This article reports results from David Fish's Dividend Champions Index calculated as of April 4, 2013, projecting gain results one year hence. Seeking Alpha reader requests prompted this first installment in a new series of index-specific articles reporting dividend yield plus price upside results for twelve popular stock indices: Dow 30; S&P 500; Aristocrats; Russell 1000; NASDAQ; NYSE International 100; Mergent Dividend Achievers; Champions; Contenders; Challengers; Carnevale's Power 25; Carnevale's Super 29.
An online tutorial for investors, 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.
Below, the Arnold Dividend Champions Index top dog selections for April were disclosed.
Dog Metrics Ranked 30 Dividend Champions Stocks by Yield
David Fish's March 28 Champions list of companies paying increasing dividends for 25 consecutive years or more was sorted by yield as of April 4 to reveal the top ten. Price and dividend data was sourced from Yahoo.com
Ten Champion dogs that promised the biggest dividend yields into April included firms representing five of nine market sectors. The top stock, Pitney Bowes (NYSE:PBI), was one of two firms in the consumer sector. Altria Group Inc. (NYSE:MO) in fifth place was the other consumer goods dog.
The balance of the top ten included: five financial, Mercury General Corp.(NYSE:MCY) second dog, Old Republic International. (NYSE:ORI) third, United Bankshares Inc. (NASDAQ:UBSI) sixth, Universal Health Realty Trust (NYSE:UHT) eighth, and HCP Inc. (NYSE:HCP) ninth; one service, Bowl America Class A (NYSEMKT:BWL.A) was fourth; one technology, AT&T Inc. (NYSE:T) placed seventh; one utility, Northwest Natural Gas (NYSE:NWN) in tenth completed the representation of market sectors in the champions index.
Dividend vs. Price Results Compared to Dow Dogs
Below is a graph of the relative strengths of the top ten Dividend Champion dogs by yield as of market close 4/4/2013 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: Champion & Dow Dogs Run With Bulls
The Champions top April dividend payers continued a bullish course set since November, 2012. In the past month Champions top ten dog dividend dropped 2.4% while price rose over 4.8%.
In the Dow dogs, meanwhile, annual dividend from $1k invested in each of the ten dropped over 1.1% since March, while aggregate single share price jumped over 5.3%. The Dow dogs extended their overbought condition as aggregate single share price of the ten continued to exceed projected annual dividend from $1k invested in each of the ten by over $121 or 32%.
Since Champion dogs are not all the blue chip high quality equivalents of the Dow list and include utilities, an additional gauge of upside potential was added to the simple high yield metric used to cull bargains.
Weighing Wall Street Wizard Wisdom
One year mean target price set by brokerage 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 Too: Analysts Calculate Over 5.94% Net Gain from Top 20 Dividend Champion Dogs In 2014
Top twenty dogs from David Fish's Dividend Champions index were graphed below to show relative strengths by dividend and price as of April 4, 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 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 a 2% higher dividend from $10K invested in this group while aggregate single share price was projected to decrease over 3.5% 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 estimate.
The Champions are the first index to exhibit this topped out condition in which analyst one year mean target prices for the top twenty stocks sink while dividends increase. This only occurs when most of the stocks on the list are currently selling at prices higher than analyst one year target estimates.
Actionable Conclusion Three: Analysts Forecast 5 Dividend Champion Dogs to Net 5.7% to 25.7% By April 2014
Five probable profit generating trades revealed by Yahoo Finance for 2014 were:
Pitney Bowes Inc (PBI) netted $257.62 based on dividends plus mean target price estimate from four analysts less broker fees;
Middlesex Water Co. (NASDAQ:MSEX) netted $79.33 based on dividends plus the mean of annual price estimates from two analysts less broker fees;
Altria Group Inc (MO) netted $73.00 based on a mean target price estimate from twelve analysts combined with projected annual dividend less broker fees;
Community Trust Bancorp Inc. (NASDAQ:CTBI) netted $63.06 based on dividends plus mean target price estimate from two analysts less broker fees;
Leggett & Platt Inc. (NYSE:LEG) netted $57.54 based on a mean target price estimate from four analysts combined with projected annual dividend less broker fees.
The average net gain in dividend and price was over 10.76% on $1k invested in each of these four dogs.
The stocks listed above were suggested only as decent starting points for your index dog dividend stock purchase research process. These were not recommendations. As a measure of broker analyst confidence in this index, only 5 stocks of the 20 top yielders (25%) showed any upside potential.
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.