Results from David Fish's Dividend Challengers 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 these data shown below revealed EV Energy Partners LP (EVEP), a Houston based oil and gas drilling and exploration firm, exhibited a 32.82% price upside to lead the index. Nine additional challenger dogs showed 9.43% to 20.69% upsides.
The chart above used a one-year mean target price set by brokerage analysts multiplied by the number of shares in a $1k investment to compare four Challengers 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 Challengers 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 and Super 29 lists combined as his Solid 40.
Below, the Arnold Dividend Challengers Index top dog selections for November were disclosed step by step.
Dog Metrics Measured Challengers Index Stocks by Yield:
David Fish's October 31 Challengers list (from here) contained stocks distinguished by having paid increasing dividends for 5 to 9 straight years. Dividend challenger stocks listed below were ranked by yields calculated as of November 22 to reveal the top ten. Price and dividend data were sourced from Yahoo.com.
Ten challenger dogs posting the biggest projected November dividend yields included firms representing four of nine market sectors. The top two stocks, Navios Maritime Partners LP (NMM) and StoneMor Partners LP (NASDAQ:STON), were the services sector representatives. A single utilities representative firm, AmeriGas Partners LP (APU), placed sixth. The lone financial firm, Triangle Capital Corp. (NYSE:TCAP) placed eighth.
Six basic materials companies took slots three through five, seven, nine and ten to complete the top ten challengers dogs list: EV Energy Partners LP, Vanguard Natural Resources LLC (VNR), Boardwalk Pipeline Partners LP (BWP), NuStar GP Holdings LLC (NSH), Enbridge Energy Partners LP (EEP), and Exterran Partners LP (EXLP).
Dividend vs. Price Results Compared to Dow Dogs
The graph below showed the relative strength of top ten Dividend Challenger dogs by yield as of market close 10/26/2013 compared to those of the Dow. Historic projected annual dividend from $10,000 invested as $1k in each of the ten highest yielding stocks and the total single share price of those ten stocks created the data points shown in blue for dividend and green for price.
Actionable Conclusion (1): Challengers Dithered as Dow Dogs Ran With Bulls
Dividend challengers aggregate single share price of the ten Challengers inclined 0.47% since October. Dividend from $10k invested as $1k in each of those top ten dogs also rose 0.92% for that period. Two lines moving in parallel showed neither a bearish nor a bullish signal for November.
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 Wrest A 13% Net Gain from Top 20 Dividend Challengers Index Dogs By 2014
Top 20 dogs from David Fish's Dividend Challengers 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 $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 price upsides and net gains including dividends less broker fees as of 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 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 8.3% lower dividend from $10K invested in this group ($1k each) while aggregate single share price was projected to increase 9.4% 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 number indicated the degree of a stock's movement opposite of market direction.
Actionable Conclusion (3): Analysts Forecast 10 Dividend Challenger Dogs to Net 15.4% to 40% By November 2014
Five of the ten top dividend yielding challenger dogs were verified as being among the ten gainers for the coming year based on analyst one-year target prices. So this month the dog strategy for challengers as graded by Wall Street wizards is 50% accurate.
Ten probable profit generating trades revealed by Yahoo Finance for 2014 were:
EV Energy Partners LP netted $400.20 based on dividends plus mean target price estimate from nine analysts less broker fees. The Beta number showed this estimate subject to volatility 45% less than the market as a whole.
StoneMor Partners LP netted $271.87 based on dividends plus a mean target price estimate from two analysts less broker fees. The Beta number showed this estimate subject to volatility 28% less than the market as a whole.
Digital Realty Trust (NYSE:DLR) netted $253.44, based on dividends plus a mean target price estimate by sixteen analysts less broker fees. The Beta number showed this estimate subject to volatility 44% less than the market as a whole.
Lexington Realty Trust (NYSE:LXP) netted $212.95 based on a mean target price estimate from seven analysts combined with projected annual dividend less broker fees. The Beta number showed this estimate subject to volatility 34% less than the market as a whole.
DCP Midstream Partners LP (NYSE:DPM) netted $182.77, based on dividend plus mean target price estimates from thirteen analysts less broker fees. The Beta number showed this estimate subject to volatility 8% less than the market as a whole.
Boardwalk Pipeline Partners LP netted $176.99 based on estimates from eleven analysts plus dividends less broker fees. The Beta number showed this estimate subject to volatility 12% less than the market as a whole.
Holly Energy Partners LP (NYSE:HEP) netted $163.22 based on estimates from four analysts plus dividends less broker fees. The Beta number showed this estimate subject to volatility 30% less than the market as a whole.
Exterran Partners LP netted $157.33 based on a mean target price estimate from seven analysts combined with projected annual dividend less broker fees. The Beta number showed this estimate subject to volatility 2% more than the market as a whole.
Williams Partners LP (NYSE:WPZ) netted $156.17 based on dividends plus mean target price estimate from fourteen analysts less broker fees. The Beta number showed this estimate subject to volatility 54% less than the market as a whole.
Vanguard Natural Resources LLC netted $153.72 based on dividends plus mean target price estimate from eleven analysts less broker fees. The Beta number showed this estimate subject to volatility 11% more than the market as a whole.
The average net gain in dividend and price was nearly 21.3% on $1k invested in each of these ten dogs. This gain estimate was subject to average volatility 24% less than the market as a whole.
The above net gain estimates did not factor in any tax problems resulting from distributions. Consult your tax advisor regarding the source and consequences of "dividends" from any investment.
The stocks listed above were suggested only as decent 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 MSFT, GE, INTC, MCD, PFE, T, VZ. 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.