Seeking Alpha
Dividend investing, growth, momentum
Profile| Send Message| ()  

Results from the industrial goods sector tallied as of market closing prices June 28 compared with analyst mean target gain results one year hence showed LSI Industries Inc. (LYTS), an Ohio firm from the industrial electrical equipment industry, sporting a 35.97% price upside.

The chart above used one year mean target price set by brokerage analysts matched against June 28 closing price to compare ten 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 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 IndiGo selections for May/June as follows:

Dog Metrics Identified Ten Top Industrial Goods Stocks

Ten industrial goods sector stocks showing the biggest dividend yields according to Yahoo as of June 28 represented six industries. Top industrial goods sector stock, Veolia Environment (VE), was one of two waste management firms in the top ten. The other was Waste Management (WM) in fifth place. CRH plc (CRH) in second place is a Cement firm. Aerospace & defense-major firms took third, and sixth slots: Lockheed Martin Corporation (LMT); Raytheon Company (RTN). Diversified machinery was represented by three firms in the top ten: Ampco-Pittsburgh Corp (AP) in fourth place, Hillenbrand, Inc. (HI) in seventh place, and General Electric (GE) in eighth. Ninth place was captured by MDC Holdings Inc. (MDC), a residential construction firm. The remaining company in the top ten represented industrial equipment and components: Emerson Electric Co. (EMR) in tenth 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 6/28/2013 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.


(Click to enlarge)

Actionable Conclusion (1): Industrial Goods Dogs Go Bullish as Dow Stays So

The May/June industrial goods collection of dividend payers resumed a bullish price course set since November, 2012. Price popped up 31.33% as of June 28 while dividend from $1k invested in each of the top ten industrial goods stocks, dropped at a rate of 4.75%. This pack of industrial goods dogs became overbought 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 ten 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 ten exceeded projected annual dividend from $1k invested in each of the ten 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 identify bargains.

Actionable Conclusion Two (2): Wall Street Wizard Wisdom Was Weighed to Calculate 10.8% 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 June 28 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.


(Click to enlarge)

Yahoo projected a 6.41% lower dividend from $10K invested in this group while aggregate single share price was projected to increase by over 6.8% 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 (3): Analysts Forecast 2014 Industrial Goods DiviDog Stock Net Gains of 11.2% to 36.9%

Ten probable profit generating trades revealed by Yahoo Finance come 2014 were:


(Click to enlarge)

  • LSI Industries Inc. netted $369.37 based on dividends plus a mean target price estimate from three analysts less broker fees;
  • Hillenbrand, Inc. netted $236.01 based on dividends plus mean target price estimate from three analysts less broker fees;
  • MDC Holdings Inc. netted $227.62 based on dividends plus the mean of annual price estimates from eight analysts less broker fees;
  • Caterpillar, Inc. (CAT) netted $183.78, based on dividends plus estimates from twenty-one analysts less broker fees;
  • Republic Services, Inc. (RSG) netted $150.89 based on estimates from five analysts plus dividends less broker fees;
  • US Ecology (ECOL) netted $135.98, based on dividends plus mean target estimates from two analysts less broker fees;
  • Rockwell Automation, Inc. (ROK) netted $131.31 based on estimates from fourteen analysts plus dividends less broker fees;
  • Emerson Electric (EMR) netted $123.75 based on estimates from twenty-three analysts plus dividends less broker fees;
  • General Electric Company netted $113.68 based on a mean target price estimate from fifteen analysts combined with projected annual dividend less broker fees;
  • Stanley Black & Decker (SWK) netted $112.08 based on estimates from eleven analysts plus dividends less broker fees.

The average net gain in dividend and price was 17.8% 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.

Source: LSI Industries 36% Upside Paced Industrial Goods Sector Dogs In June