This Morningstar/YChart (M/Y) report series was prompted by Seeking Alpha reader requests and began in February. This series also 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 one of 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 consumer defensive sector selections for April shown below.
Dog Metrics Find Ten Cool Consumer Defensive Dogs
The elite ten consumer defensive stocks showing the biggest dividend yields per the YCharts screen as of May 8 represented five industries. Tops was one of four tobacco firms listed, Vector Group (NYSE:VGR). The other tobacco firms placed seventh, ninth, and tenth: Lorillard (NYSE:LO), Reynolds American (NYSE:RAI), and Altria Group (NYSE:MO). The only personal products firm listed, CCA Industries (NYSEMKT:CAW), was second. A chain of grocery stores, Roundy's (NYSE:RNDY) took third . Fourth place went to Ambassadors Group (NASDAQ:EPAX), one of three education and training companies. The other two education firms, TAL Education Group (XRS), and National American University (NASDAQ:LINC), placed sixth and eighth. Finally, Cresud Sociedad An (NASDAQ:CRESY), a farm products company was fifth to complete this doggie honor roll.
Dividend vs. Price Results Compared to Dow Dogs
Below is a graph of the relative strengths of the top ten M/Y consumer defensive dogs by yield as of market close 5/8/2013 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): M/Y Consumer Defensive Dogs and Dow Were Bullish
The M/Y consumer defensive collection of dividend payers for April turned slightly bullish as aggregate single share price of the top ten went up while dividends from $10k invested those ten dropped. In the past month consumer defensive top ten collective price rose 3.4% while dividend sank .12%.
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 pick out bargains.
Wall Street Whiz Kids Weighed In
One year mean target price set by analysts multiplied by the number of shares in a $1k investment were used to compare five 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 See 11% Net Gain from Top 20 M/Y Consumer Defensive Dogs Come 2014
Top twenty dogs for the M/Y consumer defensive sector were graphed below to show relative strengths by dividend and price as of May 8, 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 analyst reports projected A 4.9% lower dividend from $10K invested in this group while aggregate single share price was projected to increase by OVER 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 Predict 5 M/Y Consumer Defensive DiviDogs to Net 6.37% to 73.7% in 2014
Five probable profit generating trades revealed by Yahoo Finance for 2014 were:
- Cresud Sociedad An netted $736.98, based on dividends plus mean target price estimate from three analysts less broker fees;
- TAL Education Group netted $450.33 based on dividends plus mean target price estimate from eight analysts less broker fees;
- Companhia de Bebidas (ABV) netted $110.73 based on estimates from eight analysts plus dividends less broker fees;
- Lorillard netted $69.08 based on a mean target price estimate from eight analysts combined with projected annual dividend less broker fees;
- B&G Foods (NYSE:BGS) netted $63.68, based on dividends plus mean target price estimate from four analysts less broker fees.
The average net gain in dividend and price was 28.6% on $1k invested in each of these five 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.
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.
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.