Results from the Morningstar/YChart (M/Y) consumer defensive sector tallied as of market closing prices on June 28 compared with analyst mean target gain results one year hence featured Cresud Sociedad Anónima Comercial, Inmobiliaria, Financiera y Agropecuaria (NASDAQ:CRESY), an Argentine agricultural and development firm, showing a 97.97% price upside.
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 consumer defensive selections for May/June:
Dog Metrics Chose Ten M/Y Consumer Defensive Stocks
The elite ten consumer defensive stocks showing the biggest dividend yields per the YCharts screen as of June 28 represented eight industries. Top was one of three tobacco firms listed, Vector Group (NYSE:VGR). The other tobacco firms placed fifth and tenth: British American Tobacco (NYSEMKT:BTI) and Reynolds American (NYSE:RAI). A food distributor Metcash (OTCPK:MHTLY) was second. The only personal products firm listed, Oriflame Cosmetics (OFLMY.PK), was third. Cresud Sociedad, a farm products company, was fourth. A chain of grocery stores, Roundy's (NYSE:RNDY) took sixth. Seventh place went to Orkla ASA (OTCPK:ORKLY), a Norwegian packaged goods firm. Coca-Cola Amatil (OTCPK:CCLAY), the Australian beverage and soft drinks firm took the eighth slot. An education firm, Lincoln Educational Services Corporation (NASDAQ:LINC), placed ninth to complete this consumer defensive dog honor roll.
Dividend vs. Price Results Compared to Dow Dogs
Below is a graph of the relative strengths of the top ten M/Y consumer defensive 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 One: M/Y Consumer Defensive Dogs Mixed as Dow Stayed Bullish
The M/Y consumer defensive collection of dividend payers for May/June sent mixed messages as aggregate single share price of the top ten went up along with dividends from $10k invested in those ten. In the past month consumer defensive top ten collective price rose 43% while dividend increased 5%. This disruption was caused by new equities showing up in the top ten YCharts consumer defensive screen for yield.
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: Wall Street Wizard Wisdom Was Weighed to Find 12.7% Net Gain from Top 20 Consumer Defensive Dogs By 2014
Top twenty dogs for the M/Y consumer defensive 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 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 analyst reports projected a 3.2% lower dividend from $10K invested in this group while aggregate single share price was projected to increase by 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 Predict 6 M/Y Consumer Defensive DiviDogs to Net 6.63% to 101.2% in 2014
Six probable profit generating trades revealed by Yahoo Finance for 2014 were:
Cresud Sociedad Anónima Comercial, Inmobiliaria, Financiera y Agropecuaria netted $1019.24 based on dividends plus mean target price estimate from three analysts less broker fees. This projected gain was subject to volatility of 64% more than the market as a whole;
TAL Education Group (NYSE:XRS) netted $273.89 based on dividends plus mean target price estimate from seven analysts less broker fees. This projected gain was subject to volatility of 36% less than the market as a whole;
Philip Morris International (NYSE:PM) netted $157.58 based on dividends plus mean target price estimate from fifteen analysts less broker fees. This projected gain was subject to volatility of 11% less than the market as a whole;
British American Tobacco netted $138.44, based on dividends plus mean target price estimate from fifteen analysts less broker fees. This projected gain was subject to volatility of 12% less than the market as a whole.
Altria Group (NYSE:MO) netted $98.03 based on estimates from eleven analysts plus dividends less broker fees. This projected gain was subject to volatility of 55% less than the market as a whole.
Lorillard (NYSE:LO) netted $66.31 based on a mean target price estimate from eight analysts combined with projected annual dividend less broker fees. This projected gain was subject to volatility of 66% less than the market as a whole.
The average net gain in dividend and price was 29.2% on $1k invested in each of these six dogs. This projected gain was subject to average volatility 19% less than the market as a whole.
The above net gain estimates did not factor in any foreign or domestic tax problems resulting from distributions. Consult your tax advisor regarding the source and consequences of "dividends" from any investment.
The stocks listed above are suggested only as decent starting points for your M/Y 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.
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.