Healthcare 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 10 top stocks exhibiting 4.57% to 15.35% price upsides.
The chart above used the 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 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 eleven 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 Healthcare selections for May/June:
Dog Metrics Filtered Out Ten M/Y Healthcare Stocks
Four industries were represented by the ten healthcare sector stocks showing the biggest dividend yields as of June 28 by YCharts and Morningstar. Top healthcare sector stock PDL BioPharma (NASDAQ:PDLI) was the only biotechnology firm in the top ten. Third dog, Select Medical Holdings Corporation (NYSE:SEM) was the lone medical care industry firm. Meridian Bioscience (NASDAQ:VIVO) represented medical research & diagnostic firms. The remaining seven dogs of the healthcare pack consisted of drug manufacturers - major: AstraZeneca (NYSE:AZN); GlaxoSmithKline (NYSE:GSK); Lilly and Company (NYSE:LLY); AbbVie Inc. (NYSE:ABBV); Merck (NYSE:MRK); Novartis (NYSE:NVS); Shandong Luoxin Pharmacy Stock (OTCPK:SLUXY) to complete the top ten by yield.
Dividend vs. Price Results Compared to Dow Dogs
Below is a graph of the relative strengths of the top ten M/Y healthcare 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 dividend.
Actionable Conclusion (1): M/Y Healthcare and Dow Dogs Pursued Bulls
The m/y healthcare collection of dividend payers showed a strong bull market signal as aggregate dividend from $10k invested in each of the top ten industrials dogs dropped 1.2% while aggregate single share price popped up 16.6%.
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 Weighed to Reveal 8.29% Net Gain from Top 20 Healthcare Dogs By 2014
Top twenty dogs for the M/Y 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 $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 as of 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 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 over a 3% lower dividend from $10K invested in this group while aggregate single share price was projected to increase by nearly 6% 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 2014 M/Y Healthcare DiviDogs to Net 8.4% to 17.3%
Ten probable profit generating trades revealed by Yahoo Finance for 2014 were:
- Eli Lilly and Company netted $173.40 based on a mean target price estimate from sixteen analysts combined with projected annual dividend less broker fees;
- AbbVie netted $167.71 based on dividends plus the mean of annual price estimates from eleven analysts less broker fees;
- Teva Pharmaceutical Industries (NYSE:TEVA) netted $151.94, based on dividends plus mean target price estimate from twenty analysts less broker fees;
- Select Medical Holdings netted $147.07 based on a mean target price estimate from six analysts combined with projected annual dividend less broker fees;
- Merck & Co. Inc. netted $133.71 based on dividends plus a mean target price estimate derived from fifteen analysts less broker fees;
- Pfizer Inc. (NYSE:PFE) netted $123.16 based on target estimates from sixteen analysts plus dividends less broker fees;
- Smith & Nephew (NYSE:SNN) netted $115.50, based on dividend plus mean target price estimates from four analysts less broker fees;
- Baxter International (NYSE:BAX) netted $100.11 based on dividends plus mean target price estimate per sixteen analysts less broker fees;
- Novartis netted $92.29, based on dividends plus a mean target price estimate from six analysts less broker fees;
- AstraZeneca netted $84.86 based on estimates from five analysts plus dividends less broker fees.
The average projected annual net gain in dividend and price was slightly over 12.89% on $1k invested in each of these ten dogs as of market close June 28, 2013.
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.