Dow 30 Index Results from Yahoo Finance tallied as of market closing prices July 24 compared with analyst mean target price results one year hence showed Caterpillar Inc. (CAT) exhibiting a 13.69% price upside to lead that index.
The chart above used the one year mean target price set by brokerage analysts matched against July 24 closing price to compare ten Dow 30 index 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 article reported the Dow 30 Index as of July 24, 2013 by projecting gain results one year hence. Seeking Alpha reader requests prompted this series of index-specific articles reporting dividend yield plus price upside results for this baker's dozen of stock indices: Dow 30; S&P 500; S&P Aristocrats; Russell 50; NASDAQ; NYSE International 100; Mergent Dividend Achievers; Champions; Contenders; Challengers; Carnevale's Power 25; Carnevale's Super 29; lastly a small index recently vetted, called Barron's 15 Gems.
Investor Glossary summarized dividend dog methodology thus: "...[I]nvented to find the 10 stocks of the 30-stock Dow Jones Industrial Average with the highest yield (dividend / price) and invest equally in each, [t]he Dow dividend theory also requires that you repeat this process once a year.
Below, the Arnold Dow 30 Index top dog elections for July were disclosed step by step.
Dog Metrics Ranked Dow Stocks by Yield
CME Group, one of three publishers of this index, states, "The Dow Jones Industrial Average (DJIA) is a price-weighted index of 30 blue-chip U.S. companies representing nine economic sectors including financial service, technology, retail, entertainment and consumer goods. The leadership position of the component stocks in the DJIA tends to result in an extremely high correlation of the DJIA to broader U.S. indexes, such as the S&P 500 Index providing additional opportunities."
The July 24 Dow dogs included five of nine business sectors in the top ten by yield. Three technology firms showed the biggest dividend yields according to indexArb.com: AT&T (T); Verizon (VZ); Intel Corp (INTC). A fourth tech firm, Microsoft (MSFT), placed eighth. Two healthcare firms ranked themselves in the fourth, and fifth slots: Merck (MRK), and Pfizer (PFE). The only services firm, McDonald's (MCD), placed sixth. The lone industrial goods firm, General Electric (GE) was seventh. Two basic materials firms rounded out the top ten Dow list in ninth and tenth places: Chevron Corp. (CVX), and DuPont (DD) .
Dividend vs. Price Results for DowTop 10 Stocks
Relative strength for the top ten Dow industrial index stocks by yield was graphed below as of July 24, 2013. Eight periods of historic projected annual dividend history from $1000 invested in the ten highest yielding stocks and the total single share price of those ten stocks created the data points for each period shown in blue for dividend and green for price.
Actionable Conclusion (1): Dow Dogs Shrunk from Overbought Bliss
Projected annual dividend from $1k invested in each of the top ten Dow dogs increased just 0.03% since June, while aggregate single share price dropped over 8%. Dow dogs decreased their overbought condition in which aggregate single share price of the ten exceeded projected annual dividend from $1k invested in each of the ten by over $198 or 53% in June shrunk to $152.51 or 41% in July.
Actionable Conclusion Two (2): Wall St. Wizards Forecast 6.74% Net Gain from Top 20 Dow Dogs By 2014
Top twenty dogs from the Dow 30 Industrials were graphed below to show relative strengths by dividend and price as of July 24, 2013 and those projected by analyst (wizard) 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 a 5% lower dividend from $10K invested in this group while aggregate single share price was projected to increase over 5.8% in the coming year. The number of analysts contributing to the mean target price estimate for each stock was noted in the nest to the last column on the chart. Three to nine analysts was considered optimal for a valid projection estimate.
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 (3): Ten Dow DiviDogs to Net 7.5% to 14.6% by June 2014
Ten probable profit generating trades from $1k invested in each were revealed by Yahoo Finance and indexARB.com data for 2014 were:
- Caterpillar Inc. netted $146.35, based on dividends plus a mean target price estimate by twenty-one analysts less broker fees. The Beta number showed this estimate subject to volatility 98% greater than the market as a whole.
- Coca Cola Co. (KO) netted $126.84 based on dividends plus a mean target price estimate from sixteen analysts less broker fees. The Beta number showed this estimate subject to volatility 67% less than the market as a whole.
- The Travelers Co's Inc. (TRV) netted $110.32 based on a mean target price estimate from nineteen analysts combined with projected annual dividend less broker fees. The Beta number showed this estimate subject to volatility 4% less than the market as a whole.
- Microsoft Corp. netted $105.16, based on dividend plus mean target price estimates from thirty-two analysts less broker fees. The Beta number showed this estimate subject to volatility 4% greater than the market as a whole.
- McDonald's Corp. netted $102.80 based on dividends plus mean target price estimate from twenty-two analysts less broker fees. The Beta number showed this estimate subject to volatility 75% less than the market as a whole.
- Merck & Co., Inc. netted $99.53 based on dividends plus the mean of annual price estimates from fifteen analysts less broker fees. The Beta number showed this estimate subject to volatility 56% less than the market as a whole.
- Verizon Communications netted $98.10, based on dividends plus mean target price estimate from twenty-one analysts less broker fees. The Beta number showed this estimate subject to volatility 71% less than the market as a whole.
- AT&T Inc netted $95.82 based on estimates from twenty-seven analysts plus dividends less broker fees. The Beta number showed this estimate subject to volatility 70% less than the market as a whole.
- JPMorgan Chase & Co. (JPM) netted $84.38 based on a mean target price estimate from twenty-eight analysts combined with projected annual dividend less broker fees. The Beta number showed this estimate subject to volatility 80% greater than the market as a whole.
- Pfizer Inc. netted $74.95 based on target estimates from sixteen analysts plus dividends less broker fees. The Beta number showed this estimate subject to volatility 31% less than the market as a whole.
Average net gain in dividend and price was over 10.44% on $1k invested in each of these ten dogs. This gain estimate was subject to average volatility 19% less than the market as a whole.
Stocks listed above were suggested only as decent starting points for your index dog dividend stock purchase research process. These were 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.