Nine months since that original column ran, I am encouraged by the early results. (I preface that with the word "early" as nine months is but a day to us value investor types.) By way of reminder, the screen I used included the following criteria:
- Minimum Market Cap: $2.5 billion.
- Increasing dividends for each of the past seven years.
- Minimum dividend yield of 2%.
- Decrease in shares outstanding of at least 5% in the past year.
The biggest gainers included Lowe's ( LOW) (up 65.2%), Ameriprise Financial ( AMP) (up 54%), Safeway ( SWY) (up 51.4%), Assurant ( AIZ) (up 46.6%) and Walgreen ( WAG) (up 41.8%). Interestingly, there were no home runs and no terrible performers. There was just a boatload of singles and doubles, and that's all you really need. LOW data by YCharts
Granted, this group of companies performed better than the markets in very positive market conditions, but I would be very curious to see how they'd perform in more negative conditions. Given the dividend yield of the group, which was just a bit more than 3% when I wrote the original column, I'd expect better than market performance on the downside too, but I haven't been able to put this theory to the test -- not that I'm hoping for that opportunity. However, sooner or later it will happen, and we'll obtain the evidence as to whether this is a decent strategy in up and down markets.
Not all stock screens that I've devised and used during my career have stood the test of time; sometimes they are just lucky and the luck does not last. We'll have to see if the combination of dividend growth and stock buybacks can indeed stand the test of time. At the time of publication, Heller had no positions in stocks mentioned. Follow @JonMHellerCFA This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.