Results from David Fish's Dividend Champions Index constituents listed as of market closing prices November 22 were compared to analyst mean target price projections one year hence. The resulting chart from that data shown below pointed to one stock exhibiting a 14.32% price upside. HCP Inc. (NYSE:HCP) the Long Beach, CA headquartered fully integrated real estate investment trust (REIT) serving the healthcare industry from the financial sector lead the index. Seven other members of the Champions index back in the pack showed 3.61% to 6.40% price upsides.
On the downside, three stocks exhibited pending price slumps of 4% to 10% based on 1 yr. analyst mean target pricing. Sysco Corp. (NYSE:SYY) the food wholesaler from the services sector presented the weakest 4.07% bear side sentiment. Mercury General Corp. (NYSE:MCY) weighed in at 10.3% to the downside to most tempt hungry bears.
The charts above used one year mean target price set by brokerage analysts multiplied by the number of shares in a $1k investment to pick out Champions Index stocks showing the greatest upside & downside 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 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 several stock indices: Dow 30; Russell 2000; S&P 500; S&P Aristocrats; Russell 1000; NASDAQ 100; Champions; Contenders; Challengers; Carnevale's Power 25 & Super 29 lists combined as his Solid 40.
The 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 Dividend Champions Index top dog selections for October were disclosed step by step.
Dog Metrics Sorted 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 November 22 to reveal the top ten. Price and dividend data was sourced from Yahoo.com.
Ten Champion dogs that promised the biggest dividend yields into October included firms representing five of nine market sectors. The top stock was one of four from the financial sector: Universal Health Realty Trust (NYSE:UHT). HCP Inc. , Mercury General Corp. , and Old Republic International. (NYSE:ORI) placed second, fourth, and ninth.
The balance of the top ten included one consumer goods, Altria Group Inc. (NYSE:MO), in third; one technology firm, AT&T Inc. (NYSE:T) in fifth place; Bowl America Class A (NYSEMKT:BWL.A) in sixth place was the lone service dog. Three utilities, Consolidated Edison (NYSE:ED), Northwest Natural Gas (NYSE:NWN), and WGL Holdings Inc. (NYSE:WGL) in seventh, eighth, and tenth 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 11/22/2013 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): Champions Bearish While Dow Dogs Got Bullish
The Champions top November dividend payers reversed their bullish course set for five of the seven periods charted for the year. Since October Champions top ten dog dividend increased 3.4% while price dropped 0.65%. Over the past year dividend from $10k invested as $1k in each of the ten dogs declined 17.5% while aggregate single share price rose 19.3%.
For the Dow dogs, meanwhile, projected annual dividend from $10k invested as $1K in each of the top ten Dow dogs dropped over 1.1% since October, while aggregate single share price jumped up nearly 5.3%. 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 grew some. The overhang was $125 or 33% in August, and expanded to $161 or 43% for September, shrank down to $111 or 30% for October, and expanded again to $140 or 38'% as of November 14. Most of this bull rally was triggered by JPMorgan Chase & Co. (NYSE:JPM) replacing Microsoft (NASDAQ:MSFT) in the top ten Dow dogs this past month.
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 (2): Wall St. Wizards Want 5% 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 November 22, 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 5.24% net gain.
Factoring in a .91% loss from the five negative net stocks introduced above, a net net gain of 4.33% results.
Yahoo projected a 0.93% lower dividend from $10K invested as this group while aggregate single share price was projected to increase over 1.5% 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 (3): Analysts Forecast 8 Dividend Champion Dogs to Net 5.8% to 17.8% By November 2014
Five of the ten top dividend yielding Champion dogs were verified as being among the eight net 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 63% accurate.
The eight probable profit generating trades revealed by Yahoo Finance for 2014 were:
HCP Inc. netted $178.07 based on dividends plus a mean target price estimate from twelve analysts less broker fees. The Beta number showed this estimate subject to volatility 28% less than the market as a whole.
Consolidated Edison netted $88.01 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 no volatility as opposed to the market as a whole.
AT&T Inc. netted $77.68 based on dividends plus the mean of annual price estimates from twenty-five analysts less broker fees. The Beta number showed this estimate subject to volatility 76% less than the market as a whole.
Altria Group Inc. netted $70.69 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 63% less than the market as a whole.
McDonald's Corp. (NYSE:MCD) netted $69.65 based on dividends plus mean target price estimate from twenty-one analysts less broker fees. The Beta number showed this estimate subject to volatility 72% less than the market as a whole.
Vectren Corp. (NYSE:VVC) netted $69.42 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 60% less than the market as a whole.
Leggett & Platt Inc. (NYSE:LEG) netted $61.91 based on a mean target price estimate from three analysts combined with projected annual dividend less broker fees. The Beta number showed this estimate subject to volatility 7% less than the market as a whole.
WGL Holdings Inc. netted $57.82 based on a mean target price estimate from six analysts combined with projected annual dividend less broker fees. The Beta number showed this estimate subject to volatility 48% less than the market as a whole.
The average net gain in dividend and price was over 8.4% on $1k invested in each of these eight dogs. This gain estimate was subject to average volatility 57% less than the market as a whole.
Actionable Conclusion (4): (Bear Alert) Analysts Forecast 3 Dividend Champion Dogs to Post Net Losses of 2.8% to 8.3% By November 2014
Three probable losing trades revealed by Yahoo Finance for 2014 were:
Sysco Corp. lost $27.66 based on dividends and the mean of annual price estimates from eleven analysts including $20 of broker fees. The Beta number showed this estimate subject to volatility 36% less than the market as a whole.
Mercury General Corp. lost $71.73, based on dividends and a mean target price estimate by two analysts including $20 of broker fees. The Beta number showed this estimate subject to volatility 73% less than the market as a whole.
Diebold Inc. (NYSE:DBD) lost $82.81, based on dividend and mean target price estimates from eight analysts including $20 of broker fees. The Beta number showed this estimate subject to volatility 14% greater than the market as a whole.
The average net loss in dividend and price was over 6% on $3k invested as $1k in each of these three dogs. This loss estimate was subject to average volatility 32% 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 or short sale 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.