Results for S&P 500 Aristocrats Index members from Yahoo Finance tallied as of market closing prices December 27, 2013 were compared with analyst mean target gain results one year hence. The resulting chart of that data below displayed five stocks pursuing 8.24% to 12.55% price upsides.
McDonald's Corp. (NYSE:MCD) the Oakbrook, IL headquartered restaurant operator in the service sector showed the lowest upside of the five at 8.24%. Target Corp (NYSE:TGT) the discount variety store service firm from Minneapolis rang up 9.57% to claim the fourth slot. PepsiCo Inc. (NYSE:KO), the Purchase, NY purveyor of snack and soda consumer goods fizzed 10.33% to take middle ground. Coca Cola Co. the Atlanta purveyor of snack and soda consumer goods popped 10.62% to splash the second highest upside of the five. HCP Inc. (NYSE:HCP) a Long Beach, CA hybrid healthcare REIT charted the 12.55% price upside to lead the index.
On the downside, three S&P 500 Aristocrat dogs exhibited pending price slumps based on 1 yr. analyst mean target pricing. Clorox Co (NYSE:CLX) the Oakland, CA based maker of housewares in the consumer goods sector, charted 5.66% to the downside to most tempt hungry bears. Bemis Co Inc. (NYSE:BMS) the Neenah, WI dispenser of packaging ad containers also residing in the consumer goods sector, offered a negative 3.01% price downside for bears to mull. Finally, Air Products & Chemicals Inc. (NYSE:APD) pushing major diversified chemicals in the basic materials arena, put up the least tempting bear bait at negative 2.52% upside.
Charts above used one year mean target price calculated from brokerage analysts matched against late-month closing price to compare sector stocks showing the highest upside price potential through 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.
Thirty For the Money
This article was written to reveal bargain stocks to buy and hold for at least one year. It is one component in 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.
The report below tallied yield (dividend / price) results from Yahoo Finance for the S&P Aristocrats Index as of market closing prices December 27 and compared them to results for the top ten dogs of the Dow. Arnold top dog selections for December were disclosed step by step. Four actionable conclusions were drawn.
Dog Metrics Ranked S&P 500 Aristocrats Index Stocks by Yield
McGraw Hill, publisher if this index, states, "The S&P 500® Dividend Aristocrats index measures the performance of large cap, blue chip companies within the S&P 500 that have followed a policy of increasing dividends every year for at least 25 consecutive years."
December Aristocrats placed seven of nine business sectors into the top ten by yield. One of two financial firms, HCP, Inc., led the pack. The other financial, Cincinnati Financial (NASDAQ:CINF), placed sixth. The lone technology dog, AT&T (NYSE:T) was second. A lone utility, Consolidated Edison Inc. (NYSE:ED) was third. Two consumer goods firms placed fourth, and ninth: Leggett & Platt (NYSE:LEG), and Kimberly-Clark (NYSE:KMB). Two service sector firms, McDonald's Corp , and Sysco Corporation (NYSE:SYY) placed fifth, and eighth. Basic Materials representative, Chevron Corp. (NYSE:CVX) placed seventh. Healthcare firm, AbbVie Inc. (NYSE:ABBV) was tenth and completed this top ten S&P 500 Aristocrats dog list.
Dividend vs. Price Results Compared to Dow Dogs
A graph of the relative strengths of the top ten Aristocrats dogs by yield is shown below as of market close 12/27/2013 compared to those of the Dow. Projected annual dividend history 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 green for price and blue for dividend.
Actionable Conclusion (1): S&P Aristos Dogs Were Bullish; Dow Retreated; Both Stayed Overbought
December Aristocrats continued a bullish price course initiated last March. Total single share price has increased over 28% the past nine months including 3.3% since November. The top ten Aristocrats stocks confirmed a bull track as aggregate dividend from $10k invested as $1k in each dog decreased 0.3% since November. The Aristocrats dogs expanded their overbought condition as aggregate single share price of the ten exceeded projected annual dividend from $1k invested in each by about $244 or 64%.
Bearish sentiment returned to the Dw 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 emphasize the bearish turn. The Dow dogs' overbought condition, in which the 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 when Microsoft (NASDAQ:MSFT) replaced JPMorgan Chase & Co. (NYSE:JPM) at the tail of the top ten Dow dogs in December.
To quantify the top dog rankings, analyst mean price target estimates provided 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 See A Near 6% Net Gain from Top 20 Aristocrat Dogs By 2014
Top twenty dogs from the S&P 500 Aristocrats 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 $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 net row in the chart below, exhibiting the over 5.79% net gain. Factoring in a 0.454% loss from the negative net stocks introduced above, a net net gain of 5.34% results.
Yahoo projected a 3.5% lower dividend from $10K invested in this group, while aggregate single share price was projected to increase by over 3.1% 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 numbers indicated the degree of a stocks movement opposed to market direction.
Actionable Conclusion Three (3): Analysts Expect 10 S&P 500 Dividend Aristocrats Dogs to Net 6.2% to 16.3% By December 2014
Five of the top yielding dividend S&P 500 Aristocrats dogs were verified as being among the top ten gainers for the coming year by analyst 1 year target prices. So this month, the dog strategy as graded by Wall St. wizards was 50% accurate.
Ten probable profit generating trades revealed by Yahoo Finance for 2014 were:
HCP Inc. netted $163.01 based on a mean target price estimate from twelve analysts combined with projected annual dividend less broker fees. The Beta number showed this estimate subject to volatility 45% less than the market as a whole.
Coca-Cola Co netted $113.79 based on dividends plus a mean target price estimate from fifteen analysts less broker fees. The Beta number showed this estimate subject to volatility 75% less than the market as a whole.
PepsiCo Inc. (NYSE:PEP) netted $110.70 based on dividends plus a mean target price estimate from sixteen analysts less broker fees. The Beta number showed this estimate subject to volatility 67% less than the market as a whole.
Target Corp. netted $103.41 based on dividends plus a mean target price estimate from eighteen analysts less broker fees. The Beta number showed this estimate subject to volatility 38% less than the market as a whole.
McDonald's Corp. netted $95.88 based on dividends plus a mean target price estimate from twenty-three analysts less broker fees. The Beta number showed this estimate subject to volatility 80% less than the market as a whole.
AT&T Inc netted $84.04 based on dividends plus a mean target price estimate from twenty-four analysts less broker fees. The Beta number showed this estimate subject to volatility 74% less than the market as a whole.
Procter & Gamble (NYSE:PG) netted $70.84 based on dividends plus a mean target price estimate from nineteen analysts less broker fees. The Beta number showed this estimate subject to volatility 66% less than the market as a whole.
Consolidated Edison netted $69.19 based on target price estimates from fourteen analysts plus dividends less broker fees. The Beta number showed this estimate subject to volatility 6% opposite the market as a whole.
Chevron Corp netted $68.64, based on dividend plus mean target price estimates from twenty one analysts less broker fees. The Beta number showed this estimate subject to volatility 5% more than the market as a whole.
Johnson & Johnson (NYSE:JNJ) netted $61.75 based on target price estimates from seventeen analysts plus dividends less broker fees. The Beta number showed this estimate subject to volatility 46% less than the market as a whole.
The average net gain in dividend and price was just about 9% on $9k invested as $1k in each of these nine dogs. This gain estimate was subject to average volatility 28% less than the market as a whole.
Actionable Conclusion (4): (Bear Alert) Analysts Forecast 3 S&P 500 Dividend Aristocrats Dogs to Post Net Losses of 2% to 4.6% By December 2014
Probable losing trades revealed by Yahoo Finance for 2014 were:
Air Products & Chemicals lost $20.18, based on dividends and a mean target price estimate by twenty-one analysts including $20 of broker fees. The Beta number showed this estimate subject to volatility 35% greater than the market as a whole.
Bemis Co Inc. lost $24.44, based on dividends and a mean target price estimate by eleven analysts including $20 of broker fees. The Beta number showed this estimate subject to volatility 65% less than the market as a whole.
Clorox Co lost $46.16, based on dividends and a mean target price estimate by sixteen analysts including $20 of broker fees. The Beta number showed this estimate subject to volatility 53% less than the market as a whole.
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.
All stocks listed above were suggested only as possible 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 CSCO, CVX, 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.