Industrials sector results tallied from Morningstar/YChart (M/Y) as of market closing prices June 28, compared with analyst mean target gain results one year hence showed Diana Containerships Inc. (NASDAQ:DCIX) exhibiting a 70.96% price upside.
The chart above used the one-year mean target price set by brokerage analysts matched against the June 28 closing price to compare 10 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 February prompted by Seeking Alpha reader requests. It complemented reports of possible dividend-yield-based buy opportunities from eight major market sectors as listed by Yahoo Finance posted since the fall of 2011.
So, responding to both the Seeking Alpha reader requests and Ycharts.com migration to an 11 sector list, this report series provided three actionable conclusions about the highest yield (dividend / price) stocks from the Morningstar/YCharts (M/Y) sectors: basic materials; communication services; consumer cyclical; consumer defensive; energy; financial services; healthcare; industrials; real estate; technology; utilities.
Below the author compared Dow dividend dog theory picks with one-year mean target price estimates reported from broker analysts to reveal the following Arnold M/Y Industrial selections for May/June:
Dog Metrics Dug Out Fitting M/Y Industrial Stocks
Ten industrials sector stocks showing the biggest M/Y screened dividend yields June 28, represented three industries. Top industrials stock by dividend yield represented the integrated shipping & logistics industry: Diana Containerships (DCIX). Five shipping and ports industry firms placed in second through fourth, sixth, and eighth positions: Navios Maritime Partners (NYSE:NMM); Ship Finance International (NYSE:SFL); Capital Product Partners (NASDAQ:CPLP); Knightsbridge Tankers (VLCCF); Nordic American Tankers (NYSE:NAT). Two Business services firms placed fifth and seventh: Collectors Universe (CLCT) and Intersections (NASDAQ:INTX). Staff outsourcing firm, Compass Diversified Holdings Shares of Beneficial Interest (NYSE:CODI), and rental and leasing services firm, Mitsubishi UFJ Lease & Finance (OTCPK:MIUFY) took ninth and 10th places to complete the top ten M/Y industrials dogs.
Dividend vs. Price Results Compared to Dow Dogs
Below is a graph of the relative strengths of the top 10 M/Y industrials 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 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.
Actionable Conclusion One: M/Y Industrials and Dow Dogs Chased Bulls
The m/y industrials collection of dividend payers showed a bull market signal as aggregate dividend from $10k invested in each of the top 10 industrials dogs dropped 7% while aggregate single share price popped up 14%.
For the Dow dogs, meanwhile, the 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 the 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 identify bargains.
Actionable Conclusion Two: Wall Street Wizard Wisdom Weighed to Reveal 16.56% Net Gain from Top 20 Industrials Dogs Come 2014
Top 20 dogs for the M/Y industrials 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 price upsides and net gains including dividends less broker fees of $20 as of 2014.
Historic prices and actual dividends paid from $1000 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 $1000 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 an 8.5% lower dividend from $10K invested in this group while the aggregate single share price was projected to increase by over 5% 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).
A beta (risk) ranking for each analyst rated stock was provided in the far right column on the above chart. A beta of 1 meant the stock's price would move with the market. Less than 1 showed lower than market movement. Higher than 1 showed greater than market movement.
Actionable Conclusion Three: Analysts Forecast 7 Top M/Y Industrials DiviDogs to Net 11.7% to 97% by 2014
Seven probable profit-generating trades revealed by Yahoo Finance for 2014 were:
Diana Containerships (DCIX) netted $970.63 based on estimates from five analysts plus dividends less broker fees;
Ship Finance International (SFL) netted $373.53 based on a mean target price estimate from six analysts combined with projected annual dividend less broker fees;
Primoris Services Corporation (NASDAQ:PRIM) netted $360.69 based on dividends plus a mean target price estimate from eight analysts less broker fees;
Nordic American Tankers (NAT) netted $154.94 based on dividends plus a mean target price estimate from six analysts less broker fees;
R.R. Donnelley & Sons (NASDAQ:RRD) netted $139.17 based on dividends plus the mean of annual price estimates from five analysts less broker fees;
Costamare, Inc. (NYSE:CMRE) netted $130.90 based on target estimates from six analysts plus dividends less broker fees;
TAL International Group (NYSE:TAL) netted $177.02, based on dividends plus a mean target price estimate from 10 analysts less broker fees.
The average net gain was estimated to be over 32% on $1k invested in each of these seven intrepid industrial dogs.
The above net gain estimates did not factor-in any tax problems resulting from distributions (not dividends and K-1s) from MLPs and any possible re-capture tax problems/rates that could 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 and consequences of "dividends" from any investment.
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, 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.