Results from the Morningstar/YChart (M/Y) consumer cyclical sector tallied as of market closing prices on June 28 compared with analyst mean target gain results one year hence featured Asia Entertainment & Resources (AERL), a Chinese leisure industries firm, showing a 75.71% 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 as 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 cyclical selections for May/June:
Dog Metrics Picked Ten M/Y Consumer Cyclical Stocks
Ten top consumer cyclical stocks showing the highest dividend yields per the Y Charts screen as of June 28, 2013 represented seven industries. Top was one of two auto parts companies, Superior Industries International (NYSE:SUP). The other auto parts firm, Douglas Dynamics (NYSE:PLOW), was sixth. Charm Communications (NASDAQ:CHRM), the lone advertising agency in the top ten, was second dog. Third slot was claimed by StoneMor Partners (NASDAQ:STON), one of three representatives from the personal services industry. The other two personal services firms took the fourth and eighth slots: Student Transportation (NASDAQ:STB) and NutriSystem (NASDAQ:NTRI). Halfords Group (OTCPK:HLFDY), the lone specialty retail firm in the top ten placed fifth. The leading leisure industries firm by yield, Cedar Fair (NYSE:FUN), claimed the seventh slot. Finally, Courier Corporation (NASDAQ:CRRC), a publishing firm was ninth, and CTC Media (NASDAQ:CTCM) a broadcast - TV firm placed tenth to complete the consumer cyclical ten top dogs list.
Dividend vs. Price Results Compared to Dow Dogs
Below is a graph of the relative strengths of the top ten M/Y consumer cyclical 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: Consumer Cyclical Dogs Dithered As Dow Dogs Remained Bullish
The M/Y consumer cyclical collection of dividend payers for May/June sent mixed messages as aggregate single share price of the top ten went up as did dividends from $10k invested those ten go up. In the past month consumer defensive top ten collective price rose 15.8% while dividend increased 6.2%. This disruption was caused primarily by new equities showing up in the top ten YCharts consumer cyclical 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: Wisdom of Wall Street Wizards Was Weighed to Reveal 15.67% Net Gain from Top 20 Consumer Cyclical Dogs By 2014
Top twenty dogs for the M/Y consumer cyclical 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 projected more than a 6% lower dividend from $10K invested in this group while aggregate single share price was projected to increase 8% 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 Expect 10 Consumer Cyclical DiviDogs to Net 8.3% to 78.4% in 2014
Ten probable profit generating trades for 2014 revealed by analysts reported by Yahoo Finance were:
Asia Entertainment & Resources netted $784.25 based on estimates from four analysts plus dividends less broker fees. This estimate is subject to volatility 43% greater than the market as a whole.
Six Flags Entertainment (NYSE:SIX) netted $295.42 based on dividends plus mean target price estimate from five analysts less broker fees. This estimate is subject to volatility 17% greater than the market as a whole.
Douglas Dynamics netted $276.61 based on dividend plus mean target price estimates from four analysts less broker fees. This estimate is subject to volatility 4% greater than the market as a whole.
StoneMor Partners netted $166.96 based on dividends plus mean target price estimate from two analysts less broker fees. This gain is subject to volatility 28% less than the market as a whole.
Valassis Communications (NYSE:VCI) netted $202.70 based on dividends plus mean target price estimate from four analysts less broker fees. This estimate is subject to volatility 34% greater than the market as a whole.
Student Transportation netted $196.26 based on dividends plus the mean of annual price estimates from four analysts less broker fees. This gain is subject to volatility 13% less than the market as a whole.
Superior Industries International netted $156.48, based on dividends plus a mean target price estimate from three analysts less broker fees. This estimate is subject to volatility 20% greater than the market as a whole.
Cedar Fair netted $153.91 based on estimates from five analysts plus dividends less broker fees. This estimate is also subject to volatility 20% greater than the market as a whole.
National CineMedia (NASDAQ:NCMI) netted $115.58 based on dividends plus a mean target price estimate from nine analysts less broker fees. This gain is subject to volatility 32% less than the market as a whole.
Regal Entertainment Group (NYSE:RGC) netted $82.79 based on dividends plus a mean target price estimate from twenty analysts less broker fees. This gain is subject to volatility 12% less than the market as a whole.
The average net gain in dividend and price was 25.3% on $1k invested in each of these ten consumer cyclical dogs. This gain was subject to average volatility 5% greater 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.