Results from Yahoo Finance tallied for Russell 1000 Index members as of market closing prices September 17 were compared to analyst mean target price projections one year hence. The resulting chart of that data showcased ten top stocks exhibiting 7% to 21% price upsides. FirstEnergy Corp. (FE) the Ohio based electric utility with 7.07% showed the lowest upside of the top ten. Starwood Property Trust Inc. (STWD) the Greenwich, CT based diversified REIT industry firm from the financial sector exhibited a 21.09% price upside to lead the Russell 1000 Index.
The chart above used the one year mean target price set by brokerage analysts matched against September 17 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 article reported results of the Russell 1000 Index as one in a series of index-specific articles devoted to dividend yield and price upside results. 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 first vetted in July, called Barron's 15 Gems.
This report presumed yield (dividend / price) dividend dog methodology applied to any index and compared that index side by side with the Dow. Below, the Arnold Russell 1000 Index top dog elections for September were disclosed step by step.
Dog Metrics Parsed Russell 1000 Index Stocks by Yield
Russell Investments states:
"The Russell 1000 Index measures the performance of the large-cap segment of the U.S. equity universe. It is a subset of the Russell 3000® Index and includes approximately 1000 of the largest securities based on a combination of their market cap and current index membership. The Russell 1000 represents approximately 92% of the U.S. market.
The Russell 1000 Index is constructed to provide a comprehensive and unbiased barometer for the large-cap segment and is completely reconstituted annually to ensure new and growing equities are reflected."
The top ten stocks in this index promising the biggest yields in September represented three of nine sectors. However seven firms including the top dog were financial and American Capital Agency (AGNC) led these. The rest of the financial firms placed second through fourth, sixth, seventh, & ninth: (2) Hatteras Financial Corp (HTS); (3) Annaly Capital Management Inc (NLY); (4) Chimera Investment Corp. (CIM); (6) MFA Financial Inc (MFA); (7) Two Harbors Investment (TWO); (9) Ares Capital Corp. (ARES). Two technology firms, Windstream Corp (WIN), and Frontier Communications (FTR) occupied the fifth and eighth slots. Finally, one basic materials company, Seadrill Limited (SDRL) placed tenth and completed the Russell 1000 top ten dogs.
Dividend vs. Price Results Compared to Dow Dogs
Below is a graph of the relative strengths of the top ten Russell 1000 dogs by yield as of market close 9/17/2013 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): Russell 1000 & Dow Dogs Chased Bulls
The September Russell 1000 collection of dividend payers turned bullish. Top ten dog annual dividend from 10k invested as $1k in each dog dropped 2% since July/August while aggregate single share price of the ten popped up nearly 4%.
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 so were added to the simple high yield "dog" metric used to sniff out bargains.
Actionable Conclusion Two (2): Wall St. Wizards Wrest 14.6% Net Gain from Top 20 Russell 1000 Dogs By 2014
Top twenty dogs from the Russell 1000 index were graphed below to show relative strengths by dividend and price as of September 17, 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 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 near 5% lower dividend from $10K invested in this group while aggregate single share price was projected to increase over 7% 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 numbers indicated the degree of a stocks movement opposed to market direction.
Actionable Conclusion (3): Analysts Forecast 10 Russell 1000 DiviDogs to Net 10% to 26.6% By September 2014
Four of the top yielding dividend Russell 1000 dogs were verified as being among the top ten gainers for the coming year by analyst 1 year target prices. So this month the dog strategy as graded by Wall St. wizards is 40% accurate.
Ten probable profit generating trades revealed by Yahoo Finance for 2014 were:
Starwood Property Trust Inc. netted $266.66, based on dividend plus mean target price estimates from five analysts less broker fees. The Beta number showed this estimate subject to volatility 4% less than the market as a whole.
Donnelley R R & Sons Co. (RRD) netted $249.76 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 77% greater than the market as a whole.
Mack Cali Realty Corp. (CLI) netted $228.44, based on dividends plus a mean target price estimate by nine analysts less broker fees. The Beta number showed this estimate subject to volatility 3% less than the market as a whole.
MFA Financial Inc. netted $219.36 based on dividends plus mean target price estimate from thirteen analysts less broker fees. The Beta number showed this estimate subject to volatility 62% less than the market as a whole.
Hatteras Financial Corp netted $214.33 based on a mean target price estimate from eleven analysts combined with projected annual dividend less broker fees. The Beta number showed this estimate subject to volatility 74% less than the market as a whole.
CenturyLink Inc. (CTL) netted $193.07 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 36% less than the market as a whole.
Frontier Communications netted $148.20 based on dividends plus mean target price estimate from fourteen analysts less broker fees. The Beta number showed this estimate subject to volatility 17% less than the market as a whole.
Pepco Holdings Inc. (POM) netted $141.18 based on dividends plus mean target price estimate from twelve analysts less broker fees. The Beta number showed this estimate subject to volatility 77% less than the market as a whole.
Ares Capital Corp. (ARCC) netted $141.12 based on dividends plus the mean of annual price estimates from fifteen analysts less broker fees. No Beta number was available for ARCC.
FirstEnergy Corp. netted $109.04 based on estimates from sixteen analysts plus dividends less broker fees. The Beta number showed this estimate subject to volatility 84% less than the market as a whole.
The average net gain in dividend and price was over 19.1% on $1k invested in each of these ten dogs. This gain estimate was subject to average volatility 31% 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 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.