In this week’s filter created for The Globe and Mail, we screened for stocks within the greatest contributing sector to the S&P 500 bull market by using the following criteria:
- Positive change in economic value-added (EVA) over three months and 12 months. This measures the momentum of the wealth-creating ability of the company. Note that EVA is the net operating profit after tax, or NOPAT, minus capital charge (cost of capital times the amount of invested capital);
- A return on capital greater than 10 per cent, reported as of last quarter’s end;
- A positive free-cash-flow-to-capital ratio. This ratio gives us a sense of how well the company uses the invested capital to generate free cash flows, which could be used to stimulate growth, distribute or increase dividends, reduce debt, etc. We are looking for a ratio greater than 5 per cent, which is excellent;
- A dividend-yield greater than 1.5 per cent;
- A positive share-price return over one year.
Read more in this article written by Noor Hussain, Account Executive at Inovestor Inc.
