Results from the Yahoo utilities sector tallied as of market closing prices June 28 compared with analyst mean target gain results one year hence featured Atlantic Power Company (NYSE:AT), a Boston headquartered firm from the electric utilities industry, showing a 40.36% 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).
Note my Arnold Utes selections for May/June:
Dog Metrics Selected Ten Top Utilities Sector Stocks
Ten top utilities sector stocks that showed the biggest dividend yields June 28 per Yahoo Finance data represented three industries: electric; gas; foreign. Top dog, Atlantic Power Corporation was tops of five electric firms listed. The other electrics were in fifth, seventh, eighth, and ninth places: FirstEnergy Corporation (NYSE:FE); PEPCO (NYSE:POM); TECO Energy (NYSE:TE); PPL Corporation (NYSE:PPL). Suburban Propane Partners (NYSE:SPH) in second slot was the top yielding of four gas firms. The others placed third, fourth, and sixth: Inergy, L.P. (NRGY); Amerigas Partners (NYSE:APU); National Grid plc (NYSE:NGG). One foreign utility, CPFL Energia (NYSE:CPL) was listed eighth.
Dividend vs. Price Results Compared to Dow Dogs
Below is a graph of the relative strengths of the top ten utilities 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.
Actionable Conclusion (1): Utilities Dogs Dithered as Dow Chased Bulls
The May/June Utes collection of dividend payers dithered as both aggregate single share price increased 2.4% in the past month while dividend from $10k invested in each of those ten dogs increased 0.06%. [Ok! Some might call flat dividends with a price increase bullish. I called it a dither.]
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 flush out initial bargains.
Actionable Conclusion Two (2): Wall Street Wizard Wisdom Was Weighed to Gauge 11.54% Net Gain from Top 20 Dogs Come 2014
Top twenty dogs for the utilities 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.
Yahoo projected a 7% lower dividend from $10K invested in this group while aggregate single share price was projected to increase by 5.7% 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 (3): Analysts Foretell 2014 Utilities DiviDogs to Net 9.6% to 48.1%
Ten top estimated profit generating trades in utilities were revealed by Thompson/First Call in Yahoo Finance for 2014:
- Atlantic Power Corporation netted $481.02, based on dividends plus mean target price estimate from three analysts less broker fees;
- Inergy, L.P. netted $256.53 based on dividends plus a mean target price estimate from eight analysts less broker fees;
- Unitil Corp. (NYSE:UTL) netted $153.13 based on dividends plus a mean target price estimate from four analysts less broker fees;
- Brookfield Infrastructure Partners (NYSE:BIP) netted $144.57 based on estimates from eight analysts plus dividends less broker fees;
- National Grid plc netted $132.11, based on dividend plus mean target price estimates from three analysts less broker fees;
- Duke Energy Corporation (NYSE:DUK) netted $126.37 based on estimates from nineteen analysts plus dividends less broker fees;
- PPL Corporation netted $120.78 based on estimates from sixteen analysts plus dividends less broker fees;
- Southern Company (NYSE:SO) netted $97.15 based on estimates from fifteen analysts plus dividends less broker fees;
- Ameren Corporation (NYSE:AEE) netted $96.72 based on estimates from eight analysts plus dividends less broker fees.
The average net gain was 17.78% on $1k invested in each of these ten dogs.
The above net gain estimates do not factor-in any tax problems resulting from distributions (not dividends and K-1s) from MLPs and any possible re-capture or foreign tax problems/rates that may suck projected gains out of some of these estimates at the regular tax bracket rate and not capital gain rates. Consult your tax advisor regarding the source of "dividends" from any investment.
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 AT, 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.