Investors often tout the allure of large share buybacks and hefty dividend payouts as indicators of strong stocks. Riding on this narrative, Goldman Sachs recently compiled a list of stocks offering the most potent mix of trailing buyback and dividend yields. These buyback yields represent the percentage of a company’s market capitalization given back to shareholders in the form of stock repurchases.
Marathon Petroleum, an oil refiner, topped the list with a whopping buyback yield of 26% and a dividend yield of 3%, contributing to a total cash return yield of 29%. Joining them in the top three were Synchrony Financial, a credit card company with a combined yield of 19%, and M&T Bank, which offered a total cash return yield of 15%. The list featured a diverse range of sectors, from oil and banking to healthcare and fashion, all boasting impressive buyback and dividend yields, making them potential magnets for investors seeking robust returns.
Top Stocks with Best Buyback and Dividend Yields Revealed
Investors often favor large share buybacks and dividend payouts when looking for strong stocks. A recent list compiled by Goldman Sachs provides insights into the stocks with the greatest combination of trailing buyback and dividend yields.
Marathon Petroleum Takes the Lead
Leading the pack is Marathon Petroleum (MPC) with a buyback yield of 26% and a dividend yield of 3% – resulting in a total cash return yield of a staggering 29%. Marathon Petroleum’s high-grade portfolio and cost improvements have earned it a narrow moat according to Morningstar analyst Allen Good. With a fair value estimate of $126 and a Monday price quote of $154, this oil refiner boasts of a cost advantage due to access to low-cost feedstock and lower operating costs from domestic natural gas.
Other Top Finishers
Following closely is Synchrony Financial (SYF), a credit card company, with a 16% buyback yield, a 3% dividend yield and a total cash return yield of 19%. It is noted by Morningstar analyst Michael Miller that while Synchrony’s CareCredit cards and installment loans perform well, their credit cards can sometimes face headwinds when retail sales suffer.
M&T Bank (MTB) and Marathon Oil (MRO) both come in third, each with a total cash return yield of 15%. Other top finishers include Cardinal Health (CAH), MGM Resorts (MGM), Tapestry (TPR), C.H. Robinson Worldwide (CHRW) and Expeditors International of Washington (EXPD).
Morningstar Assessments
Morningstar assessments provide a deeper understanding of these companies. For instance, Marathon Petroleum is known for its high-grade portfolio and operating cost improvements, which have led to excess returns. Synchrony Financial, on the other hand, has no moat but offers promotional financing, private-label, and co-branded general-purpose credit cards.
Takeaways
The list compiled by Goldman Sachs provides valuable insights for investors looking for stocks with a strong combination of buyback and dividend yields. It is evident that companies with a good balance of these yields are considered strong stocks. However, investors must also consider other factors such as the company’s competitive advantage, fair value estimate, and market performance. Understanding these factors can help investors make informed decisions and potentially achieve higher returns.
