The profitability screen filters stocks that have been profitable over the last four quarters and are projected to remain profitable over the next four quarters, so companies will have the earnings power to support their dividends.
The volatility measure will look for price volatility based on the past 12 months of daily returns earnings volatility, along with 3 years realized and 2 years projected. Historical data suggest that over the long term, lower volatility stocks offer better risk-adjusted returns than their more volatile counterparts.
“Research has observed a ‘low-volatility anomaly,’ where stocks with lower volatility than the overall market have historically outperformed on risk-adjusted basis over time,” according to Legg Mason.
Financial advisors can also learn more about Legg Mason’s insights at the upcoming virtual conference. On March 14, 2018, ETF Trends will be hosting its annual Virtual Summit, an online virtual conference environment where financial advisors can learn about current ETF issues, hear from industry experts and connect with peers without the burden of cost and traveling.
For more information on dividend-paying stocks, visit our dividend ETFs category.