(Editors' Note: This article covers a micro-cap stock. Please be aware of the risks associated with these stocks.)
Using closing prices for utilities stocks as of April 26, 2013, this report is based on analyst 1 yr target prices from four stocks selected by yield from the following list of thirty:
The plan in April was to use analyst estimates as a "market sentiment" gauge of upside potential. Dow dividend dog theory picks from Yahoo sectors were supplemented with one year mean target price estimates reported by yahoo from broker analysts. Eight months of reality have now passed to provide a mid-term grade for the analyst April upside calls.
Wizards of Wall Street Weighed In
One year mean target price set by analysts multiplied by the number of shares in a $1k investment were used to compare four stocks. The number of analysts providing price estimates was noted after the name for each stock. Three to nine analysts was considered optimal for a valid mean target price estimate.
Four April utilities stocks boasted 1 yr. target price upsides between 5% and 28% per analysts: Brookfield Infrastructure Partners (NYSE:BIP) at 5.10% showed the lowest upside of those four. TransAlta Corp. (NYSE:TAC) at 15.63% placed third. Gas Natural (NYSEMKT:EGAS) stood next to the top of the four at 21.36%. Finally, Atlantic Power Corporation (NYSE:AT) exhibited a 28.12% analyst 1 yr, target price upside to lead the April utilities dogs.
Wall Street Meets Main Street
The contrast between April 26 closing prices compared to November 26 closing prices were reported and charted below.
Novembers prices showed one utilities stock approaching its 1 yr analyst mean target upside, one in positive territory but behind 67% of goal, and two very negative. The best price upside was 3.88% posted by Brookfield Infrastructure Partners . The slightly positive upside of 1.10% was shown by TransAlta Corp. Negative performers were Gas Natural at minus 21.36%, and Atlantic Power Corporation exhibiting a near 22% drop since April.
The Road Between Wall Street & Main St. Reality
The chart and graph set below documented monthly price changes compared to analyst straight line incremental 1 yr target price projections for the four utilities sector stocks between April and November.
Price improvement by Brookfield Infrastructure Partners since April was documented at the top of the graph. In contrast, price performance finishing in positive territory but below analyst expectations as of November was shown by TransAlta Corp. Gas Natural and Atlantic Power Corporation showed prices swaying away from then dropping dramatically below their analyst vectors.
The Road Ahead: Can Analyst Forecasts Be Achieved?
As of November 26, the four utilities stocks contrasted to their analyst annual net gain projections as follows:
Atlantic Power Corporation netted a loss of $184.63 in dividends and price including $20 in broker fees as of November. It needed over $528 more to meet the analyst April goal of netting $343.64, based on dividend plus mean target price estimates from six analysts less broker fees. Analysts November 1yr. mean target price is pegged over $1.50 lower than that for April. Which means AT price is projected to grow at a lower and slower trajectory than the analysts projected in April.
Gas Natural netted a loss of $88.76 in dividends and price less broker fees as of November. It needed nearly $335 more to meet the analyst April goal of netting $246.02, based on dividend plus mean target price estimates from three analysts plus broker fees. Analysts November 1yr. mean target price is pegged $1.50 higher than that for April. Which means EGAS price will grow at a higher trajectory than analysts projected in April.
TransAlta Corp. netted $47.24 in dividends and price less broker fees as of November. It needed over $173 more to meet the April goal of netting $220.47, based on dividend plus mean target price estimates from seven analysts less broker fees.
Brookfield Infrastructure Partners netted $48.78 in dividends and price less broker fees as of November. It needed just $27 more to meet the April goal of netting $75.78, based on dividend plus mean target price estimates from fifteen analysts less broker fees.
As of November 2014 the average net was a loss of 1.1% on $4k invested as $1k in each of these utilities equities. This contrasts to an average net gain in dividend and price projected by analysts by April of 5.54%. This group of four utilities dogs is half on track to meet analyst forecasts. If AT and EGAS can struggle back to even, all four could meet the analyst April goal.
The ability of Analyst 1 yr. mean target price projections to forecast performance is not fool proof. As of November the April forecasts in the utilities sector were roughly 50% accurate. The final examination for this issue will be taken in April 2014. Stay tuned.
The stocks listed above were suggested only as decent starting points for a sector dog dividend stock purchase research process in April and November 2013. These were not recommendations.
Gains as reported do not factor-in any tax problems resulting from distributions. Consult your tax advisor regarding the source of "dividends" from any investment.
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 AT. 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.