This article reports intriguing information involving industrial goods sector stocks inventoried as of market close 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. Those results composed the Arnold industrial goods sector selections for April.
Dog Metrics Identified Ten Top Industrial Goods Stocks
Ten industrial goods sector stocks showing the biggest dividend yields according to Yahoo as of April 26 represented six industries. Top industrial goods sector stock, Veolia Environement (NYSE:VE), was one of two waste management firms in the top ten. The other was Waste Management (NYSE:WM) in eighth place. Aerospace & defense-major firms took second, and seventh slots: Lockheed Martin Corporation (NYSE:LMT); Raytheon Company (NYSE:RTN). CRH plc (NYSE:CRH) in third place is a Cement firm. CompX International Inc. (NYSEMKT:CIX) in the fourth slot is a security and protection firm that somehow showed up as an industrial sector stock on the yahoo finance sector screen. Diversified machinery was represented by two firms in the top ten: Ampco-Pittsburgh Corp (NYSE:AP) in fifth place, and General Electric (NYSE:GE) in tenth. Sixth place was captured by L.S. Starrett Company (NYSE:SCX), a maker of small tools. The remaining firm in the top ten represented industrial electrical equipment: LSI Industries Inc. (NYSE:LSI) in ninth place.
Dividend vs. Price Results Compared to Dow Dogs
Below is a graph of the relative strengths of the top ten industrial goods 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): Industrial Goods Dogs Flash Bear Signal as Dow Stays Bullish
The April industrial goods collection of dividend payers ended a bullish price course set since November, 2012 as aggregate single share price dropped 14.7%. April Dividend from $1k invested in each of the top ten industrial stocks, rose at a rate of 4.4%.
The Dow dogs, meanwhile remained totally bullish last month as price popped up 7% as 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 identify bargains.
Wall Street Wizard Wisdom Weighed
One year mean target price set by analysts multiplied by the number of shares in a $1k investment identified nine stocks showing the 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 See 4.1% Net Gain from Top 20 Dogs Come 2014
Top twenty dogs for the industrial goods 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 a nearly 4.7% lower dividend from $10K invested in this group while aggregate single share price was projected to increase by over 6.5% in the coming year. Note that the chart showed an overbought condition as aggregate single share price for ten industrial goods dogs exceeded projected dividends from $1k invested in each of those ten
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 Industrial Goods DiviDog Stock Net Gains of 3.6% to 19.5%
Nine probable profit generating trades revealed by Yahoo Finance for 2014 were:
- Hillenbrand, Inc. (NYSE:HI) netted $195.31 based on dividends plus mean target price estimate from three analysts less broker fees;
- US Ecology (NASDAQ:ECOL) netted $183.34, based on dividends plus mean target estimates from two analysts less broker fees;
- Eaton Corporation (NYSE:ETN) netted $178.81, based on dividends plus estimates from nineteen analysts less broker fees;
- Stanley Black & Decker (NYSE:SWK) netted $159.84 based on estimates from eleven analysts plus dividends less broker fees.
- General Electric Company (GE) netted $154.70 based on a mean target price estimate from fifteen analysts combined with projected annual dividend less broker fees;
- Emerson Electric (NYSE:EMR) netted $135.58 based on estimates from twenty-two analysts plus dividends less broker fees;
- MDUI Resources Group (NYSE:MDU) netted $86.09 based on dividends plus the mean of annual price estimates from eight analysts less broker fees;
- Republic Services, Inc. (NYSE:RSG) netted $37.13 based on estimates from six analysts plus dividends less broker fees; and
- Waste Management, Inc. (WM) netted $36.48 based on estimates from three analysts plus dividends less broker fees.
The average net gain in dividend and price was 12.9% on $1k invested in each of these nine 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.
Disclosure: I am long 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.