Results from Yahoo Finance for the healthcare sector tallied as of market closing prices August 2 compared with analyst mean target gain results one year hence showed Sanofi (NYSE:SNY), the French firm from the drug manufacturers - major industry, with a 17.2% price upside. A quick survey of headlines and press releases gave a synopsis of Sanofi's high standing in international health: "Sanofi Survey: Travel heightens allergies; Sanofi Pasteur Initiates Phase III Study ... in United States; FDA Advisory Committee Recommends Approval of Sanofi's Nasacort® AQ Nasal Spray; Sanofi Pasteur Announces Shipment of First Lots of 2013-2014 Seasonal Influenza Vaccine in U.S.; Sanofi U.S. and Joslin Diabetes Center Announce Results ... Nine other healthcare dogs displayed upsides ranging from 4.41% to 14.7%
The chart above used one year mean target price set by brokerage analysts matched against August 2 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 the fall of 2011 to reveal possible buy opportunities in each of eight major market sectors listed by Yahoo Finance: basic materials (BasMats), consumer goods (ConGo), financials (Fins), healthcare (Heal), industrial goods (IndiGo), services (Svcs), technology (Tec), and utilities (Utes).
Note the Arnold Heal selections for July/August as follows:
Dog Metrics Pointed Out Ten Top Healthcare Stocks
Four industries were represented by the ten healthcare sector stocks showing highest dividend yields as of August 2 by Yahoo Finance. The top two healthcare sector stocks were two of seven drug manufacturers - major on this list: AstraZeneca PLC (AZM), and GlaxoSmithKline (NYSE:GSK). PetMed Express (NASDAQ:PETS), in third represented drug delivery firms. The other five major manufacturers placed fourth through eighth: Eli Lilly and Company (NYSE:LLY); Merck (NYSE:MRK); Novartis AG (NYSE:NVS); Pfizer, Inc. (NYSE:PFE); Bristol-Myers Squibb Company (NYSE:BMY). Meridien Bioscience, Inc. (NASDAQ:VIVO), a diagnostic substances firm, and Teva Pharmaceutical (NASDAQ:TEVA) a drug manufacturer, completed the top ten healthcare dogs in ninth and tenth place.
Dividend vs. Price Results Compared to Dow Dogs
Relative strengths of the top ten healthcare dogs by yield as of market close 8/2/2013 compared to those of the Dow was graphed below based on 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 to create data points shown in green for price and blue for dividends.
Actionable Conclusion (1): Healthcare & Dow Dogs Cowed by Bears
The Healthcare collection of dividend payers turned and ran after June as total single share price dropped 9.6%. Aggregate dividend from $10k invested as $1k in each of the top ten healthcare dogs increased at a rate of 0.93% for the period. The healthcare pack stayed in overbought territory as aggregate single share price exceeded the dividend derived from $1K invested in each after April this year. The gap between dividend and price narrowed from $114 or 31% in July to $64 or 17% in August.
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%, showing the first bear tack of the year. 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 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 sniff out bargains.
Actionable Conclusion (2): Wall Street Wizard Wisdom Wished A 6.51% Net Gain from Top 20 Healthcare Dogs Come 2014
Top twenty dogs for the health sector were graphed below to show relative strengths by dividend and price as of August 2, 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 ten 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 a 2.65% lower dividend from $10K invested in this group while aggregate single share price was projected to increase by over 4.3% in the coming year. Note that the chart showed an overbought condition for 2014 as aggregate single share price for ten Healthcare dogs exceeded projected dividends from $1k invested in those ten.
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 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 stock price movement opposite of market direction.
Actionable Conclusion (3): Analysts Forecast 2014 Health DiviDog Net Gains of 4.4% to 17.2%
Ten probable profit generating trades were revealed by Thompson/First Call in Yahoo Finance for 2014:
- Sanofi netted $177.46, based on dividends plus mean target price estimate from three analysts less broker fees. The Beta number showed this estimate subject to volatility 15% more than the market as a whole.
- Teva Pharmaceutical netted $155.58, based on dividends plus mean target price estimates from twenty-two analysts less broker fees. The Beta number showed this estimate subject to volatility 16% less than the market as a whole.
- Baxter International, Inc. (NYSE:BAX) netted $150.64 based on estimates from fourteen analysts plus dividends less broker fees. The Beta number showed this estimate subject to volatility 29% less than the market as a whole.
- Pfizer Inc. netted $93.72 based on dividend plus a mean target price estimate from sixteen analysts less broker fees. The Beta number showed this estimate subject to volatility 31% less than the market as a whole.
- Eli Lilly and Company netted $90.62 based on dividends plus mean target price estimate from sixteen analysts less broker fees. The Beta number showed this estimate subject to volatility 57% less than the market as a whole.
- Merck & Co. Inc. netted $83.33 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 50% less than the market as a whole.
- Novartis AG netted $70.61 based on dividends plus the mean of annual price estimates from six analysts less broker fees. The Beta number showed this estimate subject to volatility 44% less than the market as a whole.
- BristolMyers Squibb netted $69.87 based on estimates from sixteen analysts plus dividends less broker fees. The Beta number showed this estimate subject to volatility 91% less than the market as a whole.
- Smith & Nephew SN (NYSE:SNN) netted $49.98 based on a mean target price estimate from four analysts combined with projected annual dividend less broker fees. The Beta number showed this estimate subject to volatility 1% less than the market as a whole.
- Medtronic, Inc. (NYSE:MDT) netted $48.07 based on dividends plus mean target price estimate from sixteen analysts less broker fees. The Beta number showed this estimate subject to volatility 4% more than the market as a whole.
The average net gain in dividend and price was 10.99% on $10k invested as $1k in each of these ten dogs. This gain estimate was subject to average volatility 30% less than the market as a whole.
Net gain estimates above 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 sector dividend stock purchase research process. These are not recommendations.
Disclosure: I am long DD, GE, INTC, JNJ, MCD, MSFT, 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.