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ITC Holdings: Slow and Steady
02/27/2014 9:00 am EST
Our strategy is to add one stock each month to our model portfolio; the stocks chosen are selected exclusively from among those issues that have announced 2-for-1 stock splits, explains Neil Macneale, editor of 2-for-1 Stock Split Newsletter.
To choose this month's portfolio addition, we first considered other stocks that made split announcements.
Open Text (OTEX) is a Canadian software company. The stock also has a decent dividend and is less volatile than the market, but its growth has been uneven and it is a little pricey.
Cognizant Technology Solutions (CTSH) is one of those companies that makes me nervous because I can't describe to you what exactly it does. Fortunately, I don't have to, because its fundamental numbers and relatively high volatility give it a significantly lower ranking score than our considerations.
Live Deal (LIVE) was deemed ineligible for consideration because it is too small, too unprofitable, and just doesn't make enough information available for a good analysis.
As such, among this month's split announcements, ITC Holdings (ITC) was clearly the most satisfactory of the group and will be added to the portfolio.
ITC Holdings is in the electricity transmission business, in Michigan, and portions of six other Midwestern states. ITC is not, itself, a regulated utility, but most of its business is conducted by several regulated operating subsidiaries.
ITC has five-year average sales and earnings growth rates in the low double digits, pays a nice 1.69% dividend, and trades with very low stock price volatility. Its net profit and the overall return to investors have both averaged above 20% for the last five years. Slow but steady is the motto here.
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