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Executive summary:

  • 10 top Healthcare dividend dogs showed promising 1 yr. upsides averaging 9.24% as of Valentines Day, while one stock faced a near 7% projected downside.
  • Dividend dropped as price rose and showed a bullish trend for top ten Healthcare dogs, but Dow dogs sent a mixed signal as both became overbought by over 35%.
  • Analysts projected average 10.23% 1 yr. net gains for HLS, SNY, BAX, VIVO, JNJ, MSA, ABBV, GSK, AQBT, & DGX, while AZN projected a 4.6% loss.
  • Consider these stocks as possible starting points for your Healthcare dog dividend stock purchase/sale research.

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Results from here, as verified using Yahoo Finance data for healthcare sector stocks, as of market closing prices February 14 compared with analyst mean target price results one year hence showed HealthSouth Corp (NYSE:HLS), after paying out its first ever quarterly dividend, flaunted a 16.44% price upside to lead the healthcare sector.

Nine healthcare dogs trailing HealthSouth showed 5.3% to 11.88% price upsides.

Actionable Conclusion (1) Ten Healthcare Valentine Dividend Dogs Chased 5.3% to 16.44% Upsides

On the downside, one stock exhibited a pending price slump based on 1 yr. analyst mean target pricing. AstraZeneca (NYSE:AZN), a London based major drug manufacturer, weighed in with 6.77% to the downside to most tempt hungry bears.

Actionable Conclusion (2) Healthcare Valentine Dividend Dog AZN Faces a 6.77% Downside

The charts 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 healthcare sector as of market closing prices February 14 and compared them to results for the top ten dogs of the Dow. Arnold's top healthcare dog selections for February were disclosed below step by step. Four additional actionable conclusions were drawn.

Dog Metrics Gauged Health Stocks by Yield

Top ten healthcare sector dogs showing the biggest dividend yields by this screen as of February 14 represented just three industries: drug manufacturers - major; diagnostic substances; hospitals. Top healthcare sector stocks were two of eight drug manufacturers - major on this list, GlaxoSmithKline (NYSE:GSK) and AstraZeneca PLC . Meridian Bioscience, Inc. (NASDAQ:VIVO), in third, represented diagnostic substances firms. In fifth place, Select Medical Holdings Corporation (NYSE:SEM) was the lone hospitals representatives. The other six major drug manufacturers placed fourth and sixth through tenth: Sanofi SA (NYSE:SNY); Eli Lilly and Company (NYSE:LLY); Pfizer (NYSE:PFE); Merck & Co. Inc. (NYSE:MRK); AbbVie Inc. (NYSE:ABBV); Johnson & Johnson (NYSE:JNJ) completed the top ten healthcare dogs.

Sector Leader Dividend vs. Price Results Compared to Dow Index Dogs

The graphs below compare relative strengths of the top ten healthcare 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 (3): Healthcare Got Bullish As Dow Dogs Dithered

The Healthcare collection of dividend payers continued on a very bullish course since October; total single share price shot up over 33% and aggregate dividend from $10k invested as $1k in each of the top ten healthcare dogs dropped at a rate of nearly 15% since then. Since January the aggregate ten top healthcare dog price rose 8% and dividend from $10k invested as $1k in each dropped 5.5%. The healthcare pack again expanded into overbought territory as aggregate single share price moved atop dividend derived from $10K invested as $1k in each. December/January healthcare top ten price exceeded dividend by $76 or 20%; in February the overhang jumped to $133 or 37%.

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.

The overbought gap is now nearly identical for Healthcare and Dow dogs at 37% and 35%, respectively.

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 (4): Wall Street Wizards Willed Over 6.2% Net Gain from Top 20 Healthcare Dogs Come February 2015

The top twenty dogs from the Healthcare 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 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 graphed from the plus row in the chart below exhibiting the 6.43% net gain.

Factoring in a .23% loss from the one negative net stock introduced above, a net gain of 6.19% results.

(click to enlarge)

Yahoo projected a 4.6% lower dividend from $10K invested as $1k in ten dogs in this group, while aggregate single share price for those ten was projected to increase by 7.6% 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 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 of 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 (5): Analysts Forecast Ten 2015 Healthcare DiviDog Net Gains Range 7.3% to 16.6%

Five of the ten top dividend yielding healthcare 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 the financial sector as graded by Wall St. wizards was 50% accurate.

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

HealthSouth Corp netted $166.25 based on estimates from ten analysts plus dividends less broker fees. The Beta number showed this estimate subject to volatility 120% more than the market as a whole.

Sanofi netted $120.54, based on dividends plus mean target price estimate from four analysts less broker fees. The Beta number showed this estimate subject to volatility 14% more than the market as a whole.

Baxter International, Inc. (NYSE:BAX) netted $127.22 based on estimates from fourteen analysts plus dividends less broker fees. The Beta number showed this estimate subject to volatility 44% less than the market as a whole.

Meridian Bioscience, Inc netted $123.27 based on dividends plus mean target price estimate from seven analysts less broker fees. The Beta number showed this estimate subject to volatility 55% greater than the market as a whole.

Johnson & Johnson netted $99.23 based on a mean target price estimate from eighteen analysts combined with projected annual dividend less broker fees. The Beta number showed this estimate subject to volatility 43% less than the market as a whole.

Mine Safety Appliances Co. (NYSE:MSA) netted $79.77, based on dividends four analysts less broker fees. The Beta number showed this estimate subject to volatility 61% more than the market as a whole.

AbbVie Inc. netted $75.21 based on dividends plus the mean of annual price estimates from twelve analysts less broker fees. A Beta number was not available for ABBV.

GlaxoSmithKline PLC netted $74.79 based on dividends plus a mean target price estimate from four analysts less broker fees. The Beta number showed this estimate subject to volatility 31% less than the market as a whole.

Abbott Labs (NYSE:ABT) netted $74.31 based on dividends plus the mean of annual price estimates from eighteen analysts less broker fees. The Beta number showed this estimate subject to volatility 29% less than the market as a whole.

Quest Diagnostics (NYSE:DGX) netted $73.35 based on dividend plus a mean target price estimate from twenty-one analysts less broker fees. The Beta number showed this estimate subject to volatility 41% less than the market as a whole.

Average net gain in dividend and price was 10.2% on $10k invested as $1k in each of these ten dogs. This gain estimate was subject to average volatility 4% less than the market as a whole.

Actionable Conclusion (6): (Bear Alert) Analysts Forecast AZN Healthcare DiviDog to Post Net Loss of 4.6% By 2015

One probable losing trades revealed by Yahoo Finance for 2015 was:

AstraZeneca, Inc. lost $46.11 based on dividend and a mean target price estimate from five analysts including broker fees. The Beta number showed this estimate subject to volatility 15% below the market as a whole.

The 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.

Stocks listed above were suggested only as possible starting points for your index dog dividend stock purchase/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.

Source: HealthSouth 16% February Upside Paced Healthcare Dogs