4 Top Utilities Dogs Spark 7.5% To 34% Gains In April

by: Fredrik Arnold

This article reports unique utterances about utilities sector stocks surveyed as of market closing prices April 26 using dividend dog methodology. This report series started applying dog dividend methodology in the fall of 2011 to reveal possible buy opportunities in each of eight major market sectors listed by Yahoo Finance: basic materials (BasMats), consumer goods (ConGo), financials (Fins), healthcare (Heal), industrial goods (IndiGo), services (Svcs), technology (Tec), and utilities (Utes).

Below the author supplemented Dow dividend dog theory picks from Yahoo sectors with one year mean target price estimates reported by yahoo from broker analysts.

Note my Arnold Utes Selections for April as follows:

Dog Metrics Pointed Out Ten Top Utilities Stocks

Ten top utilities sector stocks that showed the biggest dividend yields April 26 per Yahoo Finance data represented four industries: electric; gas; diversified; foreign. Top dog, TransAlta Corp. (NYSE:TAC) was one of two diversified utilities. The other diversified utility, Exelon Corporation (NYSE:EXC) placed sixth. In second place, Atlantic Power Corporation (NYSE:AT) was tops by yield of three electric firms listed. The other electrics were in ninth and tenth places, PEPCO (NYSE:POM), and FirstEnergy Corporation (NYSE:FE). Suburban Propane Partners (NYSE:SPH) in third slot was the top yielding of four gas firms. The others placed fourth, seventh and eighth: Amerigas Partners (NYSE:APU); Inergy, L.P. (NRGY); Gas Natural (NYSEMKT:EGAS). One foreign utility, CPFL Energia (NYSE:CPL) was listed fifth.

Dividend vs. Price Results Compared to Dow Dogs

Below is a graph of the relative strengths of the top ten utilities dogs by yield as of market close 4/26/2013 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 (1): Utilities Dogs Retreat from Bear as Dow Chases Bulls

The April utilities collection of dividend payers definitively entered bear territory as aggregate single share price dropped 10.5% in the past month while dividend from $10k invested in each of those ten dogs jumped 4%.

The Dow, meanwhile stayed totally bullish as price popped up 7% while dividend sank 3.8%. The Dow extended an overbought condition as aggregated single share price exceeded dividend from $1k invested in each stock by $140.52 or 38%.

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 cull bargains.

Weighing Wall Street Wizard Wisdom

One year mean target price set by analysts multiplied by the number of shares in a $1k investment were used to compare seven 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 (2): Analysts Forecast 8.5% Net Gain from Top 20 Utilities Dogs Come 2014

Top twenty dogs for the utilities sector were graphed below to show relative strengths by dividend and price as of April 26, 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 only a .83% lower dividend from $10K invested in this group while aggregate single share price was projected to bearishly DROP by 2.3% 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 (3): Analysts Foretell 2014 Utilities DiviDogs to Net 7.5% to 34.6%

Just four probable profit generating trades out of a possible twenty were revealed by Yahoo Finance for 2014:

Atlantic Power Corporation netted $343.64, based on dividends plus mean target price estimate from six analysts less broker fees;

Gas Natural netted $246.02 based on dividends plus a mean target price estimate from three analysts less broker fees;

TransAlta Corp. netted $220.47, based on dividend plus mean target price estimates from seven analysts less broker fees;

Brookfield Infrastructure Partners (NYSE:BIP) netted $75.78 based on estimates from fifteen analysts plus dividends less broker fees.

The average net gain was 22.15% on $1k invested in each of these four dogs.

The above net gain estimates do not factor-in any tax problems resulting from distributions (not dividends and K-1s) from MLPs and any possible re-capture or foreign tax problems/rates that may suck projected gains out of some of these estimates at the regular tax bracket rate and not capital gain rates. Consult your tax advisor regarding the source of "dividends" from any investment.

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 AT, 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.