Applying the Fund Score Method through FSM Models: Join us on Thursday, May 21^st at 1pm ET for a live webinar on the application of fund scores in a systematic, rules-based model. This webinar will feature an overview of the various FSM strategies and potential implementation ideas. Click here to register!

Replay for Fund Scores and Asset Class Group Scores Webinar: We have a replay available for our latest webinar on Fund Scores and the Asset Class Group Scores page that took place on Thursday, May 14^th. In this webinar, we explore the concepts and methodology used to calculate the Fund Score that is assigned to ETFs and Mutual Funds across the NDW Research Platform. Click here to view the replay!

Investors started their weeks on Monday morning (5/18) to the Dow Jones Industrial Average DJIA, S&P 500 SPX and Nasdaq Composite NASD each rallying in excess of 3%. The gap higher diluted the losses posted last week (ending 5/15) in which the major equity indices fell in the neighborhood of -2%, their worst week in almost two months (source: wsj.com). With today’s movement upward the 20-point chart for SPX (pictured below) returned to a buy signal with a triple top break at 2960, continuing its relatively steep ascent well-above the bullish support line. Additionally, the bullish percent indicator for the S&P 500 BPSPX will return to a column of Xs near the 50-yard line (based on intraday readings), meaning that approximately 50% of stocks in the S&P 500 will be trading on a Point and Figure buy signal on their trend chart. This increase in participation signaled by the reversal up into Xs is especially notable and welcomed given the fact that only 89 stocks in the S&P 500 have posted positive returns year-to-date (through 5/15) while 99 stocks in the index are down -40% or more.

To further pile on the generally bullish statistics we find the S&P 500 roughly 9% above its 50-day moving average, and perhaps to a surprise, this has historically been a positive event. If able to surpass the 10% threshold, the data point would align with lows hit in 2009, 1998, 1991, 1982, and 1975. Recognizing that elevated levels of volatility remain present, investors should remain cautious and highly conscious of their underlying holdings / risk tolerance. To receive intraday alerts on further action, consider using the blue “Set Alert” button located near the top of each chart page.

If you are an income investor, chances are that your income needs persist or may even increase during periods of market volatility and economic uncertainty. With bond yields near historic lows, as evidenced by the US Treasury 10YR Yield Index TNX trading at 0.675%, and cash-like vehicles such as the Vanguard Prime Money Market Fund VMMXX yielding a mere 2.12%, many simply cannot afford to park money in conservative asset classes. This creates a dilemma in the current environment as both cash and fixed income rank first and second, respectively, in the broad asset class relative strength rankings in DALI. However, even prior to the recent bout of market volatility, investors have had to venture into riskier asset classes such as domestic equities in order to maintain a required level of income as the long-term trend for rates has been negative. While the idea of taking on more risk in order to maintain your goals and lifestyle was an afterthought with domestic equities ranked atop of the broader asset class rankings in DALI, as it had been for the better part of the last decade, today’s third-place ranking requires an extra level of diligence for dividend stock pickers. Further, the current dominance of growth-style equities within the broader asset class necessitates additional consideration with an emphasis on only the soundest individual technical names from within blend or value-style categories. Today, we're going to highlight two ways to find high-RS dividend-paying stocks on the NDW Research Platform.

The first way to find high-RS dividend-paying stocks is by using the DWA Yield Portfolio SPX500YLD. The model employs a systematized approach toward picking dividend-focused and high-RS individual names, holding up to 5 stocks at once. The model draws from strong attribute and high-yielding members within the S&P 500 Index SPX, using a daily-evaluated RS Matrix to determine the top names from the overall universe. Currently, the model has 100% exposure to energy stocks for the first time ever since the model’s inception in October of 2009 and maintains a weighted average yield of 5.85%. Additionally, the model has outperformed SPX by over 900 basis points on a year-to-date basis.

The second way is by using specifically-curated criteria to find strong and actionable names. With the overall market backdrop in mind, we used the Stock Screener tool (found under Security Selection > Security Screener) to identify those S&P 500 stocks that have decent volume, have attributes of 3 or higher, maintain a buy signal, and a positive trend on their chart, and are within buyable ranges on their weekly distribution curves. Additionally, we sought out those stocks that are yielding 2% or higher, as our goal with this screen was to find stocks that are yielding higher than the S&P 500 Trust ETF SPY. The search criteria listed below resulted in 19 stocks.

Search Criteria:

• Universe: S&P 500
• Last Price: > $20
• Optionable
• Average 30-Day Volume: 500,000 Shares
• Technical Attribute: 3, 4 and 5
• P&F Signal: Buy
• P&F Trend: Positive
• Overbought/Oversold (%): -25% to 25%
• Yield: > 2%

Technically-Sound Dividend-Paying Stocks

Symbol	Name	Price	Tech Attrib/Score	Broad Sector	Yield	Overbought/Oversold
ADI	Analog Devices, Inc.	101.80	3	Technology	2.44	7%
AJG	Arthur J. Gallagher & Co.	87.23	4	Financial	2.06	14%
AVGO	Broadcom Ltd	260.41	3	Technology	4.99	11%
CMCSA	Comcast Corporation	35.92	4	Consumer Cyclical	2.56	-7%
DRE	Duke Realty Corporation	30.83	5	Real Estate	3.05	-17%
HSY	The Hershey Company	130.38	3	Consumer Noncyclical	2.37	-20%
INTC	Intel Corporation	58.28	4	Technology	2.27	12%
KLAC	KLA Corp	167.43	5	Technology	2.03	20%
KMB	Kimberly-Clark Corporation	138.64	3	Consumer Noncyclical	3.09	10%
LNT	Alliant Energy Corporation	45.95	5	Utilities	3.31	-22%
MDLZ	Mondelez International Inc.	49.96	4	Consumer Noncyclical	2.28	-7%
MXIM	Maxim Integrated Products Inc	52.06	3	Technology	3.69	5%
NLOK	NortonLifeLock Inc.	20.03	3	Technology	2.50	11%
NRG	NRG Energy, Inc.	32.60	5	Utilities	3.68	15%
PEP	PepsiCo, Inc.	135.95	4	Consumer Noncyclical	3.01	22%
PG	The Procter & Gamble Company	114.61	3	Consumer Noncyclical	2.76	-3%
RSG	Republic Services, Inc.	79.47	4	Industrial	2.04	-0%
UNP	Union Pacific Corporation	151.24	5	Industrial	2.56	12%
VZ	Verizon Communications Inc.	54.71	3	Communications	4.50	-10%

Duke Realty Corporation DRE

One strong dividend-payer is Duke Realty Corporation DRE. This 5 for 5’er returned to a positive trend in late March and ranks in the top third of the favored real estate sector RS matrix. Additionally, DRE has maintained a market RS buy signal since May of 2016, confirming long-term strength against the broader market. Currently, the stock trades on a second consecutive buy signal and has just reversed up into Xs following a test of its bullish support line. Demand is in control and long exposure may be added here with initial support offered at $29. DRE carries a dividend yield of 2.91% and displays a low relative risk (rRisk) reading of 0.94, which is notable considering the diversified S&P 500 Index SPX benchmark reading is 1.00.

PepsiCo, Inc. PEP

PEP is a solid 4 for 5’er that moved back into a positive trend in early April. This large-cap stock ranks in the top half of the favored food beverages/soap sector and maintains a long-term market RS buy signal. PEP has given two consecutive buy signals since March, confirming that demand is in control. At current levels, PEP sits just two boxes away from completing a third consecutive buy signal at $140. With a solid technical picture, a weekly distribution reading of just 22% overbought, and a yield of 3.02%, new positions are welcome here. Note that the stock’s all-time high from February of this year sits at $146 while initial support is offered at $130. Year-to-date, PEP is outpacing the S&P 500 by 10.83% (through 5/15). 

Union Pacific Corporation UNP

UNP is a perfect 5 for 5’er within the transports/non air sector that has maintained a market RS buy signal since July 2002, confirming the stock’s superior strength versus the broader market. In addition, UNP has maintained a long-term peer RS buy signal since October 2008 and offers a yield of 2.43%. In late-April, UNP returned to an overall positive trend when it broke a spread triple top at $152 before rallying to $166. UNP experienced a brief pullback to $148, however, with today’s market action, the chart has returned to a column of Xs at $160. From current levels, UNP sits just four boxes away from marking a second consecutive buy signal at $168. Initial support is now offered at $148 with additional support at the $142 level.

Procter & Gamble PG

Procter & Gamble is another technically-sound income-producing name that made our shortlist. PG is a 3 for 5’er that has maintained its long-term positive trend since October of 2018 – no an easy feat given the recent and historic market selloff. Further, the stock returned to a market RS buy signal in March of 2020, providing a confirmation of its long-term outperformance against the S&P 500 Equal Weighted Index SPXEWI. Currently, PG ranks in the top half of the favored food beverages/soap sector RS matrix and is on a third consecutive buy signal. Okay to add long exposure here as the weight of the evidence is positive. Note that PG tests support at $112 and finds further support at $108. PG carries a yield 2.72% and displays a low rRisk reading of 0.95.

Daily Option Ideas for May 18, 2020