Recent Performance
One way to assess a stock’s recent performance is to plot the current price relative to its 52-week trading range:
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Stocks trading below the 50% mark are potentially are undervalued. The chart hides the magnitude of the trading range, but a quick check confirms that both GILD and NKE performed rather poorly over the past 52 weeks. GILD is down 28% and NKE is down 21%:
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| Source: Google Finance |
Another way to look at a stock’s recent performance is to plot current yield relative to the 52-week yield range. For consistent dividend payments, a stock’s yield rises when the stock price drops, and vice versa. Dividend growth investors often look at current yield relative to average yield over a time frame. A higher current yield suggests that a stock may be undervalued.
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Because of the inverse price-yield relationship, the chart essentially reverses the order of the stocks. It is not an exact reversal, though. The reason is many stocks have experienced dividend increases over the past year.
Finally, I like to compare recent returns compare to annualized returns over a longer time frame. Doing so allows me to get a sense of each stock’s recent performance. The following chart compares 1-year returns to annualized 5-year returns for all my DivGro stocks. Note that dividends are not accounted for in this chart:
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The chart confirms that GILD has been the worst performer over the past year, this time compared with its annualized performance over five years. In contrast, CAT is performing quite well relative to its annualized 5-year performance.
Positions To Close
I plan to sell the following stocks if conditions are right:
• BHP Billiton (BBL)
With an annualized loss of 11%, BBL is the worst performer of my long-term positions. It is rated 2-stars and ranked #48 out of 49 stocks. The company has cut the dividend twice in the past year, so BBL now yields only 1.99%. My plan is to sell BBL by year’s end and to offset capital gains. The stock is in an uptrend, so I’m waiting to see if I can reduce my losses a bit!
• Helmerich & Payne Inc (HP)
HP is rated 4-stars and ranked #38 out of 49 stocks. While HP yields an impressive 4.21%, I’m concerned about dividend safety in light of the company’s near-term outlook and the collapse of energy resource pricing. I’m close to breakeven, and if the stock price continues to improve, I should be able to sell my shares for a small profit before year’s end.
• PennantPark Investment (PNNT)
I’m happy to see a small profit in my PNNT position. In August, I confessed to significantly increasing my PNNT position in an attempt to recover past losses. With an unsustainable yield of nearly 15%, I don’t see PNNT as a long-term holding. It is ranked #49 out of 49 stocks in DivGro and is my only 1-star stock. PNNT just declared another 28¢ dividend, so I’ll hang onto my shares a little longer…
• Caterpillar Inc (CAT)
I think it is time to part ways with CAT. The stock has made a decent comeback in the past 52-weeks despite a 15% drop in revenue. I rate the stock 4-stars, but it is ranked #36 out of 49 stocks, and I’m concerned about the company’s near-term future (3). Revenue is expected to drop in 2017, and now the CEO has resigned after 43 years with the company. My CAT position shows annualized profits of 6%.
