According to GuruFocus backtesting results from 2008, only 3.3% of U.S. stocks can be rated as a perfect 5-stars for business predictability. Of these, only 3% had recorded a loss in the past 10 years.
A company’s predictability is ranked according to the consistency of its revenue per share and EBITDA per share. The GuruFocus Predictable Companies screener can be used to find and sort these stocks. The following are the five highest-yielding S&P 500 stocks with a 5-star business predictability rating.
Realty Income Corp (O, Financial)
Realty Income operates as an equity real estate investment trust, or REIT, and owns a diversified portfolio of more than 4,300 properties as of 2014. The company’s dividend yield is 4.9%, and its 10-year EBITDA growth rate is 6.3%.
The stock increased marginally by 4% over the past year and closed at $45.07 on June 15. The current P/E ratio is 41.8 and the P/S ratio is 10.5.
In 2014, EBITDA per share was $3.95, up from $3.50 the year before. The figure rose by 8.55% over the past five years as shown in the graph below.
One cause for concern is that free cash flow has been negative since 2013, recording at $-606.6 million last year.
Louis Moore Bacon (Trades, Portfolio) was the only guru to add Realty Income as a new holding during the first quarter, purchasing 37,310 shares of the stock.
Public Storage (PSA, Financial)
Public Storage is a Maryland REIT that acquires, develops, and operates self-storage facilities that lease generally on a month-to-month basis. Its dividend yield is 3.2%, and the 10-year EBITDA growth is 6.4%.
Public Storage’s stock increased 11% over the last year, closing at $185.60 on June 15. The P/E ratio is 33.5 and the P/S ratio is 14.32.
The company reported net income of $1,144 million last year, up from $1,052 million in 2013. Despite a dip from 2008 to 2010, net income has been on an upward trend over time.
Paul Tudor Jones (Trades, Portfolio) initiated a new position in Public Storage during Q1, while Pioneer Investments (Trades, Portfolio), Jeremy Grantham (Trades, Portfolio) and Ray Dalio (Trades, Portfolio) added to their existing positions.
General Mills (GIS, Financial)
General Mills’ dividend yield is 3.1% and the 10-year EBITDA growth rate is 6.5%. The stock for the manufacturer of food products increased 2% over the last year, and has a current P/E ratio of 23.5 and P/S ratio of 1.9.
As a stalwart stock, General Mills’ net income increased marginally by about 4% over the past five years. In 2014, the company reported net income of $1,824 million.
The DCF calculator estimates a fair value of $30.92, giving a -78% margin of safety. Bill Frels (Trades, Portfolio) increased his stake in the company during Q1, while 10 other gurus either trimmed or sold out their positions.
Omnicom Group (OMC, Financial)
Omnicom Group is a holding company that provides advertising, marketing, and corporate communication services. Omnicom’s dividend yield is 2.8% and the EBITDA growth rate over the past 10 years is 7.5%.
Over the past year, the stock price increased 2% and closed at $71.72 on June 15. The current P/E ratio is 16.6, while the P/S ratio is 1.18.
The DCF calculator estimates fair value of $52.18, giving a -38% margin of safety. In 2014, Omnicom reported net income of $1,104 million, an increase from $991 million the year before. The figure rose 6.35% over the past five years.
During Q1, Jim Simons (Trades, Portfolio) purchased a new holding in the company, while three other gurus added to existing positions.
Kohl’s Corp (KSS, Financial)
Department store chain Kohl’s has a dividend yield of 2.7% and a 10-year EBITDA growth rate of 11.1%. Over the past year, the stock increased 19% and closed at $62.57 on June 16. The current P/E ratio is 14.6 and the P/S ratio is 0.7.
The stock is overvalued according to the DCF calculator, which estimates a fair value of $51.27, giving a -22% margin of safety. In 2014, net income was $867 million, down from $889 million the year before. Over the last five years, net income declined by about 7.5%.
Steven Cohen (Trades, Portfolio), John Keeley (Trades, Portfolio), and Caxton Associates (Trades, Portfolio) each initiated a new position in Kohl’s during Q1.
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