Results from the healthcare sector tallied as of market-closing prices on June 28 compared with analysts' mean target gain results one year hence showed Sanofi (NYSE:SNY), a French firm from the major drug manufacturers industry, with 31.45% price upside.
The chart above used one-year mean target prices set by brokerage analysts matched against June 28 closing prices to compare 10 healthcare sector 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.
This report series started applying dog dividend methodology in the fall of 2011 to reveal possible buy opportunities in each of the 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). Below, the author compared Dow dividend dog theory picks exhibiting the highest yield (dividend/price) from Yahoo sectors with one-year mean target price estimates reported from broker analysts.
Note my Arnold Heal selections for May/June are as follows:
Dog Metrics Pointed Out 10 Top Healthcare Stocks
Four industries were represented by the 10 healthcare sector stocks showing highest dividend yields as of June 28 by Yahoo Finance. Top healthcare sector stock, PetMed Express (NASDAQ:PETS), represented drug delivery firms. Meridian Bioscience, Inc. (NASDAQ:VIVO) in sixth place represented diagnostic substance firms. Second-place dog GlaxoSmithKline (NYSE:GSK) was the best of seven drug manufacturers, major on this list. The other six major manufacturers were Eli Lilly (NYSE:LLY) in third position, Merck (NYSE:MRK) in fourth, Novartis AG (NYSE:NVS) in fifth, Pfizer (NYSE:PFE) in seventh, Bristol-Myers Squibb (NYSE:BMY) in eighth, and Johnson & Johnson (NYSE:JNJ) in ninth. Baxter International, Inc. (NYSE:BAX) -- the only medical instruments and supplies firm in the top 10 -- completed the top 10 healthcare dogs in 10th place.
Dividend Vs. Price Results Compared to Dow Dogs
Relative strengths of the top 10 healthcare dogs by yield as of market close on June 28, 2013, compared to those of the Dow was graphed below based on 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 to create data points shown in green for price and blue for dividends.
Click to enlarge images.
Actionable Conclusion No. 1: Healthcare Dogs Turned Bullish as Dow Stayed Bullish
The healthcare collection of dividend payers resumed a bullish price course initiated October 2012. For the May/June period, total single share price popped up 22.2% since April. Aggregate dividend from $10K invested in each of the top 10 healthcare dogs dropped at a rate of 10.2% last month. The healthcare pack entered overbought territory as aggregate single share price exceeded the dividend derived from $1K invested in each for the first time this year.
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%. The Dow dogs' bull run 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 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 diagnose bargains.
Actionable Conclusion No. 2: Wall Street Wizard Wisdom Was Weighed to Calculate Over 9.9% Net Gain From Top 20 Dogs Come 2014
The top 20 dogs for the healthcare sector were graphed below to show relative strengths by dividend and price as of June 28, 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 upsides to 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 the 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, divided by two created the 2014 data points green for price and blue for dividends.
Yahoo projected a 6.3% lower dividend from $10K invested in this group while aggregate single share price was projected to increase by over 8.8% in the coming year. Note that the chart showed an overbought condition for 2014 as aggregate single share price for 10 healthcare dogs exceeded projected dividends from $1K invested in those 10. 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 No. 3: Analysts Forecast 2014 Health Dividend Dog Net Gains of 9.2% to 31.45%
Ten probable profit generating trades revealed by Yahoo Finance for 2014 were:
- Sanofi netted $314.50, based on dividends plus mean target price estimate from four analysts less broker fees.
- Herbalife Ltd. Co. (NYSE:HLF) netted $269.32, based on dividends plus a mean target price estimates by six analysts less broker fees.
- Eli Lilly netted $177.07 based on dividends plus mean target price estimate from sixteen analysts less broker fees.
- Steris Corp. (NYSE:STE) netted $159.80 based on a mean target price estimate from six analysts combined with projected annual dividend less broker fees.
- Teva Pharmaceutical (NYSE:TEVA) netted $147.60 based on dividends plus mean target price estimate from 19 analysts less broker fees.
- Mine Safety Appliances Co. (NYSE:MSA) netted $138.97 based on dividend plus a mean target price estimate from four analysts less broker fees.
- Teleflex Incorporated (NYSE:TFX) netted $136.92 based on estimates from seven analysts plus dividends less broker fees.
- Merck & Co. netted $136.51 based on dividends plus the mean of annual price estimates from 15 analysts less broker fees.
- Baxter International, Inc. netted $94.91 based on estimates from 15 analysts plus dividends less broker fees.
- Novartis AG netted $92.29 based on dividends plus the mean of annual price estimates from six analysts less broker fees.
The average net gain in dividend and price was 18.53% on $1K invested in each of these 10 dogs. The stocks listed above are suggested only as decent starting points for your sector dividend stock purchase research process. These are not recommendations.
Disclosure: I am long JNJ, DD, GE, INTC, 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.