Price results from industrial goods sector stocks calculated as of September 30, 2013, were compared to analyst mean target price projections one year hence. The resulting chart from that data (shown below) featured six stocks exhibiting 9% to 35% price upsides. General Electric Company. (GE), the Fairfield, CT, headquartered diversified machinery industry firm (that some categorize as a conglomerate), with 9.40% showed the lowest upside of those six. LSI Industries Inc. (LYTS), a Cincinnati, OH based electrical equipment industry firm, exhibited a 35.45% price upside to lead the sector.
The chart above used one year mean target price set by brokerage analysts matched against September 30 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 series of articles 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).
This report presumed yield (dividend / price) dividend dog methodology applied to any sector and compared that sector side by side with the Dow industrial index leaders. Below, the Arnold Industrial Goods Sector top dog selections for September were disclosed step by step.
Note the Arnold IndiGo selections for September as follows:
Dog Metrics Sorted Ten Top Industrial Goods Stocks
Ten industrial goods sector stocks showing the biggest dividend yields according to Yahoo as of September 30 represented seven industries. Top industrial goods sector stock, Veolia Environement (VE), was one of three waste management firms in the top ten. The others were Waste Management (WM) in fifth place and Republic Services, Inc. (RSG) in ninth. Aerospace and defense-major firm Lockheed Martin Corporation (LMT) was in second place. Diversified machinery was represented by two firms in the top ten: Ampco-Pittsburgh Corp (AP) in fifth place, and General Electric in eighth. The lone small tools industry firm, L.S. Starrett Company (SCX), placed fourth. CRH plc (CRH) a Cement firm, placed sixth. MDC Holdings Inc. (MDC), a residential construction firm, placed seventh. The remaining company in the top ten was Swiss industrial equipment and components firm ABB Ltd. (ABB) in tenth place.
Dividend vs. Price Results Compared to Dow Dogs
The graph below of relative strengths of the top ten industrial goods sector dogs by yield as of market close 9/30/2013 compared to those of the Dow industrials index was prepared to show projected annual dividend history from $10,000 invested as $1k in each of the ten highest yielding stocks along with the total single share price of those ten stocks with the data points shown in green for price and blue for dividends.
Actionable Conclusion (1): Industrial Goods And Dow Dogs Both Bullish
The industrial goods collection of dividend payers turned bullish after August as total single share price popped up 4.9% and aggregate dividend from $10k invested as $1k in each of the top ten healthcare dogs dropped at a rate of 3.8% for the period. The industrial goods pack is now within $5 of overbought territory where aggregate single share price of the ten exceeds the dividend derived from $10k invested as $1K in each.
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 (2): Wall Street Wizards Want 8.73% Net Gain from Top 20 Industrial Goods Dogs Come 2014
Top twenty dogs for the industrial goods sector were graphed below to show relative strengths by dividend and price as of September 30, 2013, and those projected by analyst mean price target estimates to the same date in 2014.
A hypothetical $1,000 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 $1,000 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 $1,000 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 5.5% lower dividend from $10K invested in this group while aggregate single share price was projected to increase by over 4.8% in the coming year. Note that the chart showed an overbought condition as aggregate single share price for ten industrial goods dogs exceeded projected dividends from $1k invested in each of those ten.
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 were 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 Industrial Goods DiviDog Net Gains of 5.8% to 36.2%
Four of the ten top dividend yielding industrial goods dogs were verified as being among the ten gainers for the coming year based on analyst 1 year target prices. So this month the dog strategy for this sector as graded by Wall St. wizards was 40% accurate.
Ten probable profit generating trades were revealed by Thompson/First Call in Yahoo Finance for 2014:
LSI Industries Inc. netted $362.80 based on dividends plus a mean target price estimate from two analysts less broker fees. The Beta number showed this estimate subject to volatility 69% more than the market as a whole.
MDC Holdings Inc. netted $236.619 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 108% more than the market as a whole.
Republic Services, Inc. netted $174.15 based on estimates from six analysts plus dividends less broker fees. The Beta number showed this estimate subject to volatility 44% less than the market as a whole.
Hillenbrand, Inc. (HI) netted $139.21 based on dividends plus mean target price estimate from three analysts less broker fees. The Beta number showed this estimate subject to volatility 6% more than the market as a whole.
Caterpillar, Inc. (CAT) netted $106.62, based on dividends plus estimates from twenty-one analysts less broker fees. The Beta number showed this estimate subject to volatility 76% more than the market as a whole.
General Electric Company netted $105.41 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 22% more than the market as a whole.
Avery Dennison Corporation (AVY) netted $88.06 based on estimates from six analysts plus dividends less broker fees. The Beta number showed this estimate subject to volatility 10% more than the market as a whole.
Waste Management, Inc. netted $86.94, based on dividends plus mean target estimates from four analysts less broker fees. The Beta number showed this estimate subject to volatility 41% less than the market as a whole.
General Dynamics (GD) netted $58.54 based on estimates from sixteen analysts plus dividends less broker fees. The Beta number showed this estimate subject to volatility 5% more than the market as a whole.
Eaton Corporation (ETN) netted $58.52 based on estimates from twenty-two analysts plus dividends less broker fees. The Beta number showed this estimate subject to volatility 68% more than the market as a whole.
The average net gain in dividend and price was 14.17% on $1k invested in each of these ten dogs. This gain estimate was subject to average volatility 28% more 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.
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.