Best Buy Among Splits

12/25/2013 7:00 am EST


Neil Macneale

Index Provider, 2 for 1 Index

Each month, we review those stocks that have announced 2-for-1 splits; from those, we select one for our model portfolio, explains Neil Macneale, editor of 2-for-1 Stock Split Newsletter.

November's split announcements climbed up to a total of five, a nice change from the last five months, when we've seen very few split announcements.

The third-ranked stock based on our screen methodology was Borg Warner (BWA), a company that had already made an appearance in the 2-for-1 portfolio, back in 2004-06.

It returned 14.8% annualized then, and would be categorized as one of those solid, old-line manufacturers I like so much. However, its numbers aren't quite as good this time around, especially regarding volatility.

Papa John's Pizza (PZZA) came in Number Two in the rankings, but had a significantly lower score, primarily due to its relatively high valuation numbers.

The top-rated stock among split announcements is RLI Corp. (RLI). I had never heard of this company, and I'm pleased to make its acquaintance.

RLI is an insurance company based in Peoria, Illinois, underwriting property, casualty, and surety policies for businesses and individuals across the country.

It has an A+ rating from A.M. Best Company, a distinction held by fewer than 10% of all property and casualty insurance companies in the country.

Along with the 2-for-1 split announcement on November 14, RLI also declared a $3 per share special dividend, on top of its regular dividend, something that seems to happen every year. So, the regular, plus the special, brings the annual dividend yield to about 4.5%.

RLI's profit and returns compare very well to its peers and the stock is one-third less volatile than the market. RLI should be a less than spectacular, but steady, contributor to the 2-for-1 portfolio.

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