Results from David Fish's Dividend Champions Index as of June 14, 2013, are reported in this article, which contrasts recent stock prices and dividends with those projected one year out. Seeking Alpha reader requests prompted this series of index-specific articles reporting dividend yield plus price upside results for 12 popular stock indices: the Dow 30, S&P 500, S&P Aristocrats, Russell 50, Nasdaq, NYSE International 100, Nasdaq (formerly Mergent) Dividend Achievers, Champions, Contenders, Challengers, Carnevale's Power 25, and Carnevale's Super 29.
Investor Glossary, posted this brief description of dividend dog methodology: "...[I]nvented to find the 10 stocks of the 30-stock Dow Jones Industrial Average with the highest yield (dividend/price) and invest equally in each, [t]he Dow dividend theory also requires that you repeat this process once a year." This report presumes dividend dog methodology applied to any index and compared that index side by side with the Dow.
Below, the Arnold Dividend Champions Index top dog elections for May/June are disclosed step by step.
Dog Metrics Ranked 30 Dividend Champions Stocks by Yield
Champs 30 List -- June 2013
David Fish's May 31 Champions list of companies paying increasing dividends for 25 consecutive years or more was sorted by yield as of June 14 to reveal the top 10. Price and dividend data was sourced from Yahoo.com.
Ten Champion dogs that promised the biggest dividend yields into June included firms representing five of nine market sectors. The top stocks were three of five from the financial sector: Mercury General Corp. (NYSE:MCY), Old Republic Int'l. (NYSE:ORI), and Universal Health Realty Trust (NYSE:UHT). The other two financial firms, United Bankshares, Inc. (NASDAQ:UBSI) and HCP, Inc. (NYSE:HCP), placed sixth and eighth.
The balance of the top 10 included one service firm, Bowl America Class A (NYSEMKT:BWL.A) in fourth place; one technology, AT&T, Inc. (NYSE:T) in fifth place; and Altria Group, Inc. (NYSE:MO) in seventh place -- the lone consumer goods dog. Two utilities, Consolidated Edison (NYSE:ED) and Northwest Natural Gas (NYSE:NWN), were in ninth and tenth places, completing the representation of market sectors in the champions index.
Dividend Vs. Price Results Compared to Dow Dogs
Below is a graph of the relative strengths of the top ten Dividend Champion dogs by yield as of market close June 14, 2013, compared to those of the Dow. Historic projected annual dividend history from $1,000 invested in each of the 10 highest-yielding stocks and the total single share prices of those 10 stocks created the data points shown in green for price and blue for dividend.
Click to enlarge images.
Actionable Conclusion (1): Champion and Dow Dogs Continue to Run With Bulls
The Champions top May/June dividend payers continued a bullish price course set since November 2012. In the past month Champions top 10 dog dividend dropped 8.6% while price rose nearly 8.5%. For the Dow dogs, meanwhile, projected annual dividend from $1K invested in each of the top 10 dropped over 2.2% since April, while aggregate single share price popped up over 13.6%. Dow dogs increased their overbought condition as aggregate single share price of the 10 exceeded projected annual dividend from $1K invested in each of the 10 by over $198, or 53%.
Since Champion dogs may not all be the blue-chip, high-quality equivalents of the Dow list and also include utilities, an additional gauge of upside potential was added to the simple high yield metric used to cull bargains.
Working With Wall Street Wizard Wisdom
One year mean target price set by brokerage analysts multiplied by the number of shares in a $1K investment were used to compare 10 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 for a valid mean target price estimate.
Actionable Conclusion (2): Analysts Calculate Over 6.39% Net Gain from Top 20 Dividend Champion Dogs in 2014
The top 20 dogs from David Fish's Dividend Champions index were graphed below to show relative strengths by dividend and price as of June 14, 2013, and those projected by analyst mean price target estimates to the same date in 2014. A hypothetical $1,000 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 as of 2014.
Historic prices and actual dividends paid from $1,000 invested in the 10 highest-yielding stocks and the aggregate single share prices of those 20 stocks divided by two created data points for 2013. Projections based on estimated increases in dividend amounts from $1,000 invested in the 20 highest-yielding stocks and aggregate one-year analyst target share prices from Yahoo Finance and divided by two created the 2014 data points green for price and blue for dividends.
Yahoo projected a 2.85% lower dividend from $10K invested in this group while aggregate single share price was projected to increase over 2.87% 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 were considered optimal for a valid estimate.
The Champions was the first index to exhibit a topped out condition in a previous report. In April the top 20 stock analyst aggregate one-year mean target price sank, while dividends increased. This could only occur when most of the stocks on the list were selling at prices higher than analysts' one-year target estimates.
Actionable Conclusion (3): Analysts Forecast 10 Dividend Champion Dogs to Net 4% to 15% by June 2014
Ten probable profit generating trades revealed by Yahoo Finance for 2014 were:
- HCP, Inc. netted $151.49 based on dividends plus mean target price estimate from 11 analysts less broker fees.
- Vectren Corp. (NYSE:VVC) netted $108.77 based on dividends plus the mean of annual price estimates from five analysts less broker fees.
- United Bankshares, Inc. netted $102.11 based on dividends plus mean target price estimate from 13 analysts less broker fees.
- Middlesex Water Co. (NASDAQ:MSEX) netted $98.25 based on dividends plus the mean of annual price estimates from two analysts less broker fees.
- AT&T, Inc. netted $79.97 based on dividends plus the mean of annual price estimates from 27 analysts less broker fees.
- Consolidated Edison, Inc. netted $$79.97 based on dividends plus mean target price estimate from 14 analysts less broker fees.
- Altria Group, Inc. netted $78.65 based on a mean target price estimate from 12 analysts combined with projected annual dividends less broker fees.
- Northwest Natural Gas netted $54.48 based on dividends plus mean target price estimate from five analysts less broker fees.
- Cincinnati Financial (NASDAQ:CINF) netted $45.40 based on dividends plus mean target price estimate from seven analysts less broker fees.
- Tompkins Financial Corp. (NYSEMKT:TMP) netted $41.98 based on a mean target price estimate from three analysts combined with projected annual dividend less broker fees.
The average net gain in dividend and price was over 8.4% on $1K invested in each of these 10 dogs. The stocks listed above were suggested only as decent starting points for your index dog dividend stock purchase research process. These are not recommendations.
Disclosure: I am long DD, GE, INTC, JNJ, MCD, 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.