Ten of 15 Gems Index members from Barron's tallied by Yahoo Finance as of market closing prices September 20 were compared with analyst mean target gain results one year hence. The resulting chart of that data showcased ten top stocks exhibiting 15% to 33% price upsides. Apple Inc. (NASDAQ:AAPL) with 15.47% showed the lowest upside of the top ten. Marathon Petroleum Corp (NYSE:MPC) exhibited a 33.2% price upside to lead the index.
The chart above used the one year mean target price set by brokerage analysts matched against September 20 closing price to compare ten Barron's Gems stocks showing the highest upside price potential into 2014. "Cheap Stocks in a Pricey Market" published in the July 22 edition of Barron's listed 15 Gem stocks with price/earnings numbers "in the single digits" measured as of July 18. 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 Barron's 15 Gems Index as of the above September 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 this small index first vetted in July, 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 Barron's 15 Gems Index top dog selections for September were disclosed step by step.
Dog Metrics Ranked Barron's 15 Gems Stocks by Yield
Author Andrew Bary in his Cheap Stocks in a Pricey Market Barron's article stated:
"Within the S&P 500, about three dozen stocks are valued at less than 10 times projected 2014 earnings; the nearby table identifies 15 low P/E gems. The single-digit group includes [many] well-known companies..."
The Barron's 15 Gem dogs encompassed four of nine business sectors. Three sectors were included in the top ten by yield.
Two basic materials firms showed the biggest dividend yields according to Yahoo Finance: Freeport-McMoRan Copper & Gold (NYSE:FCX); Ensco plc (NYSE:ESV). Three more "basmat" firms showed up in the top ten by yield: Valero Energy Corporation (NYSE:VLO), placed fifth; Marathon Petroleum Corporation , and Phillips 66 (NYSE:PSX) placed seventh and tenth. Two financials firms, JPMorgan Chase & Co. (NYSE:JPM), and MetLife, Inc. (NYSE:MET), placed third and ninth on this list. Two technology firms placed in the fourth, and sixth slots: Hewlett Packard (NYSE:HPQ), and Apple Inc. . A lone industrial goods firm, Deere & Company (NYSE:DE) was seventh and rounded out the top ten Gems list.
Dividend vs. Price Results for Gems Top 10 Stocks vs. Dow Dogs
Relative strength for the top ten Barron's 15 Gems stocks by yield was graphed below as of September 20, 2013. Seven 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): Gem Dogs Overbought and Mixed as Dow Dogs Chased Bulls
The overbought condition of the top ten Barron's Gems by yield was signaled by aggregate single share price of the ten exceeding projected annual dividend from $1k invested in each of the ten. This gap peaked at $708 or 350% in March. The Gems overbought gap was $624 or 233% for July and moved to $642 or 232% for September.
The muddled Gems condition was signaled by aggregate single share price of the ten rising 3% since July while projected annual dividend for the ten rose 3.5%.
For the Dow dogs, meanwhile, annual dividend from $10k invested as $1K in each of the top ten 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 Two (2): Wall St. Wizards Forecast 14.53% Net Gain from 15 Gems By 2014
Barron's 15 Gems were graphed below to show relative strengths by dividend and price as of September 20, 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 1.5 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 1.5 created the 2014 data points green for price and blue for dividends.
Yahoo projected a 13% lower dividend from $10K invested in this group while aggregate single share price was projected to increase nearly 14% 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 stocks movement opposed to market direction.
Actionable Conclusion (3): Analysts Say Ten Gems DiviDogs to Net 14.48% to 33.8% by September 2014
Eight of the top yielding dividend Barron's Gem dogs were verified as top gainers for the coming year by analyst 1 year target prices. So this month the dog strategy as graded by wall street wizards is 80% accurate.
Ten probable profit generating trades from $10k invested as $1k in each stock as revealed by Yahoo Finance data for 2014 were:
Marathon Petroleum Corp. netted $338.08, based on dividends plus a mean target price estimate by sixteen analysts less broker fees. The Beta number showed this estimate subject to volatility 174% greater than the market as a whole.
Valero Energy Corporation netted $245.68 based on a mean target price estimate from seventeen analysts combined with projected annual dividend less broker fees. The Beta number showed this estimate subject to volatility 148% greater than the market as a whole.
Ensco plc netted $215.21 based on estimates from thirty-three analysts plus dividends less broker fees. The Beta number showed this estimate subject to volatility 58% greater than the market as a whole
Phillips 66 netted $213.90 based on dividends plus mean target price estimate from thirteen analysts less broker fees. The Beta number showed this estimate subject to volatility 113% greater than the market as a whole.
General Motors Company (NYSE:GM) netted $198.30 based on price target estimates from fifteen analysts less broker fees. (GM does not yet pay a dividend.) The Beta number showed this estimate subject to volatility 69% greater than the market as a whole.
MetLife, Inc. netted $194.78 based on dividends plus the mean of annual price estimates from seventeen analysts less broker fees. The Beta number showed this estimate subject to volatility 109% greater than the market as a whole.
JPMorgan Chase & Co. netted $191.17 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 82% greater than the market as a whole.
Hewlett Packard netted $170.39, based on dividends plus mean target price estimate from twenty-four analysts less broker fees. The Beta number showed this estimate subject to volatility 64% greater than the market as a whole.
Apple Inc. netted $160.78, based on dividend plus mean target price estimates from forty-nine analysts less broker fees. The Beta number showed this estimate subject to volatility 24% less than the market as a whole. Of all 15 Barron's Gems AAPL was the only stock with a beta number less than 1.
Citigroup, Inc. (NYSE:C) netted $144.81 based on dividends plus a mean target price estimate from twenty-seven analysts less broker fees. The Beta number showed this estimate subject to volatility 114% greater than the market as a whole.
The average net gain in dividend and price was over 20.7% on $1k invested in each of these ten dogs. This gain estimate was subject to average volatility 91% greater 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.