Dow 30 Results from Yahoo Finance tallied as of market closing prices September 17, 2013 compared with analyst mean target price results one year hence showed JPMorgan Chase & Co. (JPM) exhibiting a 18.81% price upside to lead that index. General Electric (GE) with 7.61% showed the lowest upside of the top ten.
The chart above used one-year mean target price set by brokerage analysts matched against September 17 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 reports the Dow 30 Index as of the above date 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 1000; NASDAQ 100; NYSE International 100; Mergent Dividend Achiever; 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 selections for September 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 September 17 Dow dogs included six 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 sixth. Two healthcare firms ranked themselves in the fourth, and fifth slots: Merck (MRK), and Pfizer (PFE). The only services firm, McDonald's (MCD), placed seventh. The basic materials representative, Chevron Corp. (CVX), placed eighth. The lone industrial goods firm, General Electric was ninth. One consumer goods firm rounded out the top ten Dow list in tenth place: Procter & Gamble (PG).
Dividend vs. Price Results for Dow Top 10 Stocks
Relative strength for the top ten Dow industrial index stocks by yield was graphed below. 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 Get Bullish, Expand Overbought Bliss
Projected annual dividend from $10k invested as $1K in each of the top ten Dow dogs dropped 1.5% since August, while aggregate single share price hopped up 6%, ending a bear track since June. Dow dogs increased 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, then shrunk to $153 or 41% in July, compressed to $125 or 33% in August then expanded to $161 or 43% for September.
To quantify the top dog rankings, analyst mean price target estimates provide a "market sentiment" gauge of upside potential and was added to the simple high yield "dog" metric used to sniff out bargains.
Actionable Conclusion Too (2): Wall St. Wizards Forecast 7.85% 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 September 16, 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 7% lower dividend from $10K invested in this group while aggregate single share price was projected to increase over 7.5% 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 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. A negative beta number indicated the degree of a stock price movement opposite of market direction.
Actionable Conclusion (3): Ten Dow DiviDogs to Net 8.9% to 18.8% by September 2014
Ten probable profit generating trades from $1k invested in each were revealed by Yahoo Finance and indexARB.com data for 2014 were:
JPMorgan Chase & Co. netted $188.14, based on dividends plus a mean target price estimate by twenty-eight analysts less broker fees. The Beta number showed this estimate subject to volatility 80% greater than the market as a whole.
Coca-Cola Co. (KO) netted $172.70 based on dividends plus a mean target price estimate from fifteen analysts less broker fees. The Beta number showed this estimate subject to volatility 70% less than the market as a whole.
Hewlett-Packard (HPQ) netted $147.05 based on a mean target price estimate from twenty-four analysts combined with projected annual dividend less broker fees. The Beta number showed this estimate subject to volatility 64% more than the market as a whole.
Verizon Communications netted $130.30, based on dividends plus mean target price estimate from twenty-six analysts less broker fees. The Beta number showed this estimate subject to volatility 82% less than the market as a whole.
Pfizer Inc. netted $121.06 based on target estimates from sixteen analysts plus dividends less broker fees. The Beta number showed this estimate subject to volatility 19% less than the market as a whole.
AT&T Inc. netted $110.65 based on estimates from twenty-four analysts plus dividends less broker fees. The Beta number showed this estimate subject to volatility 67% less than the market as a whole.
Cisco Systems (CSCO) netted $101.46, based on dividend plus mean target price estimates from thirty-two analysts less broker fees. The Beta number showed this estimate subject to volatility 37% greater than the market as a whole.
Wal-Mart Stores (WMT) netted $95.77 based on dividends plus mean target price estimate from twenty-two analysts less broker fees. The Beta number showed this estimate subject to volatility 67% less than the market as a whole.
Merck & Co., Inc. netted $95.39 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 45% less than the market as a whole.
General Electric netted $89.61 based on a mean target price estimate from thirteen analysts combined with projected annual dividend less broker fees. The Beta number showed this estimate subject to volatility 24% greater than the market as a whole.
The average net gain in dividend and price was over 12.52% on $1k invested in each of these ten dogs. This gain estimate was subject to average volatility 14% less than the market as a whole.
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.