15 new stocks make our Safest Dividend Yield Model Portfolio this month.

Recap from February’s Picks

The Model Portfolio rose 0.1% on a price return basis and rose 0.4% on a total return basis. The S&P 500 rose 0.1% on a price return basis and 0.5% on a total return basis. The best-performing stocks in the portfolio were large-cap stock Seagate Technology (STX), which was up 18%, and small-cap stock, DSW Inc. (DSW), which was up 10%. Overall, six out of the 20 Safest Dividend Yield stocks outperformed the S&P in February.

This Model Portfolio leverages our Robo-Analyst technology[1], which scales our forensic accounting expertise (featured in Barron’s) across thousands of stocks.[2]

This Model Portfolio only includes stocks that earn an Attractive or Very Attractive rating, have positive free cash flow and economic earnings, and offer a dividend yield greater than 3%. Companies with strong free cash flow provide higher quality and safer dividend yields because we know they have the cash to support the dividend. We think this portfolio provides a uniquely well-screened group of stocks that can help clients outperform.

Featured Stock for March: National Research Corp (NRCIB: $50/share)

National Research Corp (NRCIB), a healthcare data analytics/insights provider, is the featured stock in March’s Safest Dividend Yields Model Portfolio. We previously featured NRCIB as a Long Idea in October 2016. Since then, the stock is up 29% while the S&P 500 is up 22%. Despite its outperformance, NRCIB remains undervalued.

Since 2007, NRCIB has grown revenue 9% compounded annually while after-tax profit (NOPAT) has grown 12% compounded annually, per Figure 1. NOPAT margins have increased from 14% in 2007 to 19% in 2017 while the company’s return on invested capital (ROIC) improved from 14% to 33% over the same time.

Figure 1: NRCIB Revenue & NOPAT Since 2007

Sources: New Constructs, LLC and company filings

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