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 utilities producing 11.4% to 26.94% price upsides.
Integrys Energy Group (NYSE:TEG) the Chicago headquartered gas company with 11.43% upside placed lowest of the six. Just ahead, Brookfield Infrastructure (NYSE:BIP) showing 11.82% upside is a Toronto electric ,transport, & timber firm. Just below the midpoint of the six posting a 12.04% upside was Summit Midstream Partners (NYSE:SMLP) a Dallas gas utility. Just above the center point, PG&E Corp (NYSE:PCG) showed 14.32% upside. TransAlta Corp. (NYSE:TAC) the Calgary, Canada based diversified utility exhibiting a 18.37% price upside was second. At the top, First Energy (NYSE:FE) the Akron, OH electric utility generated a 26.94% upside to lead the November utilities sector. Four more dogs at the back of the utilities pack showed 6.87% to 8.48% price upsides.
The chart above used one year mean target price set by brokerage analysts matched against December 3 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.
Since the fall of 2011 this report series applied dog dividend methodology to uncover 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 November 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 three industries: diversified; gas; electric. Top two dogs, Just Energy Group, Inc. [Canada] (NYSE:JE) and TransAlta Corp. represented diversified utilities. The gas firms placed third, fifth, seventh, and tenth: Suburban Propane Partners (NYSE:SPH); PAA Natural Gas Storage LP (NYSE:PNG); Summit Midstream Partners LP ; Integrys Energy Group . In Fourth place, FirstEnergy Corporation was tops of four electric firms listed. The other electrics placed sixth eighth, and ninth: Pepco Holdings, Inc. (NYSE:POM); Entergy Corp (NYSE:ETR); TECO Energy, Inc. (NYSE:TE) and completed the top ten ute dogs.
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 12/3/2013 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 & Dow Dogs Both Chased Bulls
Utilities dividend payers as of December 3 showed sagging dividend from $10k invested as $1k in each of the top ten stocks, while aggregate single share price of those ten popped up. Dividend dropped at a rate of over 10% after October while total single share price jumped nearly 34% for that period as new dogs were screened into the top ten.
For the Dow dogs, meanwhile, projected annual dividend from $10k invested as $1K in each of the top ten Dow dogs increased over 2.5% since November 20, while aggregate single share price fell 1.4%. The Dow dogs overbought condition in which aggregate single share price of the ten exceeded projected annual dividend from $10k invested in those ten (@$1k each) shrank again. The overhang was $161 or 43% for September; shrank down to $111 or 30% for October; expanded to $140 or 38% to end November. Much of this bear chase was triggered by Microsoft (NASDAQ:MSFT) being replaced by JPMorgan Chase (NYSE:JPM) in the top ten Dow dogs in mid-November.
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 dig out bargains.
Actionable Conclusion (2): Wall Street Wizards Expect 11% 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 December 3, 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 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.
Yahoo projected a near 7% lower dividend from $10K invested in this group while aggregate single share price was projected to increase by over 8.5% 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 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 10% to 32%
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:
First Energy netted $317.02, based on dividends plus mean target price estimate from sixteen analysts less broker fees. The Beta number showed this estimate subject to volatility 89% less than the market as a whole.
TransAlta Corp netted $248.28 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.
PG&E Corp netted $167.91 based on estimates from eighteen analysts plus dividends less broker fees. The Beta number showed this estimate subject to volatility 74% less than the market as a whole.
Summit Midstream Partners LP netted $154.90 based on estimates from seven analysts plus dividends less broker fees. No Beta number was available for SMLP.
Integrys Energy Group netted $144.37 based on estimates from eight analysts plus dividends less broker fees. The Beta number showed this estimate subject to volatility 48% less than the market as a whole.
Brookfield Infrastructure Partners netted $143.84 based on estimates from seven analysts plus dividends less broker fees. The Beta number showed this estimate subject to volatility 56% less than the market as a whole.
Unitil Corp. (NYSE:UTL) netted $110.84 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.
UIL Holdings, Inc. (NYSE:UIL) netted $107.65 based on estimates from eleven analysts plus dividends less broker fees. The Beta number showed this estimate subject to volatility 68% less than the market as a whole.
Entergy Corp netted $102.10 based on estimates from fourteen analysts plus dividends less broker fees. The Beta number showed this estimate subject to volatility 78% less than the market as a whole.
PPL Corporation (NYSE:PPL) netted $97.34, 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.
The average net gain in dividend and price was 16% on $10k invested as $1k in each of these ten utilities dogs. This gain estimate was subject to average volatility 73% less than the market as a whole.
The 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.
Stocks listed above were suggested only as possible starting points for your sector 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 GE, INTC, MCD, MSFT, 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.