This Morningstar/YChart (M/Y) report series was prompted by Seeking Alpha reader requests and began last month. It complemented my reports of possible dividend yield based buy opportunities from eight major market sectors as listed by Yahoo Finance which I've posted since the fall of 2011.
So, in response to both Seeking Alpha reader requests and Ycharts.com migration to an eleven sector list, this report series offered three actionable conclusions in unique articles devoted top high yield members of the M/Y sectors: basic materials; communication services; consumer cyclical; consumer defensive; energy; financial services; healthcare; industrials; real estate; technology; utilities. These sectors were all subjected to screening based on a once per year trading system triggered by yield supplemented with one year mean target price estimates from broker analysts.
Recently, an online investor primer, Investor Glossary, 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.
Below, the Arnold M/Y Technology Sector Selections for March were disclosed.
Tests Turn Out Top M/Y Technology Dogs
Top ten technology sector stocks from Yahoo Finance screens showing the biggest dividend yields March 22 represented seven industries. The top two technology sector stocks represented application software: Cimatron (NASDAQ:CIMT), and Simulations Plus (NASDAQ:SLP). Third dog, Mind C.T.I. (NASDAQ:MNDO), represented information technology services. Communication equipment firms took fourth, fifth, and ninth places: Technical Communications (NASDAQ:TCCO); Ituran Location and Control (NASDAQ:ITRN); Communications Systems (NASDAQ:JCS). Rimage Corporation (RIMG) a computer systems firm, took sixth place. Two internet information firms, SouFun (NYSE:SFUN), and United Online (NASDAQ:UNTD), placed seventh and eighth, Lastly, RF Industries (NASDAQ:RFIL) an electronics components firm took tenth place.
Dividend vs. Price Results Compared to Dow Dogs
Below is a graph of the relative strengths of the prime ten M/Y technology dogs by yield as of market close 3/22/2013 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 dividend.
Actionable Conclusion: M/Y Technology Dogs Turn from Bear as Dow Chases Bulls
March's M/Y technology collection of dividend payers price dropped .45% in the past month. Meanwhile, aggregate dividend from $10k invested in each of those top ten dogs jumped 35%.
The Dow, was bullish as price popped up 9.2% while dividend sank 3.1% last month. The Dow shows an overbought condition by 24% as aggregated single share price exceeded dividend from $1k in vested 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 find bargains.
Wall Street Wizard Wisdom Tested
One year mean target price set by brokerage analysts multiplied by the number of shares in a $1k investment were used to compare eight 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 Too: Analysts Anticipate 13.9% Net Gain from Top 20 M/Y Technology Dogs In 2014
Top twenty dogs for the M/Y technology sector were graphed below to show relative strengths by dividend and price as of March 22, 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 price upsides and net gains including dividends less broker fees of $20 as of 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 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 an 11% lower dividend from $10K invested in this group while aggregate single share price was projected to increase by over 11.5% 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 Forecast 4 Top Gain M/Y Technology Dogs to Net 20.9% to 78.9% Come 2014
Four probable profit generating trades revealed by Yahoo Finance for 2014 were:
Silicon Motion Technology (NASDAQ:SIMO) netted $789.49 based on estimates from seven analysts plus dividends;
United Online (UNTD) netted $329.92, based on dividends plus a mean target price estimate from three analysts;
Comtech Telecommunications Corporation (NASDAQ:CMTL) netted $214.82 based on dividends plus the mean of annual price estimates from five analysts;
SouFun (SFUN) netted $209.95 based on dividends plus a mean target price estimate from four analysts.
The average net gain in dividend and price was slightly over 38.6% on $1k invested in each of these four top tech dogs.
The stocks listed above were suggested only as decent starting points for your M/Y sector dividend stock purchase research process. These were 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.