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Executive summary:

  • 10 top Utilities dividend dogs showed promising 1 yr. upsides as of Valentine's Day.
  • Dividend dropped as price rose to show a bullish trend for top ten Utilities dogs but Dow dogs sent a mixed signal.
  • Analysts projected average 11% 1 yr. upsides for PEGI, TAC, BIP, WGL, TEG, SPH, PPL, FE, UTL, & DUK.
  • Consider these stocks starting points for your Utilities dog dividend stock purchase research.

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This monthly report tallied results from here as verified using Yahoo Finance data for utilities sector stocks as of market closing prices February 14 (Valentine's Day) along with analyst mean target price results one year hence. The comparison found three utilities producing near 12% to 22% price upsides.

At the low end of the top three, TransAlta Corp. (NYSE:TAC) the Calgary, Canada based diversified utility exhibited an 11.93% price upside. Brookfield Infrastructure Partners L.P. (NYSE:BIP) the Toronto headquartered electric company with 12.08% upside placed at the midpoint of the three. Pattern Energy Group Inc. (NASDAQ:PEGI) the San Francisco based wind generation diversified utility powered a 21.95% upside to lead the February utilities sector. Seven more dogs at the back of the utilities pack showed 2.4% to 7.6% price upsides.

Actionable Conclusion (1) Ten Utilities Valentine Dividend Dogs Chased 2.4% to 22% Upsides

The chart above used one year mean target price set by brokerage analysts matched against February 14 closing price to compare ten sector 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.

Thirty For the Money

Since the fall of 2011 this report series applied dog dividend methodology to uncover possible buy opportunities in each of eight major market sectors listed by Yahoo Finance: basic materials (BasMats), consumer goods (ConGo), financials (Fins), healthcare (Heal), industrial goods (IndiGo), services (Svcs), technology (Tec), and utilities (Utes). In the past year the series has expanded to report (1) dividend yield; (2) price upside; (3) net gain results based on analyst 1 yr. target projections.

Dog dividend methodology is 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. Now named Dogs of the Dow, O'Higgins system also works to find bargains in any collection of dividend paying stocks. Utilizing analyst price upside estimates has expanded the stock lists to include popular growth equities, if desired.

The report below tallied yield (dividend / price) results from Yahoo Finance for the Utilities sector as of market closing prices February 14 and compared them to results for the top ten dogs of the Dow. Arnold top utilities dog selections for February were disclosed below step by step. Three additional actionable conclusions were drawn.

Dog Metrics Gauged Utilities Stocks by Yield

Ten top utilities sector stocks that showed the biggest dividend yields February 14, per Yahoo Finance data, represented three industries: diversified; gas; electric. Top two dogs, Just Energy Group, Inc. [Canada] (NYSE:JE), and TransAlta Corp. , represented the diversified utilities. Three gas firms placed third, eighth, and ninth: Suburban Propane Partners (NYSE:SPH); Summit Midstream Partners LP (NYSE:SMLP); Integrys Energy Group (NYSE:TEG). Five electric firms dominated the list, claiming slots four through eight and ten: TECO Energy, Inc. (NYSE:TE); Pepco Holdings, Inc. (NYSE:POM); Entergy Corp (NYSE:ETR); Brookfield Infrastructure Partners L.P. ; Southern Company (NYSE:SO).

Dividend vs. Price Results Compared to Dow Dogs

The graphs below compare relative strengths of the top ten utilities sector dogs by yield as of market close 2/14/2014 with those of the Dow industrials index. Annual dividend history from $10,000 invested as $1k in each of the ten highest yielding stocks along with the total single share price of those ten stocks made the data points shown in green for price and blue for dividends.

(click to enlarge)

Actionable Conclusion (2): Utilities Dogs Chased Bulls As Dow Dogs Dithered Up.

Utilities dividend payers as of February 14 showed sagging dividend from $10k invested as $1k in each of the top ten stocks, while aggregate single share price of those ten popped up. Dividend dropped at a rate of 5.7% since January while total single share price increased 1.5% for that period as three new dogs pushed into the top ten.

For the Dow dogs, meanwhile, projected annual dividend from $10k invested as $1K in each of the top ten Dow dogs increased 0.27% since January while aggregate single share price rose nearly 4.4%. The Dow dogs overbought condition in which aggregate single share price of the ten exceeded projected annual dividend from $10k invested in those ten (@$1k each) widened again. The overhang was $140 or 38% to end November; shrank back to $111 or 29% into December/January; expanded to $132 or 35% into February

To quantify the top dog rankings, analyst mean price target estimates provided a "market sentiment" gauge of upside potential and so were added to the simple high yield "dog" metric used to dig out bargains.

Actionable Conclusion (3): Wall Street Wizards Expect 8.2% Net Gain from Top 20 Utilities Dogs Come February 2015

Top twenty dogs for the utilities sector were graphed below to show relative strengths by dividend and price as of February 14, 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 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.

(click to enlarge)

Yahoo projected a near 3.6% lower dividend from $10K invested in this group while aggregate single share price was projected to increase by over 3.8% 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 projection estimate. Estimates provided by one analyst were not applied (n/a).

A beta (risk) ranking for each 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 stock price movement opposite market direction.

Actionable Conclusion (4): Analysts Forecast Valentine 2015 Utilities DiviDogs to Net 5% to 25%

Only four of the ten top dividend yielding utilities dogs were verified as being among the ten gainers for the coming year based on analyst 1 year target prices. So this month the dog strategy for this sector as graded by Wall St. wizards was 40% accurate.

Ten probable profit generating trades were revealed by Thompson/First Call in Yahoo Finance by 2015:

Pattern Energy Group Inc netted $246.42 based on estimates from five analysts plus dividends less broker fees. No Beta number was available for PEGI.

TransAlta Corp netted $180.29 based on dividends plus a mean target price estimate from five analysts less broker fees. The Beta number showed this estimate subject to volatility 76% less than the market as a whole.

Brookfield Infrastructure Partners L.P. netted $151.41 based on estimates from seven analysts plus dividends less broker fees. The Beta number showed this estimate subject to volatility 48% less than the market as a whole.

WGL Holdings (NYSE:WGL) netted $102.53 based on estimates from five analysts plus dividends less broker fees. The Beta number showed this estimate subject to volatility 45% less than the market as a whole.

Integrys Energy Group netted $97.26 based on estimates from seven analysts plus dividends less broker fees. The Beta number showed this estimate subject to volatility 51% less than the market as a whole.

Suburban Propane L.P netted $82.56 based on estimates from eight analysts plus dividends less broker fees. The Beta number showed this estimate subject to volatility 32% less than the market as a whole.

PPL Corporation (NYSE:PPL) netted $76.13, based on dividend plus mean target price estimates from eighteen analysts less broker fees. The Beta number showed this estimate subject to volatility 87% less than the market as a whole.

First Energy (NYSE:FE) netted $68.50, based on dividends plus mean target price estimate from seventeen analysts less broker fees. The Beta number showed this estimate subject to volatility 98% less than the market as a whole.

Unitil Corp. (NYSE:UTL) netted $58.51 based on dividends plus a mean target price estimate from four analysts less broker fees. The Beta number showed this estimate subject to volatility 71% less than the market as a whole.

Duke Energy (NYSE:DUK) netted $50.26 based on estimates from twenty analysts plus dividends less broker fees. The Beta number showed this estimate subject to volatility 92% less than the market as a whole.

The average net gain in dividend and price was 11.1% on $10k invested as $1k in each of these ten utilities dogs. This gain estimate was subject to average volatility 70% 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 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.

Source: 3 Ultra Utilities Dogs Generated 12% To 22% Valentine Upsides