This article reports stories of services sector stocks tallied as of market closing prices April 26 using Dow dividend dog methodology. In the fall of 2011, this report series started applying dog methods 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).
The dog theory picks below reporting the highest yield (dividend/price) from Yahoo sectors were supplemented with one year mean target price estimates from broker analysts. These compose the Arnold services sector selections for April.
Dog Metrics Selected Ten Top Services Sector Stocks
The top ten services sector stocks showing the biggest dividend yields April 26 per Yahoo represented four industries. Top services stock by dividend yield was Navios Maritime Partners (NMM), one of seven stocks representing the shipping industry. Other shippers were Capital Product Partners (CPLP) in second place, Knightsbridge Tankers (VLCCF) in third, Ship Finance International (SFL) in fourth, Nordic American Tankers (NAT) in eighth, Teekay Offshore Partners (TOO) in ninth, and Teekay LNG Partners (TGP) in tenth. StoneMor Partners (STON) represented personal services in fifth place. Compass Diversified Holdings (CODI) represented staffing and outsourcing services in sixth position. Business services took the seventh slot represented by R.R. Donnelley & Sons (RRD) to complete the services sector top ten dogs.
Dividend vs. Price Results Compared to Dow Dogs
Below is a graph of the relative strengths of the top ten services 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): Services Dogs and Dow Got Bullish
The April services collection of dividend payers continued a bullish price course set since December 2012. Aggregate dividend from $10k invested in each of the top ten industrial stocks, dropped at a rate of 39% since the first of the year while total single share price popped up 90.6% in that period. In the past month, services' dividends dropped 3% while price rose 4.3%.
The Dow dogs, meanwhile remained totally bullish last month as price popped up 7% as dividends sank 3.8%. The Dow extended an overbought condition as aggregated single share price exceeded dividends 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 dig 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 were considered optimal to provide valid mean target price estimates.
Actionable Conclusion (2): Analysts See 13.18% Net Gain from Top 20 Services Dogs Come 2014
Top twenty dogs for the services 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, in green for price and blue for dividends.
Yahoo projected a nearly 4.2% lower dividend from $10K invested in this group while aggregate single share price was projected to increase by 6.9% 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 Forecast 2014 Services DiviDog Stock Net Gains of 7.2% to 30.5%
Ten probable profit generating trades revealed by Yahoo Finance for 2014 were:
World Wrestling Entertainment (WWE) netted $304.97 based on dividends plus mean target price estimate from three analysts less broker fees;
Teekay Tankers (TNK) netted $281.96 based on dividends plus estimates from seven analysts less broker fees;
United Online, Inc. (UNTD) netted $238.11, based on dividends plus mean target estimates from three analysts less broker fees;
Ship Finance International (SFL) netted $235.89 based on estimates from seven analysts plus dividends less broker fees;
R.R. Donnelley & Sons Co. (RRD) netted $233.25 based on a mean target price estimate from five analysts combined with projected annual dividend less broker fees;
TAL International Group (TAL) netted $208.83, based on dividend plus mean target price estimates from nine analysts less broker fees;
Cedar Fair, LP (FUN) netted $92.17 based on estimates from five analysts plus dividends less broker fees;
Global Partners LP (GLP) netted $91.64 based on target estimates from four analysts plus dividends less broker fees;
Teekay Offshore Partners LP (TOO) netted $80.17 based on dividends plus the mean of annual price estimates from seven analysts less broker fees;
Teekay LNG Partners LP (TGP) netted $72.29, based on dividends plus mean target price estimate from five analysts less broker fees.
The average net gain in dividend and price was 18.4% on $1k invested in each of these ten dogs less broker fees.
These net gains do not factor in any tax problems resulting from distributions (not dividends and K-1s) from MLPs and any possible re-capture 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.