Sunday, December 2

Week 387 - A-Rated Members of "The 2 and 8 Club" In The S&P 100 Index

Situation: If you’re a stock-picker, you’ll need a special watch list so you can work at home. Consider the fact that your spouse and children will want to know what you’re doing and why. Think of it as an opportunity. You’ll get to spend more time at home and convince them that you’re not a gambling their future away! 

Mission: Use our Standard Spreadsheet to illustrate members of “The 2 and 8 Club” in the S&P 100 Index that having S&P ratings of A- or better on their bonds stocks.

Execution: see Table.

Administration: Our least restrictive definition of “The 2 and 8 Club” is all companies in the Russell 1000 Index that reliably pay an above-market quarterly dividend (meaning a yield of ~2% or more) and have raised it at least 8%/yr over the past 5 years. So, we mine the FTSE High Dividend Yield Index because it is composed of the ~400 companies in the Russell 1000 Index that reliably pay an above-market dividend. We exclude any companies that have an S&P rating on their debt lower than BBB+ or an S&P rating on their common stock lower than B+/M. For this week’s blog, we’re listing the few companies in top tier of “The 2 and 8 Club”, which are those in the S&P 100 Index that are A-rated.

Bottom Line: Only 12 companies meet our criteria, half of which are in the highest risk S&P industries: Financial Services and Information Technology. Over the long term, investment in high quality companies drawn from those industries will bring greater rewards than investment in the S&P 500 Index or Dow Jones Industrial Average (as well as sharper losses during intervening Bear Markets). Boeing (BA) and Texas Instruments (TXN) appear overpriced, which we determine by using Graham Numbers and 7-Yr P/Es (see Columns W-Z in the Table). Accordingly, investment in these stocks is best conducted by using an automatic monthly dollar-cost averaging plan, e.g. Computershare.

Risk Rating: 6 (where 10-Yr US Treasury Notes = 1, S&P 500 Index = 5, and gold bullion = 10)

Full Disclosure: I dollar-average into JPM, NEE and IBM, and also own shares of MMM.

"The 2 and 8 Club" (CR) 2017 Invest Tune All rights reserved.

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