Results from David Fish's Dividend Contenders Index compiled as of July 30, 2013 projecting price upside results one year hence showed W.P. Carey Inc. (WPC), the independent commercial equity real estate investment trust, posted a 12.9% upside to lead a pack of nine dogs this month.
The chart above used one year mean target price set by brokerage analysts multiplied by the number of shares in a $1k investment to compare nine Contenders 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.
Results for the Contenders Index comprised one of fourteen in a series of index-specific articles devoted to dividend yield and price upside results. Prompted by Seeking Alpha reader requests, the series has supplied results for these stock indices: Dow 30; Barron's 15 Gems; Russell 2000; S&P 500; S&P Aristocrats; Russell 1000; NASDAQ 100; NYSE International 100; Mergent Dividend Achievers; Champions; Contenders; Challengers; Carnevale's Power 25; Carnevale's Super 29.
This report presumed yield (dividend / price) dividend dog methodology applied to any index and compared that index side by side with the Dow. Below, are the Arnold Dividend Contenders Index top dog selections for July were disclosed step by step.
Dog Metrics Graded Dividend Contenders Index Stocks by Yield
David Fish's June 28 Contenders list (from here) contained stocks distinguished by having paid increasing dividends for 10 to 24 years. Contenders stocks listed below were ranked by yields calculated as of July 30 to reveal the top ten. Price and dividend data was sourced from Yahoo.com.
Four of nine Yahoo Finance market sectors were represented in the top ten contenders dog list below. Top two dogs were two of six basic materials firms: Natural Resource Partners LP (NRP); NuStar Energy LP (NS). The other basic materials firms placed fourth, fifth, seventh, and eighth: Kinder Morgan Energy Partners (KMP); TC Pipelines LP (TCP); Alliance Resource Partners LP (ARLP); Buckeye Partners LP (BPL).
The balance of the top ten contenders included the lone consumer goods stock, Vector Group Ltd. (VGR) in third place. One technology firm, Communications Systems Inc. (JCS) placed sixth; two financials firms, Omega Healthcare Investors (OHI), in ninth, and Juniata Valley Financial Corp. (JUVF.OB) in tenth completed the top ten contenders dog show.
Dividend vs. Price Results Compared to Dow Dogs
Below is a graph of the relative strengths of the top ten Dividend Contender dogs by yield as of market close 7/30/2013 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): Contenders Bullish & Dow Dogs Not
Contenders top July dividend payers maintained a bullish course. In the past month the contenders top ten dog dividend dropped 2.3% while price rose nearly 1.5%.
For the Dow dogs, meanwhile, annual dividend from $1k invested in each of the top ten 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 was shrunk to $152.51 or 41% in July.
Since Contender dogs may not be all the blue chip high quality equivalents of the Dow list, and also include utilities, an additional gauge of upside potential was added to the simple high yield metric used to find bargains.
Actionable Conclusion Two (2): Wall Street Wizard Wisdom Went Well Weighing 8.5% Net Gain from Top 20 Dividend Contenders Index Dogs By 2014
Top twenty dogs from David Fish's Dividend Contenders index were graphed below to show relative strengths by dividend and price as of July 30, 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 a 3% lower dividend from $10K invested in this group while aggregate single share price was projected to increase over 4% in the coming year. The number of analysts contributing to the mean target price estimate for each stock was noted in the next to the last column on the charts. Three to nine analysts was considered optimal for a valid 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. A negative beta number indicated the degree of a stocks movement opposite of market direction.
Actionable Conclusion (3): Analysts Forecast 9 Dividend Contender Dogs to Net 7% to 17% By June 2014
Nine probable profit generating trades were revealed by Yahoo Finance for 2014:
- Natural Resource Partners LP netted $170.37 based on dividends plus the mean of annual price estimates from four analysts less broker fees. The Beta number showed this estimate subject to volatility 17% more than the market as a whole.
- W.P. Carey Inc. netted $156.40 based on dividends plus the mean of annual price estimates from two analysts less broker fees. The Beta number showed this estimate subject to volatility 28% less than the market as a whole.
- Kinder Morgan Energy Partners netted $150.97 based on a mean target price estimate from twelve analysts combined with projected annual dividend less broker fees. The Beta number showed this estimate subject to volatility 51% less than the market as a whole.
- Omega Healthcare Investors netted $128.10 based on dividends plus mean target price estimate from three analysts less broker fees. The Beta number showed this estimate subject to volatility 4% more than the market as a whole.
- Enterprise Products Partners (EPD) netted $124.04 based on dividends plus mean target price estimate from nineteen analysts less broker fees. The Beta number showed this estimate subject to volatility 28% less than the market as a whole.
- NuStar Energy LP netted $114.12 based on dividends plus mean target price estimate from nine analysts less broker fees. The Beta number showed this estimate subject to volatility 8% more than the market as a whole.
- Urstadt Biddle Properties (UBA) netted $88.55 based on a mean target price estimate from two analysts combined with projected annual dividend less broker fees. The Beta number showed this estimate subject to volatility 16% less than the market as a whole.
- Alliance Resource Partners LP netted $77.20 based on dividends plus mean target price estimate from five analysts less broker fees. The Beta number showed this estimate subject to volatility 10% less than the market as a whole.
- PPL Corp. (PPL) netted $73.09 based on dividends plus the mean of annual price estimates from sixteen analysts less broker fees. The Beta number showed this estimate subject to volatility 86% less than the market as a whole.
The average net gain in dividend and price was over 12% on $1k invested in each of these nine dogs. This gain estimate was subject to average volatility 21% less than the market as a whole.
The above net gain estimates did not factor-in any tax problems resulting from distributions. 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 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.