Stocks That Should Benefit from 0% Funds Rate

5Hill

The U.S. Federal Reserve’s decision to essentially cut interest rates to 0% helps eliminate the yield competition for equities. The aggressive move also underscores the challenges that the economy face.

 

As a result, RBC Capital Markets chief institutional strategist Myles Zyblock has updated his high-yield, high-predictability stock screen for both the U.S. and Canadian markets.

There are four criteria required for stocks to be considered: high predictability based on earnings variance and quality, recent history of a dividend increase (higher than it was 12 months ago), a dividend yield advantage versus their respective benchmark, and relatively high overall quantitative scores (based on value, growth, momemtum and predictability).

Within the S&P/TSX composite index, the stable, above-average dividend yielders are Telus Corp. (TU), TransCanada Corp. (TRP), Fortis Inc. (FRTSF.PK), Shaw Communications Inc. (SJR), Enbridge Inc. (ENB), Rogers Communications Inc. (RCI), Saputo Inc. (SAPIF.PK) and ATCO Ltd. (ATCO)

 

Twenty names made the cut among Russell 1000 stocks, including Verizon Communications Inc. (VZ), Coca-Cola Co. (KO), Kellogg Co. (K), Johnson & Johnson (JNJ), Hasbro Inc. (HAS), Norfolk Southern Corp. (NSC) and Abbott Laboratories (AT).

 

Every two weeks, Chad McAlpine, a quantitative analyst at RBC, puts together a list that shows the top-ranked stocks in the TSX composite (excluding trusts) based on value, growth, momentum and predictability. Five names made the top 15 based on both predictability and momentum. The names are: Rogers Communications, Enbridge, ShawCor Ltd. (SAWLF.PK) [TSX:SCL.A], Shoppers Drug Mart Corp [TLX:SC]. and Tim Hortons Inc (THI).

 

He suggested that predictability will likely be a key factor during the first half of 2009, and at some point following peak earnings in Canada, momentum strategies should take the lead.

 

-- from SeekingAlpha.com