Results from Yahoo Finance tallied for Russell 1000 Index members as of market closing prices October 17 were compared to analyst mean target price projections one year hence. The resulting chart of that data showcased five top stocks exhibiting 12% to 19% price upsides. R.R. Donnelley & Sons Co. (RRD), the Chicago based business services firm, with 11.8% showed the lowest upside of those top five. CenturyLink Inc. (CTL), a telecom services technology company from Monroe, LA posted an upside number just short of 12%. Two financial companies exceeded a 12% upside: MFA Financial Inc. (MFA) a diversified REIT based in New York at 12.3%, and Mack Cali Realty Corp. (CLI) an office REIT based in Edison, NJ at 12.85%. Starwood Property Trust Inc. (STWD) the Greenwich, CT based diversified REIT firm from the financial sector exhibited a 18.93% price upside to lead the Russell 1000 Index. However, four stocks (not shown here, but later) were flagged by analyst pricing as bear bait.
The chart above used the one year mean target prices set by brokerage analysts matched against October 17 closing prices 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 these fourteen stock indices: Dow 30; Barron's 15 Gems; 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; 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, the Arnold Russell 1000 Index top dog selections for October were disclosed step by step. Lurking at the end of this article are four Russell 1000 picks analysts flagged as too high priced and ripe for a bear alert.
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 October 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 sixth, & ninth: (2) Annaly Capital Management Inc (NLY); (3) MFA Financial Inc.; (4) Hatteras Financial Corp. (HTS); (5) Chimera Investment Corp. (CIM); (6) Two Harbors Investment (TWO); (9) Ares Capital Corp. (ARCC). Two technology firms, Windstream Corp. (WIN), and Frontier Communications (FTR) occupied the seventh 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
The graph below plotted the relative strengths of the top ten Russell 1000 dogs by yield as of market close 10/17/2013 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 One: Russell 1000 & Dow Dogs Dithered
The October Russell 1000 collection of dividend payers dithered. Top ten dog annual dividend from 10k invested as $1k in each dog dropped nearly 7.5% since September while aggregate single share price of the ten dropped just 0.3%.
For the Dow dogs, meanwhile, projected annual dividend from $10k invested as $1K in each of the top ten Dow dogs dropped just 0.6% since September, while aggregate single share price swooned 11%, ending a brief bullish track. The Dow dogs overbought condition in which aggregate single share price of the ten exceeded projected annual dividend from $1k invested in each of the ten shrank. The overhang was $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, then shrank down to $111 or 30% for October.
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 dig out bargains.
Actionable Conclusion Two: Wall St. Wizards Wrest 10.7% 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 October 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 nearly a 3.2% lower dividend from $10K invested in this group while aggregate single share price was projected to increase over 4.4% 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 Three: Analysts Forecast 10 Russell 1000 DiviDogs to Net 9.6% to 24.4% By October 2014
Five 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 50% accurate.
Ten probable profit generating trades revealed by Yahoo Finance for 2014 were:
Starwood Property Trust Inc. netted $243.75, based on dividend plus mean target price estimates from five analysts less broker fees. The Beta number showed this estimate subject to volatility equal to the market as a whole.
MFA Financial Inc. netted $220.64 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 $189.94 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 68% less than the market as a whole.
CenturyLink Inc. netted $164.49 based on a mean target price estimate from sixteen analysts combined with projected annual dividend less broker fees. The Beta number showed this estimate subject to volatility 46% less than the market as a whole.
Mack Cali Realty Corp. netted $162.81, based on dividends plus a mean target price estimate by nine analysts less broker fees. The Beta number showed this estimate subject to volatility 2% less than the market as a whole.
R.R. Donnelley & Sons Co. netted $160.24 based on dividends plus the mean of annual price estimates from three analysts less broker fees. The Beta number showed this estimate subject to volatility 77% greater than the market as a whole.
Windstream Corp netted $149.77 based on dividends plus mean target price estimates from thirteen analysts less broker fees. The Beta number showed this estimate subject to volatility 9% less than the market as a whole.
Ares Capital Corp. netted $147.82 based on dividends plus the mean of annual price estimates from fifteen analysts less broker fees. No Beta number was available for ARCC.
Annaly Capital Management Inc netted $141.75 based on estimates from seventeen analysts plus dividends less broker fees. The Beta number showed this estimate subject to volatility 82% less than the market as a whole.
Pepco Holdings Inc. (POM) netted $96.44 based on dividends plus mean target price estimate from eleven analysts less broker fees. The Beta number showed this estimate subject to volatility 81% less than the market as a whole.
The average net gain in dividend and price was over 16.7% on $10k invested as $1k in each of these ten dogs. This gain estimate was subject to average volatility 30% less than the market as a whole.
Actionable Conclusion Four: (Bear Alert) Analysts Forecast 4 Russell 1000 DiviDogs to Post Net Losses of .4% to 3.9% By October 2014
Four probable losing trades revealed by Yahoo Finance for 2014 were:
Chimera Investment Corp. lost $3.77, based on dividend and mean target price estimates from six analysts including $20 of broker fees. The Beta number showed this estimate subject to volatility 3% greater than the market as a whole.
Hospitality Properties Trust (HPT) lost $14.69 based on dividends and the mean of annual price estimates from five analysts including $20 of broker fees. The Beta number showed this estimate subject to volatility 27% greater than the market as a whole.
New York Community Bancorp (NYCB) lost $23.79, based on dividends and a mean target price estimate by twenty-one analysts including $20 of broker fees. The Beta number showed this estimate subject to volatility 19% more than the market as a whole.
Valley National Bancorp (VLY) lost $39.07 based on dividend and a mean target price estimate from seven analysts including broker fees. The Beta number showed this estimate subject to volatility 12% more than the market as a whole.
The average net loss in dividend and price was over 2% on $4k invested as $1k in each of these four dogs. This loss estimate was subject to average volatility 15% more than the market as a whole.
The net gain and loss 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.
Stocks listed above were suggested only as possible 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.