This report series began in the fall of 2011 applying dog dividend methodology to reveal possible buy opportunities in each of eight major market sectors listed by Yahoo Finance: basic materials (BMats), consumer goods (ConGo), financials (Fins), healthcare (Heal), industrial goods (IndiGo), services (Svcs), technology (Tec), and utilities (Utes).
An online investor primer, Investor Glossary, recently offered this brief 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 were supplemented with one year mean target price estimates from broker analysts for this article.
Below, the Arnold Technology Sector Selections for March were disclosed.
Dog Metrics Revealed Top Technology Stocks
Top ten technology sector stocks from Yahoo Finance screening showing the biggest dividend yields as of March 15 represented four industries. Top technology sector stock, NTELOS Holdings Corp. (NTLS), was the lone wireless technology firm. Second through sixth and eighth places were taken by six Telecom services - domestic representatives: Windstream Corporation (WIN); Frontier Communications Corporation (FTR); Consolidated Communications Holdings (CNSL); CenturyLink, Inc. (CTL); Hickory Tech Corp. (HTCO); AT&T Inc. (T). In between domestic telecom group, Garmin Ltd. (GRMN) represented scientific & technical instrument firms in seventh place. Two application software firms rounded out the top ten: American Software, Inc. (AMSWA) was ninth; Magic Software Enterprises (MGIC), was number ten.
Dividend vs. Price Results Compared to Dow Dogs
Below is a graph of the relative strengths of the top ten technology 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: Technology Dogs Show Mixed Signal as Dow Gets Bullish
March's technology collection of dividend payers swooned in both dividend from $10k invested in each of the top ten stocks, and aggregate single share price of those ten. Dividend dropped at a rate of 13% since February while total single share price dropped 21% in that period.
The Dow went totally bullish as price popped up 9.2% while dividend sank 3.1% in the past month. The Dow showed 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 flush 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 ten 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. Three to nine analysts was considered optimal for a valid mean target price estimate.
Actionable Conclusion Two: Analysts Predicted 11.63% Net Gain from Top 20 Technology Dogs Come 2014
Top twenty dogs for the technology sector were 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 nearly a 9.4% lower dividend from $10K invested in this group while aggregate single share price was projected to increase by over 7.4% in the coming year. 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 (n/a).
Actionable Conclusion Three: Analysts Augur 2014 Technology DiviDogs to Net 5.5% to 58.4%
Ten probable profit generating trades revealed by Yahoo Finance for 2014 were:
EarthLink Inc. (ELNK) netted $583.94, based on dividends plus mean target price estimate from four analysts;
Windstream Corporation netted $233.97 based on dividends plus mean target price estimate from thirteen analysts;
Frontier Communications netted $224.50 based on a mean target price estimate from twelve analysts combined with projected annual dividend;
Garmin Ltd. netted $201.93 based on dividend plus a mean target price estimate from seven analysts;
NTELOS Holdings Corp. netted $187.73 based on dividends plus estimates from four analysts;
CenturyLink, Inc. netted $116.75 based on estimates from sixteen analysts plus dividends;
Nokia Corporation (NOK) netted $99.53, based on dividend plus mean target price estimates from sixteen analysts;
Microchip Technology Inc. (MCHP) netted $92.18 based on estimates from sixteen analysts plus dividends;
TELUS Corporation (TU) netted $57.23 based on dividends plus the mean of annual price estimates from ten analysts;
Maxim Integrated Products (MXIM) netted $70.81 based on target estimates from twenty five analysts plus dividends.
The average net gain in dividend and price was 18.5% on $1k invested in each of these ten 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.