This Morningstar/YChart (M/Y) report series began in February prompted by Seeking Alpha reader requests. 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, responding to both the Seeking Alpha reader request and Ycharts.com migration to an eleven sector list, this report provided three actionable conclusions about the highest yield (dividend / price) stocks from the Morningstar/YCharts (M/Y) sectors: basic materials; communication services; consumer cyclical; consumer defensive; energy; financial services; healthcare; industrials; real estate; technology; utilities.
These dog theory picks were supplemented with one year mean target price estimates from broker analysts. Those results composed the Arnold M/Y technology sector selections for April shown below.
Dog Metrics Tests Turn Out Top M/Y Technology Dogs
Top ten technology sector stocks from YCharts screens showing the biggest dividend yields May 3 represented eight industries. The top technology sector dog, Cimatron (NASDAQ:CIMT), represented application software. Second dog, Mind C.T.I. (NASDAQ:MNDO), represented information technology services. A communication equipment firm, Ituran Location and Control (NASDAQ:ITRN), took third place. Three internet content firms, SouFun (NYSE:SFUN), SMTP, Inc. (OTCQB:SMTP), and United Online (NASDAQ:UNTD), placed fourth, seventh and tenth. Rimage Corporation (RIMG) a computer systems firm, took fifth place. Nam Tai Electronics (NTE) from the electronics components industry was sixth. Communications Systems (NASDAQ:JCS) making communications equipment was eighth. Finally, RF Industries (NASDAQ:RFIL) an electronics components firm took ninth place to complete the top ten m/y tech dogs.
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 5/3/2013 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 One: M/Y Technology Dogs & Dow Went Bullish
The April m/y technology collection of dividend payers took a barely bullish price course as aggregate single share price inched up 2% since March. April Dividend from $1k invested in each of the top ten m/y tech stocks, dropped down at a rate of 13.5% last month.
The Dow dogs, meanwhile, remained totally bullish last month as price popped up 7% and 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 Tested
The one year mean target price set by brokerage analysts multiplied by the number of shares in a $1k investment identified 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 Two: Analysts Anticipate 12.4% 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 May 3, 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 12.2% lower dividend from $10K invested in this group while aggregate single share price was projected to increase by over 24.7% 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 7 Top Gain M/Y Technology Dogs to Net 6.3% to 48% Come 2014
Seven probable profit generating trades revealed by Yahoo Finance for 2014 were:
Silicon Motion Technology (NASDAQ:SIMO) netted $480.44 based on estimates from six analysts plus dividends less broker fees;
SouFun (SFUN) netted $285.91 based on dividends plus a mean target price estimate from four analysts less broker fees;
United Online (UNTD) netted $261.39, based on dividends plus a mean target price estimate from three analysts less broker fees;
Comtech Telecommunications Corporation (NASDAQ:CMTL) netted $174.44 based on dividends plus the mean of annual price estimates from five analysts less broker fees;
Cypress Semiconductor (NASDAQ:CY) netted $142.88 based on mean target price estimates from sixteen analysts plus dividends less broker fees;
Garmin Ltd. (NASDAQ:GRMN) netted $80.26, based on dividends plus a mean target price estimate from six analysts less broker fees;
Intersil Corporation (NASDAQ:ISIL) netted $63.12 based on one year target price estimates from fifteen analysts plus dividends less broker fees.
The average net gain in dividend and price was slightly over 21.2% on $1k invested in each of these seven 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.