Results from David Fish's Dividend Champions Index constituents listed as of market closing prices September 25 were compared to analyst mean target price projections one year hence. The resulting chart from that data shown below pointed to nine stocks exhibiting 3.5% to 11% price upsides. WGL Holdings Inc. (NYSE:WGL), the Washington, DC based gas firm from the utility sector, with 3.45% showed the lowest upside of those nine. HCP Inc. (NYSE:HCP), the Long Beach, CA based independent hybrid REIT industry firm from the financials sector, exhibited a 11.14% price upside to lead the index.
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 four Champions 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 reported results for the Champions Index as one of fourteen in a series of index-specific articles devoted to dividend yield and price upside results. Prompted by Seeking Alpha reader requests, this series has supplied results for the following stock indices: Dow 30; S&P 500; S&P Aristocrats; Russell 1000; NASDAQ 100; NYSE International 100; Dividend Achievers; Champions; Contenders; Challengers; Carnevale's Power 25; Carnevale's Super 29; Barron's 15 Gems; Russell 2000.
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 Champions Index top dog selections for September were disclosed step by step.
Dog Metrics Graded Dividend Champions Index Stocks by Yield
David Fish's Champions list of companies paying increasing dividends for 25 consecutive years or more was sorted by yield as of September 25 to reveal the top ten. Price and dividend data was sourced from Yahoo.com.
Ten Champion dogs that promised the biggest dividend yields into September included firms representing five of nine market sectors. The top stock was one of five from the financial sector: Universal Health Realty Trust (NYSE:UHT). Mercury General Corp. (NYSE:MCY), HCP Inc., Old Republic International (NYSE:ORI), and United Bankshares Inc. (NASDAQ:UBSI), placed fourth, fifth sixth and tenth.
The balance of the top ten included one consumer goods, Altria Group Inc. (NYSE:MO), placed second; one technology firm, AT&T Inc. (NYSE:T) in third place; Bowl America Class A (NYSEMKT:BWL.A) in seventh place was the lone service dog. Two utilities, Consolidated Edison (NYSE:ED), and Northwest Natural Gas (NYSE:NWN), in eighth and ninth places completed the representation of market sectors in the Champions index.
Dividend vs. Price Results Compared to Dow Dogs
The graph of relative strengths of the top ten Dividend Champion dogs by yield as of market close 9/25/2013 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 One: Champion Dogs Ran from Bear While Dow Was Bullish
The Champions top September dividend payers reversed a bullish course set since November, 2012. In the past month Champions top ten dog dividend increased 2.6% while price dropped 2.5%.
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, 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 provided 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: Wall St. Wizards Want 6.7% Net Gain from Top 20 Dividend Champions Index Dogs In 2014
Top twenty dogs from David Fish's Dividend Champions index were graphed below to show relative strengths by dividend and price as of September 25, 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 2.4% lower dividend from $10K invested as this group while aggregate single share price was projected to increase nearly 2.9% 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 Three: Analysts Forecast 4 Dividend Champion Dogs to Net 5.3% to 14% By September 2014
Five of the ten top dividend Champion dogs were verified as being among the nine gainers for the coming year based on analyst 1 year target prices. So this month the dog strategy as graded by Wall St. wizards is 56% accurate.
The nine probable profit generating trades revealed by Yahoo Finance for 2014 were:
HCP Inc. netted $140.31 based on dividends plus a mean target price estimate from twelve analysts less broker fees. The Beta number showed this estimate subject to volatility 33% less than the market as a whole.
Vectren Corp. (NYSE:VVC) netted $133.87 based on a mean target price estimate from five analysts combined with projected annual dividend less broker fees. The Beta number showed this estimate subject to volatility 57% less than the market as a whole.
AT&T Inc. netted $131.84 based on dividends plus the mean of annual price estimates from twenty-four analysts less broker fees. No Beta number was available for AT&T.
Altria Group Inc. netted $107.34 based on a mean target price estimate from ten analysts combined with projected annual dividend less broker fees. The Beta number showed this estimate subject to volatility 60% less than the market as a whole.
Consolidated Edison netted $101.73 based on a mean target price estimate from fourteen analysts combined with projected annual dividend less broker fees. The Beta number showed this estimate subject to volatility 9% opposed to the market as a whole.
Leggett & Platt Inc. (NYSE:LEG) netted $97.28 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 5% more than the market as a whole.
Northwest Natural Gas netted $65.16 based on dividends plus mean target price estimate from three analysts less broker fees. The Beta number showed this estimate subject to volatility 70% less than the market as a whole.
Clorox Company (NYSE:CL) netted $54.11 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 60% less than the market as a whole.
WGL Holdings Inc. netted $53.66 based on dividends plus the mean of annual price estimates from eight analysts less broker fees. The Beta number showed this estimate subject to volatility 46% less than the market as a whole.
The average net gain in dividend and price was over 9.8% on $1k invested in each of these ten dogs. This gain estimate was subject to average volatility 59% less than the market as a whole.
The stocks listed above were suggested only as decent starting points for your Champion 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.
Disclosure: I am long T, VZ, PFE, MSFT, MCD, INTC, GE. 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.