- David Kostin, the chief US equity strategist at Goldman Sachs, says he's brought together a group of S&P 500 stocks that return double the average company in the broader index.
- Kostin adds that the stocks have underperformed the index for the last few years despite their superior returns.
- The performance of those stocks has steadily gotten worse as investors got more optimistic about economic growth.
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It's a rare combination, but Goldman Sachs says you can get better-than-average returns from a few stocks while also buying them at better-than-average prices.
David Kostin, chief US equity strategist at Goldman Sachs, says he's identified a group of stocks that more than double the cash return of the median S&P 500 stock, which is currently 4.4%. Most of them pay hefty dividends, and some augment that by repurchasing large amounts of their stock every year.
And yet Kostin says those stocks have been collectively underperforming the S&P 500, as shown in the chart below. It shows the high-return stocks falling farther and farther behind the benchmark index over the last three years, with a few attempted rallies that didn't last long.
Put simply, these stocks that offer strong cash distributions can be found at a bargain.
And most recently, they've gotten even cheaper relative to the market as investors got more optimistic about the economy and resumed their preference for growth over higher-yielding stocks.
Listed below are Kostin's top 15 stocks. They're ranked from lowest to highest based on their yield, defined as dividend payouts and stock buybacks as a percentage of their market caps over the past 12 months.
15. NetApp
Ticker: NTAP
Sector: Information technology
Market Cap: $13.2 billion
Trailing 12-month buybacks: 9.0%
Dividends: 2.1%
Total yield: 11.1%
Source: Compustat and Goldman Sachs
14. Apple
Ticker: AAPL
Sector: Information technology
Market Cap: $1.42 trillion
Trailing 12-month buybacks: 10.5%
Dividends: 1.9%
Total yield: 12.4%
Source: Compustat and Goldman Sachs
13. Xerox
Ticker: XRX
Sector: Information technology
Market Cap: $8 billion
Trailing 12-month buybacks: 9.2%
Dividends: 3.7%
Total yield: 12.9%
Source: Compustat and Goldman Sachs
12. Citigroup
Ticker: C
Sector: Financials
Market Cap: $170.6 billion
Trailing 12-month buybacks: 10.0%
Dividends: 3.1%
Total yield: 13.1%
Source: Compustat and Goldman Sachs
11. Hewlett Packard Enterprise
Ticker: HPE
Sector: Information technology
Market Cap: $19.2 billion
Trailing 12-month buybacks: 10.4%
Dividends: 2.8%
Total yield: 13.2%
Source: Compustat and Goldman Sachs
10. Lam Research
Ticker: LCRX
Sector: Information technology
Market Cap: $47.2 billion
Trailing 12-month buybacks: 10.5%
Dividends: 2.8%
Total yield: 13.3%
Source: Compustat and Goldman Sachs
9. Wells Fargo
Ticker: WFC
Sector: Financials
Market Cap: $205.8 billion
Trailing 12-month buybacks: 9.9%
Dividends: 3.8%
Total yield: 13.7%
Source: Goldman Sachs
8. Fifth Third Bancorp
Ticker: FITB
Sector: Financials
Market Cap: $21.3 billion
Trailing 12-month buybacks: 10.0%
Dividends: 3.8%
Total yield: 13.8%
Source: Compustat and Goldman Sachs
7. Devon Energy
Ticker: DVN
Sector: Energy
Market Cap: $9 billion
Trailing 12-month buybacks: 9.9%
Dividends: 3.8%
Total yield: 13.7%
Source: Compustat and Goldman Sachs
6. NRG Energy
Ticker: NRG
Sector: Energy
Market Cap: $9.5 billion
Trailing 12-month buybacks: 14.2%
Dividends: 0.3%
Total yield: 14.5%
Source: Compustat and Goldman Sachs
5. Newell Brands
Ticker: NWL
Sector: Consumer discretionary
Market Cap: $8.6 billion
Trailing 12-month buybacks: 10.6%
Dividends: 4.2%
Total yield: 14.7%
Source: Compustat and Goldman Sachs
4. Oracle
Ticker: ORCL
Sector: Information technology
Market Cap: $176.3 billion
Trailing 12-month buybacks: 14.7%
Dividends: 1.7%
Total yield: 16.4%
Source: Compustat and Goldman Sachs
3. Waters
Ticker: WAT
Sector: Healthcare
Market Cap: $14.2 billion
Trailing 12-month buybacks: 16.5%
Dividends: 0.0%
Total yield: 16.5%
Source: Compustat and Goldman Sachs
2. Evergy
Ticker: EVRG
Sector: Utilities
Market Cap: $16.1 billion
Trailing 12-month buybacks: 15.0%
Dividends: 3.2%
Total yield: 18.3%
Source: Compustat and Goldman Sachs
1. eBay
Ticker: EBAY
Sector: Consumer discretionary
Market Cap: $29.9 billion
Trailing 12-month buybacks: 17.30%
Dividends: 1.1%
Total yield: 18.4%
Source: Compustat and Goldman Sachs
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