Pro Portfolio Proof II: David Katz ‘Safer’ Value Portfolio Picks

The Dividend Dogs Rule

The “dog” moniker was earned by stocks exhibiting three traits: (1) paying reliable, repeating dividends, (2) their prices fell to where (3) yield (dividend/price) grew higher than their peers. Thus, the highest yielding stocks in any collection became known as “dogs.” More specifically, these are, in fact, better termed, “underdogs”.

Ten Top “Safer” Katz Value Dogs Represented Five Sectors

Eight of eleven Morningstar sectors were represented by the 30 firms in the David Katz value stock portfolio with positive annual returns and whose dividends were backed by sufficient cash cushions as of March 24. The sector representation broke out as follows: Communication Services (1); Consumer Defensive (6); Healthcare (4); Technology (5); Industrials (6); Financial Services (5); Consumer Cyclical (2); Energy (1); Basic Materials (0); Real Estate (0); Utilities (0).

The top ten Katz Value portfolio by yield included the first five sectors on the list above.

30 Positive Return Katz Value Stocks Were Backed By Cash Flow Margin to Cover Dividends

Periodic Safety Check

You see below the list that passed the portfolio “stress” test. These 20 dogs report sufficient annual cash flow yield to cover their anticipated annual dividend yield. The margin of excess is shown in the bold face “Safety Margin” column.

Financial guarantees. however, are readily re-directed by a determined board of directors managing company policy cancelling or varying the payout of dividends to shareholders. This article asserts that adequate cash flow is a strong justification for a company to sustain annual dividend increases.

Three additional columns of financial data listed after the Safety Margin figures revealed payout ratios (lower is better), total annual returns, and dividend growth levels for each stock. These metrics go beyond yield to gauge stock payout reliability.

Total annual returns were used to select the 42 baseline dogs for this article. Those 1-year positive…

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