(Editors' Note: This article covers a micro-cap stock. Please be aware of the risks associated with these stocks.)
Results from David Fish's Dividend Champions 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 eight stocks posting 7.49% to 16.72% price upsides. The eight included one basic materials firm at the top; two consumer goods firms in second and eighth places; one services representative in third; a financial firm fourth; a technology dog fifth; two utilities in sixth and seventh. Two firms posting less than 5% upsides trailed: a utility was ninth; a financial entity placed tenth.
Actionable Conclusion (1): 10 Champion Dogs Seek 4.6% to 16.7% 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
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 here verified by Yahoo Finance 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 Sorted Dividend Champions Index Stocks by Yield
David Fish's Champions list of companies paying increasing dividends for 25 consecutive years or more was sorted by yield as of January 31 to reveal the top ten.
Ten Champion dogs that promised the biggest dividend yields through January included firms representing five of nine market sectors: financial; technology; consumer gods; services; utilities. The top stocks, Universal Health Realty Trust (NYSE:UHT), and HCP Inc. (NYSE:HCP),were two of four from the financial sector. The other financial firms, Mercury General Corp. (NYSE:MCY), and Old Republic International. (NYSE:ORI) placed fifth, and eighth.
The balance of the top ten included one technology firm, AT&T Inc. (NYSE:T), in third; one consumer goods, Altria Group Inc. (NYSE:MO), in fourth place; Bowl America Class A (NYSEMKT:BWL.A) in sixth place was the lone service dog. Three utilities, Consolidated Edison (NYSE:ED), Northwest Natural Gas (NYSE:NWN), and WGL Holdings Inc. (NYSE:WGL) in seventh, ninth, and tenth places completed the representation of market sectors in the champions index.
Dividend vs. Price Results Compared to Dow Dogs
Periodic strengths of ten top Champions dogs by yield was graphed below as of market closing prices 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): Champions Bearish As Dow Dogs Dithered Up
In January the Champions top dividend payers continued their retreat from the bear. Champions top ten dog dividend increased 2.9% while price dropped 1.7%.
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 $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 provide a "market sentiment" gauge of upside potential. Added to the simple high yield "dog" metric, analyst mean price target estimates is another tool used to dig out bargains.
Actionable Conclusion (3): Wall St. Wizards Saw 7.9% Net Gain from Top 20 Dividend Champions Index Dogs Into 2015
Top twenty dogs from David Fish's Dividend Champions index were graphed below to show relative strengths by dividend and price as of January, 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 4% lower dividend from $20K invested as $1k in each stock in this group while aggregate single share price was projected to increase over 6% 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 number indicated the degree of a stocks movement opposite of market direction.
Actionable Conclusion (4): Analysts Forecast Ten Dividend Champion Dogs to Net 6.5% to 18.5% By January 2015
Four of the ten top dividend yielding Champion dogs were verified as being among the ten net gainers for the coming year based on analyst 1 year target prices. So this month the dog strategy as graded by Wall St. wizards is 40% accurate.
The ten probable profit generating trades revealed by Yahoo Finance for 2015 were:
Chevron Corp (NYSE:CVX) netted $185.14 based on dividends plus a mean target price estimate from nineteen analysts less broker fees. The Beta number showed this estimate subject to volatility 11% more than the market as a whole.
Altria Group Inc. netted $172,79 based on a mean target price estimate from eleven analysts combined with projected annual dividend less broker fees. The Beta number showed this estimate subject to volatility 55% less than the market as a whole.
AT&T Inc. netted $118.06 based on dividends plus the mean of annual price estimates from twenty-four analysts less broker fees. The Beta number showed this estimate subject to volatility 67% less than the market as a whole.
McDonald's Corp. (NYSE:MCD) netted $111.36 based on dividends plus 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.
United Bankshares Inc. (NASDAQ:UBSI) netted $106.80 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 8% greater than the market as a whole.
WGL Holdings Inc. netted $99.11 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 45% less than the market as a whole.
Middlesex Water Co. (NASDAQ:MSEX) netted $98.59 based on a mean target price estimate from two analysts combined with projected annual dividend less broker fees. The Beta number showed this estimate subject to volatility 35% less than the market as a whole.
Leggett & Platt Inc. (NYSE:LEG) netted $94.26 based on a mean target price estimate from four analysts combined with projected annual dividend less broker fees. The Beta number showed this estimate subject to volatility 11% less than the market as a whole.
Northwest Natural Gas netted $70.95 based on a mean target price estimate from two analysts combined with projected annual dividend less broker fees. The Beta number showed this estimate subject to volatility 64% less than the market as a whole.
Cincinnati Financial (NASDAQ:CINF) netted $65,45 based on a mean target price estimate from six analysts combined with projected annual dividend less broker fees. The Beta number showed this estimate subject to volatility 14% less than the market as a whole.
The average net gain in dividend and price was over 11.2% on $10k invested as $1k in each of these ten dogs. This gain estimate was subject to average volatility 33% 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 index dog dividend stock purchase or short sale 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.