Results for S&P 500 Aristocrats Index members from Yahoo Finance tallied as of market closing prices January 31, 2014 were compared with analyst mean target gain results one year out. The resulting chart of that data below displayed nine stocks posting 9.7% to 19.22% price upsides. Three consumer goods firms popped 13% to 19.22% to lead the pack. Two basic materials firms hit 12% & 18%. Two healthcare companies charted 12.5% & 14% price upsides. One technology firm tailed these dogs with an analyst-estimated upside just over 8%.
Actionable Conclusion (1): 10 Aristocrat Dogs Seek 8% to 19% Upsides In January
The chart 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 into 2015 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
The object of this posting was 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 January 31 and compared those results with analyst 1 yr target projections and the top ten dogs of the Dow. Arnold top dog selections for January 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."
January Aristocrats dogs by yield included firms representing seven of nine business sectors. The lone technology dog, AT&T (NYSE:T) led the pack. One of two financial firms, HCP, Inc. (NYSE:HCP), placed second. The other financial, Cincinnati Financial (NASDAQ:CINF), placed sixth. A lone utility, Consolidated Edison Inc. (NYSE:ED) was third. Two consumer goods firms placed fourth, and tenth: Leggett & Platt (NYSE:LEG), and Clorox Co. (NYSE:CLX). Basic Materials representative, Chevron Corp. (NYSE:CVX) placed fifth. Two service sector firms, McDonald's Corp. (NYSE:MCD), and Sysco Corporation (NYSE:SYY) placed seventh, and eighth. One Healthcare firm, AbbVie Inc. (NYSE:ABBV) was ninth and completed this top ten S&P 500 Aristocrats dog list.
Dividend vs. Price Results Compared to Dow Dogs
Periodic strengths of ten top Aristocrats dogs by yield was graphed below as of market closes through 1/31/2013 and 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 (2): S&P Aristocrat Dogs Shrank From Bear As Dow Dogs Dithered Higher
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%.
Conflict infected the Dow dogs as projected annual dividend from $10k invested as $1K in each of the top ten increased nearly 2.5% since December. Aggregate single share price also increased nearly 6.3% to confirm the dithering. 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, expanded again to $140 or 38% in November, closed a bit to $111 or 29% for December, and widened to $145 or 38% in January. Most of this dither up was triggered by Procter & Gamble (NYSE:PG) replacing Microsoft (NASDAQ:MSFT) at the tail end of the ten Dow dogs this month.
To quantify top dog rankings, analyst mean price target estimates provided a "market sentiment" gauge of upside potential. Added to the simple high yield "dog" metric, analyst mean price target estimates were another tool used to sniff out bargains.
Actionable Conclusion (3): Wall St. Wizards Saw Over 9% Net Gains from Top 20 Aristocrat Dogs By 2015
Top twenty dogs from the S&P 500 Aristocrats index were graphed below to show relative strengths by dividend and price as of January 31, 2014 and those projected by analyst mean price target estimates to the same date in 2015.
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 2015.
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 2014. 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 2015 data points green for price and blue for dividend.
Yahoo projected a 7.3% lower dividend from $10K invested in this group while aggregate single share price was projected to increase by over 8.7% 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 (4): Analysts Expected 10 S&P 500 Dividend Aristocrats Dogs to Net 6.2% to 16.3% By January 2015
Four 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 40% accurate.
Ten probable profit generating trades revealed by Yahoo Finance for 2015 were:
Coca-Cola Co. (NYSE:KO) netted $201.84 based on dividends plus a 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.
Chevron Corp. netted $199.12, based on dividend plus mean target price estimates from nineteen analysts less broker fees. The Beta number showed this estimate subject to volatility 11% more than the market as a whole.
Procter & Gamble netted $182.07 based on dividends plus a mean target price estimate from nineteen analysts less broker fees. The Beta number showed this estimate subject to volatility 60% less than the market as a whole.
Johnson & Johnson (NYSE:JNJ) netted $151.70 based on target price estimates from eighteen analysts plus dividends less broker fees. The Beta number showed this estimate subject to volatility 43% less than the market as a whole.
Target Corp. (NYSE:TGT) netted $150.37 based on dividends plus a mean target price estimate from twenty-one analysts less broker fees. The Beta number showed this estimate subject to volatility 27% less than the market as a whole.
PepsiCo Inc. (NYSE:PEP) netted $139.91 based on dividends plus a mean target price estimate from seventeen analysts less broker fees. The Beta number showed this estimate subject to volatility 64% less than the market as a whole.
Nucor Corp. (NYSE:NUE) netted $133.88 based on a mean target price estimate from nineteen analysts combined with projected annual dividend less broker fees. The Beta number showed this estimate subject to volatility 49% more than the market as a whole.
AT&T Inc. netted $118.06 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 67% less than the market as a whole.
AbbVie Inc. netted $117.11 based on target price estimates from twelve analysts plus dividends less broker fees. No Beta number was available for ABBV.
McDonald's Corp. netted $111.36 based on dividends plus a mean target price estimate from twenty-six analysts less broker fees. The Beta number showed this estimate subject to volatility 63% less than the market as a whole.
The average net gain in dividend and price was over 16.5% on $10k invested as $1k in each of these ten dogs. This gain estimate was subject to average volatility 37% 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.
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.