While the Nasdaq rose 6% in the third quarter, some
well-chosen stocks did much better.
Nationstar Mortgage (
) rose 54% in Q3.Cabela's (
) surged 45%.Google (
) jumped 30%. For dividend investors, there's just one problem:
None of those stocks pays a dividend.
Were there big gainers among dividend stocks? Yes, but the
odds of finding a big gainer were inversely proportional to the
IBD ran a screen for Q3 gainers that aren't low-priced or
thinly traded. The Q3 gain had to be at least 12%, i.e., about
double the Nasdaq.
The variable was the yield, and it illustrated a reality: If
an investor buys only big-yield stocks, he or she sharply reduces
the chance of finding a big winner.
The screen's results:
Dividend yield of 4% or more: Only 14 stocks made this
screen.Rentech Nitrogen (
) led with a 41% pop. More than a third of the other stocks were
lowly rated stocks bouncing off lows.
), for example, rose 14% in Q3, but it remains 19% off its high.
Of the 14, only four sported an EPS Rating of 80 or better.
Dividend yield of 3% or more: Sixteen additional stocks made
this screen, bringing the total to 30. However, including stocks
with 3% minimum yields didn't improve the quality much.
Only one of the 16 held an EPS Rating above 80:Sturm Ruger
(RGR), which has a best-possible EPS Rating of 99, gained 23% in
Dividend yield of 2% or more: Widening the search to yields as
low as 2% had a dramatic effect. Five times as many stocks (71)
showed up as in the 4% screen.
Whirlpool (WHR) was the biggest Q3 gainer among the stocks
added. The housing-related play rose 36% in Q3. Whirlpool's EPS
Rating is 86, putting it above about seven of every eight stocks
in EPS growth.
Dividend yield of 1% or more: This screen yielded 129 stocks.
Big gainers includedLithia Motors (LAD), up 45% with an EPS
Rating of 99.
Some investors ignore the dividend. They look for income
chiefly from price appreciation. They had more choices. In Q3,
329 stocks appeared in the screen when stocks paying a dividend
of less than 1% or no dividend are included.