt.
- Universal Corporation is not attractive as its dividend is not covered by cash generation.
- Philip Morris’ FCF is missing, this means the Cash Flow Statement has not been published or updated yet (this sometimes happens with quarterly reports). If you see this just check back a week or more later and the ratio will most likely be updated.
It is as easy as that
That is how easy it is to find quality high yield ideas. I hope you have found it helpful.
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