Results for S&P 500 Index members from Yahoo Finance tallied as of market closing prices December 27 were compared with analyst mean target gain results one year hence. The resulting chart of that data below showcased five stocks sporting 13% to nearly 17% price upsides.
Integrys Energy Group, Inc. (NYSE:TEG) a gas utility based in Chicago posted 13.29% and showed the lowest upside of those five. HCP, Inc (NYSE:HCP) a Long Beach, CA based healthcare facilities REIT in the financial sector or was second lowest posting 14.67% upside. PG&E Corporation (NYSE:PCG) a San Francisco based electric utility showed the midpoint 15.27% upside. Ventas Inc. (NYSE:FE) a Chicago based healthcare REIT in the financial sector exhibited a nearly top 15.74% price upside. Health Care REIT, Inc. (NYSE:HCN) the Toledo, OH based healthcare REIT in the financial sector exhibited a 16.79% upside to lead the S&P 500 index in analyst 1 yr mean target price upsides. Five other members of the S&P500 index back in the pack showed 7.23% to 10.67% price upsides.
The chart above used one year mean target prices set by brokerage analysts matched against December 27 closing price to compare ten S&P 500 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 was written to reveal bargain stocks to buy and hold for at least one year. It is one of an ongoing series that has reported (1) dividend yield; (2) price upside; (3) net gain results based on analyst 1 yr target projections. Stocks reported were termed dogs because they were all selected based on Michael B. O'Higgins book "Beating The Dow" (HarperCollins, 1991), which revealed how high yielding stocks whose prices increased (and whose dividend yields therefore decreased) could be sold off once a year to sweep gains and reinvest the seed money into higher yielding stocks in the same index, named Dogs of the Dow. O'Higgins system works to find bargains in any collection of dividend paying stocks. Utilizing analyst price upside estimates expanded the universe to include popular growth equities if desired.
This 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 S&P 500 Index top dog selections for December were disclosed step by step. Three actionable conclusions were drawn.
Dog Metrics Sorted S&P 500 Stocks by Yield
McGraw Hill Finance, publisher of the Dow Jones S&P 500 Index states:
"The S&P 500® is widely regarded as the best single gauge of large cap U.S. equities. There is over USD 5.58 trillion benchmarked to the index, with index assets comprising approximately USD 1.3 trillion of this total. The index includes 500 leading companies and captures approximately 80% coverage of available market capitalization."
Just three of nine sectors placed top dogs in this index for December. Top dog Windstream Corp (NASDAQ:WIN) was one of four technology firms in the top ten. The other technology firms were Frontier Communications (NASDAQ:FTR), second; CenturyLink Inc. (NYSE:CTL), third; AT&T, Inc. (NYSE:T), ninth.
Four Utilities filled the four, seven, eight, and ten slots: First Energy Corp. ; Pepco Holdings, Inc. (NYSE:POM); Entergy Corporation (NYSE:ETR); TECO Energy (NYSE:TE). Fifth and sixth places were taken by financial firms, HCP, Inc and Health Care REIT which completed the S&P 500 top ten dogs.
Dividend vs. Price Results Compared to Dow Dogs
Relative strengths of the top ten S&P 500 dogs by yield as of market close 12/27/2013 compared to those of the Dow are shown in the graphs and charts below. Projected annual dividend history from $10.000 invested as $1k 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): S&P 500 & Dow Dogs Retreated in December
The December S&P 500 collection of dividend payers ran from bears as price dropped over 10% after November. Aggregate dividend from $1k invested in each ($10k total) for the top ten S&P 500 stocks increased at a 4% rate in that period to confirm the bearish state.
Bearish sentiment also returned to the Dow dogs as projected annual dividend from $10k invested as $1K in each of the top ten Dow dogs increased nearly 2% since November. Aggregate single share price dropped nearly 3.8% to confirm the bearish turn. 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 sank 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, expanded again to $140 or 38% in November, then closed a bit to $111 or 29% for December. Most of this bear attack was triggered by Microsoft (NASDAQ:MSFT) replacing JPMorgan Chase & Co. (NYSE:JPM) as the tail of the top ten Dow dogs this past month.
To quantify top dog rankings, analyst mean price target estimates provide a "market sentiment" gauge of upside potential which was added to the simple high yield "dog" metric used to dig out bargains.
Actionable Conclusion (2): Wall St. Wizards Wand A Near 11% Net Gain from Top 20 S&P 500 Dogs In 2014
Top twenty dogs from the S&P 500 index were graphed below to show relative strengths by dividend and price as of December 27, 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 $1000 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 $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 dividends.
Yahoo projected a near 8% lower dividend from $10K invested in this group while aggregate single share price was projected to increase over 9% in the coming year. The number of analysts contributing to the mean target price estimate for each stock was noted in 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 opposed to market direction.
Actionable Conclusion (3): Analysts Saw Ten S&P 500 Dogs Netting 13.5% to 20.5% By November, 2014
Six of the top yielding dividend S&P 500 dogs were verified as top gainers for the coming year by analyst 1 year target prices. So this month the dog strategy as graded by wall street wizards is 60% accurate.
Ten probable profit generating trades revealed by Yahoo Finance for 2014 were:
Health Care REIT netted $205.38 based on a mean target price estimate from fifteen analysts combined with projected annual dividend less broker fees. The Beta number showed this estimate subject to volatility 36% less than the market as a whole.
Windstream Corporation netted $194.02, based on dividends plus a mean target price estimate by thirteen analysts less broker fees. The Beta number showed this estimate subject to volatility 7% less than the market as a whole.
Ventas, Inc. (NYSE:VTR) netted $188.07 based on estimates from twelve analysts plus dividends less broker fees. The Beta number showed this estimate subject to volatility 42% less than the market as a whole.
HCP, Inc netted $184.22 based on estimates from twelve analysts plus dividends less broker fees. The Beta number showed this estimate subject to volatility 35% less than the market as a whole.
PG&E Corporation netted $177.86 based on dividends plus mean target price estimate from eighteen analysts less broker fees. The Beta number showed this estimate subject to volatility 65% less than the market as a whole.
Integrys Energy Group netted $162.84 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 52% less than the market as a whole.
First Energy Corporation netted $153.83 based on dividends plus mean target price estimate from seventeen analysts less broker fees. The Beta number showed this estimate subject to volatility 95% less than the market as a whole.
CenturyLink netted $152.76 based on dividends plus the mean of annual price estimates from sixteen analysts less broker fees. The Beta number showed this estimate subject to volatility 45% less than the market as a whole.
Frontier Communications netted $137.45 based on dividends plus mean target price estimate from twelve analysts less broker fees. The Beta number showed this estimate subject to volatility 16% less than the market as a whole.
PPL Corporation (NYSE:PPL) netted $134.77 based on estimates from eighteen analysts plus dividends less broker fees. The Beta number showed this estimate subject to volatility 83% less than the market as a whole.
The average net gain in dividend and price was about 17% on $10k invested as $1k in each of these ten dogs. This gain estimate was subject to average volatility 48% less than the market as a whole.
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.
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, T, GE, INTC, MCD, PFE, 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.