This end of month report tallied results from here as verified using Yahoo Finance data for utilities sector stocks as of market closing prices November 1 along with analyst mean target price results one year hence. The comparison found three firms producing 12.9% to 36.8% price upsides.
Southcross Energy Partners (NYSE:SXE) the Dallas headquartered gas company with 12.9% showed the lowest upside of those three. In the middle was TransAlta Corp. (NYSE:TAC) the Calgary, Canada based diversified utility exhibiting a 13.82% price upside. At the top, Companhia de Saneamento Basico do Estado de Sao Paulo (NYSE:SBS) the Brazilian water utility sprayed a 36.79% upside to lead the October Utilities sector. Seven more utes sector dogs back in the pack showed 2.94% to 11.65% price upsides.
On the downside, two stocks exhibited pending price slumps of 5.16% & 12.13% based on 1 yr. analyst mean target pricing. PAA Natural Gas Storage (NYSE:PNG) a Houston based gas firm presented the weaker bearish sentiment at 5.16% while American Midstream Partners (NYSE:AMID) a Denver based gas company measured 12.13% to the downside to most tempt hungry bears.
The charts above used one year mean target price set by brokerage analysts matched against November 1 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 Utes selections for October were disclosed step by step.
Dog Metrics Measured Ten Top Utilities Stocks
Ten top utilities sector stocks that showed the biggest dividend yields November 1 per Yahoo Finance data represented four industries: diversified; water; gas; electric. Top dog, Just Energy Group, Inc. [Canada] (NYSE:JE) was best of three diversified utilities: TransAlta Corp. was listed third, and Brookfield Renewable Energy Partners LP [Bermuda] (NYSE:BEP) was tenth. The lone water utility, Companhia de Saneamento Basico do Estado de Sao Paulo was second. In the fourth slot, Southcross Energy Partners, L.P. was the top yielding of four gas firms. The other gas utilities placed fifth, sixth and seventh: American Midstream Partners LP; Suburban Propane Partners (NYSE:SPH); PAA Natural Gas Storage LP.
Dividend vs. Price Results Compared to Dow Dogs
The graph below of relative strengths of the top ten utilities sector dogs by yield as of market close 11/1/2013 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): Utilities Dogs Bearish While Dow Dogs Were Unsettled
Utilities dividend payers as of November 1 showed increased dividend from $10k invested as $1k in each of the top ten stocks, while aggregate single share price of those ten plummeted. Dividend rose at a rate of nearly 14% after September while total single share price dropped over 23% for that period.
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 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 Expect 10% Net Gain from Top 20 Utilities Dogs Come 2014
Top twenty dogs for the utilities sector were graphed below to show relative strengths by dividend and price as of November 1, 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 $20,000 invested as $1k in each of 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 dividend graphed from the plus row in the chart below exhibiting the nearly 10% net gain.
Factoring in a 0.37% loss from the two negative net stocks introduced above, a net net gain of 9.63% results.
Yahoo projected a near 4.5% lower dividend from $10K invested in this group while aggregate single share price was projected to increase by over 3.8% 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 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 Utilities DiviDogs to Net 6% to 44%
Only four of the ten top dividend yielding utilities 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:
Companhia de Saneamento Basico do Estado de Sao Paulo netted $439.43, based on dividends plus mean target price estimate from two analysts less broker fees. The Beta number showed this estimate subject to volatility 71% greater than the market as a whole.
TransAlta Corp netted $203.95 based on dividends plus a mean target price estimate from five analysts less broker fees. The Beta number showed this estimate subject to volatility 65% less than the market as a whole.
Southcross Energy Partners, L.P. netted $188.44 based on estimates from four analysts plus dividends less broker fees. The Beta number showed this estimate subject to volatility 36% less than the market as a whole.
Summit Midstream Partners LP (NYSE:SMLP) netted $148.20 based on estimates from seven analysts plus dividends less broker fees. The Beta number showed this estimate subject to volatility 7% more than the market as a whole.
Southern Company (NYSE:SO) netted $102.87 based on estimates from seventeen analysts plus dividends less broker fees. The Beta number showed this estimate subject to volatility 98% less than the market as a whole.
PPL Corporation (NYSE:PPL) netted $101.71, based on dividend plus mean target price estimates from eighteen analysts less broker fees. The Beta number showed this estimate subject to volatility 81% less than the market as a whole.
Unitil Corp. (NYSE:UTL) netted $100.74 based on dividends plus a mean target price estimate from four analysts less broker fees. The Beta number showed this estimate subject to volatility 77% less than the market as a whole.
Pepco Holdings, Inc. netted $83.93 based on estimates from twelve analysts plus dividends less broker fees. The Beta number showed this estimate subject to volatility 80% less than the market as a whole.
Integrys Energy Group (NYSE:TEG) netted $72.37 based on estimates from five analysts plus dividends less broker fees. The Beta number showed this estimate subject to volatility 48% less than the market as a whole.
TECO Energy, Inc. (NYSE:TE) netted $60.16 based on estimates from twelve analysts plus dividends less broker fees. The Beta number showed this estimate subject to volatility 37% less than the market as a whole.
The average net gain in dividend and price was 15% on $1k invested in each of these ten utilities dogs. This gain estimate was subject to average volatility 44% less than the market as a whole.
Actionable Conclusion (4): (Bear Alert) Analysts Forecast 2 Utilities DiviDogs to Post Net Losses of 0.85% & 6.5% By October 2014
Two probable losing trades revealed by Yahoo Finance for 2014 were:
PAA Natural Gas Storage L P lost $8.53, based on dividend and mean target price estimates from five analysts including $20 of broker fees. The Beta number showed this estimate subject to volatility 4% less than the market as a whole.
Suburban Propane L.P. lost $66.61 based on dividends and the mean of annual price estimates from three analysts including $20 of broker fees. The Beta number showed this estimate subject to volatility 34% less than the market as a whole.
The average net loss in dividend and price was over 3.7% on $2k invested as $1k in each of these two dogs. This loss estimate was subject to average volatility 14% less 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.
Disclosure: I am long VZ, T, 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.