Applying dog dividend methodology to reveal possible buy opportunities, this report series started in the fall of 2011. Each of eight major market sectors were reported as listed by Yahoo Finance: basic materials (BMats), consumer goods (ConGo), financials (Fins), healthcare (Heal), industrial goods (IndiGo), services (Svcs), technology (Tec), and utilities (Utes).
Briefly, Investor Glossary, an online investor primer, recently offered this description of dividend dog methodology: "...[I]nvented to find the 10 stocks of the 30-stock Dow Jones Industrial Average with the highest yield (dividend / price) and invest equally in each, [t]he Dow dividend theory also requires that you repeat this process once a year.
Dow dividend dog theory picks from Yahoo sectors have recently been supplemented with one year mean target price estimates from broker analysts.
Below, the Arnold Healthcare Selections for March are disclosed.
Dog Metrics Sniffed Out Top Healthcare Stocks
Three industries were represented by the ten healthcare sector stocks showing the biggest dividend yields as of March 15 by Yahoo Finance. February's top healthcare sector stock, Daxor Corporation (NYSEMKT:DXR), the only medical instruments and supplies firm in the top ten, placed second. In March, PetMed Express (NASDAQ:PETS), in fourth represented drug delivery firms. The top dog was one of eight drug manufacturers, major on this list, AstraZeneca (NYSE:AZN). The others were: GlaxoSmithKline (NYSE:GSK) in third position; Merck (NYSE:MRK) in fifth; Novartis AG (NYSE:NVS) in sixth; Bristol-Myers Squibb Company (NYSE:BMY), seventh; Eli Lilly and Company (NYSE:LLY) in eighth; Pfizer, Inc. (NYSE:PFE), in ninth; Sanofi (NYSE:SNY) in tenth completed the top ten healthcare dogs.
Dividend vs. Price Results Compared to Dow Dogs
Below is a graph of the relative strengths of the top ten healthcare dogs by yield as of market close 3/15/2013 compared to those of the Dow. Historic projected annual dividend history from $1000 invested in each of the ten highest yielding stocks and the total single share prices of those ten stocks created the data points shown in green for price and blue for dividends.
Actionable Conclusion: Healthcare Dogs Flash Mixed Signal as Dow Gets Bullish
March's healthcare collection of dividend payers continued a bullish price course set since October, 2012. Aggregate dividend from $10k invested in each of the top ten healthcare stocks, however, rose (bearishly) at a rate of 4% since February while total single share price popped up (bullishly) 9.9% in that period. The Dow went totally bullish as price popped up 9.2% while dividend sank 3.1%. The Dow shows an overbought condition by 24% as aggregated single share price exceeded dividend from $1k invested in each stock by $92.
Since sector dogs are not the blue chip high quality equivalents of the Dow list, an additional gauge of upside potential was added to the simple high yield metric used to sniff out bargains.
Wizards of Wall Street Weighed In
One year mean target price set by analysts multiplied by the number of shares in a $1k investment were used to compare nine stocks showing the highest upside price potential into 2014 out of 20 selected by yield. The number of analysts providing price estimates was noted after the name for each stock. A number of three to nine analysts was considered optimal for a valid mean target price estimate.
Actionable Conclusion Two: Analysts See 6.87% Net Gain from Top 20 Dogs Come 2014
Top twenty dogs for the healthcare sector are graphed below to show relative strengths by dividend and price as of March 15, 2013 and those projected by analyst mean price target estimates to the same date in 2014.
A hypothetical $1000 investment in each equity was divided by the current share price to find the number of shares purchased. The shares number was then multiplied by projected annual per share dividend amounts to find the dividend return. Thereafter the analyst mean target price was used to gauge the stock upsides to 2014.
Historic prices and actual dividends paid from $1000 invested in the ten highest yielding stocks and the aggregate single share prices of those twenty stocks divided by 2 created the data points for 2013. Projections based on estimated increases in dividend amounts from $1000 invested in the twenty highest yielding stocks and aggregate one year analyst target share prices from Yahoo Finance divided by 2 created the 2014 data points green for price and blue for dividends.
Yahoo projected a nearly 3% lower dividend from $10K invested in this group while aggregate single share price was projected to increase by nearly 4% in the coming year. Note that the chart shows an overbought condition when aggregate single share price for ten Healthcare dogs exceeded projected dividends from $1k invested in those ten.
The number of analysts contributing to the mean target price estimate for each stock was noted in the last column on the charts. Three to nine analysts was considered optimal for a valid projection estimate. Estimates provided by one analyst were not applied.
Actionable Conclusion Three: Analysts Forecast 2014 Health DiviDog Stock Net Gains of 3.45% to 28.65%
Nine probable profit generating trades revealed by Yahoo Finance for 2014 were:
Sanofi netted $286.51, based on estimates from three analysts;
AstraZeneca netted$ 125.50 based on a mean target price estimate from three analysts;
Merck & Co. Inc. netted $119.03, based on estimates from fifteen analysts;
Steris Corp. (NYSE:STE) netted $108.59 based on a mean target price estimate from six analysts;
Mine Safety Appliances Co. (NYSE:MSA) netted $103.52, based on estimates from four analysts;
Medtronic, Inc. (NYSE:MDT) netted $86.56 based on estimates from eighteen analysts;
GlaxoSmithKline netted $78.57, based on estimates from three analysts;
Teleflex Incorporated (NYSE:TFX) netted $68.50 based on estimates from seven analysts;
Baxter International, Inc. (NYSE:BAX) netted $34.50 based on estimates from sixteen analysts.
The average net gain in dividend and price was 11.2% on $1k invested in each of these nine dogs.
The stocks listed above are suggested only as decent starting points for your sector dividend stock purchase research process. These are not recommendations.
Disclaimer: This article is for informational and educational purposes only and should not be construed to constitute investment advice. Nothing contained herein shall constitute a solicitation, recommendation or endorsement to buy or sell any security. Prices and returns on equities in this article except as noted are listed without consideration of fees, commissions, taxes, penalties, or interest payable due to purchasing, holding, or selling same.
Disclosure: I am long DD, GE, INTC, JNJ, MCD, MSFT, PFE, T, VZ. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.