- 5 top S&P 500 index dividend dogs showed strong 1 yr. upsides of 10.48% to 21.28% as of February 24 while five laggards in the top ten (as ranked by analyst mean target price) showed single digit results of 4.78% to 7.84%
- A bull signal flashed from the top yielding S&P 500 index top ten dogs (by yield) as dividend dropped and price increased. Meanwhile, a bear attacked the dogs of the Dow.
- Analysts projected average 14.9% 1 yr. net gains for KMI, VZ, WIN, MO, FTR, T, PM, RAI, TEG, & CTL.
- Consider these stocks as possible starting points for your S&P 500 index dividend dog stock purchase research.
S&P 500 Index prices from Yahoo! Finance tallied as of market closing February 24 compared with analyst mean target gain results one year hence showcased ten stocks sporting 4.78% to 21.28% price upsides. These included five telecoms, three tobacco firms, one gas utility, and a gas & oil pipeline firm, hence a gab and gas collection.
This report presumed yield (dividend / price) dividend dog methodology applied to any index and compared that index side by side with the Dow. Below, Arnold top dog selections for February were disclosed below step by step. Four actionable conclusions were drawn.
Actionable Conclusion (1): 10 S&P 500 Dogs Seek 5% to 21% Upsides Come February 2015
The chart above used one year mean target prices set by brokerage analysts matched against February 24 closing price to compare ten S&P 500 index 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.
Seeking Alpha reader requests prompted this series of index-specific articles reporting dividend yield plus price upside results for these indices: Dow 30; S&P 500; Russell 2000 & 1000; S&P Aristocrats; NASDAQ 100; Champions; Challengers; Global.
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 collection now named Dogs of the Dow. O'Higgins system works to find bargains in any collection of dividend paying stocks. Utilizing analyst price upside estimates has expanded the universe to include popular growth equities as desired.
Dog Metrics Parsed S&P 500 Stocks by Yield
McGraw Hill Finance, publisher of the Dow Jones S&P 500 Index states:
"The S&P 500® is widely regarded as the best single gauge of large cap U.S. equities. There is over USD 5.58 trillion benchmarked to the index, with index assets comprising approximately USD 1.3 trillion of this total. The index includes 500 leading companies and captures approximately 80% coverage of available market capitalization."
Just four of nine sectors placed top dogs in this index by yield for January: technology; financial; consumer goods; utilities. Top dog Windstream Corp (NASDAQ:WIN) was one of four technology firms in the top ten. Other technology firms were Frontier Communications (NYSE:FTR), second; CenturyLink Inc. (NYSE:CTL), third; AT&T, Inc. (NYSE:T), fifth.
Fourth and sixth places were taken by financial firms, HCP, Inc (NYSE:HCP) and Health Care REIT (NYSE:HCN). Two consumer goods firms, Reynolds American (NYSE:RAI) and Altria (NYSE:MO) filled the seventh and eighth slots with smoke. Finally, two utilities took the ninth and tenth slots: TECO Energy (NYSE:TE); Pepco Holdings, Inc. (NYSE:POM) which completed these S&P 500 top ten dogs by yield.
Dividend vs. Price Results Compared to Dow Dogs
Relative strengths of the top ten S&P 500 dogs by yield as of market close 2/24/2014 compared to those of the Dow are shown in the graphs and charts below. Projected annual dividend history from $10.000 invested as $1k in each of the ten highest yielding stocks and the total single share prices of those ten stocks created the data points shown in green for price and blue for dividend.
Actionable Conclusion (2): S&P 500 Dogs Charged as Dow Retreated in February
February's S&P 500 collection of dividend payers charged after bulls as price popped up 7% after January. Aggregate dividend from $1k invested in each ($10k total) for the top ten S&P 500 stocks fell at a 3% rate in that period to confirm the bullish state.
Gloom returned to the Dow dogs as projected annual dividend from $10k invested as $1K in each of the top ten Dow dogs increased 0.62% since January. Aggregate single share price fell 3.4% to confirm the bearish sign. 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 fell back. The overhang was $140 or 38% in November, closed a bit to $111 or 29% for December, expanded to $145 or 38% for January, then retreated to $125 or 33% in February. Most of this recent gloom on the Dow was triggered by Coca Cola Co. (NYSE:KO) replacing Microsoft (NASDAQ:MSFT) at the tail of the top ten Dow accompanied by a General Electric (NYSE:GE) price drop propelling GE higher by yield.
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 Want 10% Net Gains from Top 20 S&P 500 Dogs by 2015
Top twenty dogs from the S&P 500 index graphed below showed relative strengths by dividend and price as of February 24, 2014 against 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 $1k in each of 20 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 dividends.
Yahoo projected a 5.6% lower dividend from $10K invested in this group while aggregate single share price was projected to increase 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 opposed to market direction.
Actionable Conclusion (4): Analysts Saw Ten S&P 500 Dogs Netting 9.7% to 24.4% By 2015
Six of the top yielding dividend S&P 500 dogs were verified as top gainers for the coming year by analyst 1 year target prices. So this month the dog strategy as graded by wall street wizards is 60% accurate.
Ten probable profit generating trades revealed by Yahoo! Finance into 2015 were:
Kinder Morgan (NYSE:KMI) netted $243.86 based on estimates from fourteen analysts plus dividends less broker fees. The Beta number showed this estimate subject to volatility 43% less than the market as a whole.
Verizon Communications (NYSE:VZ) netted $193.07 based on dividends plus mean target price estimate from twenty-seven analysts less broker fees. The Beta number showed this estimate subject to volatility 98% less than the market as a whole.
Windstream Corporation netted $177.48, based on dividends plus a mean target price estimate by eleven analysts less broker fees. The Beta number showed this estimate subject to volatility 3% less than the market as a whole.
Altria netted $157.22 based on estimates from eleven analysts plus dividends less broker fees. The Beta number showed this estimate subject to volatility 58% less than the market as a whole.
Frontier Communications netted $145.58 based on dividends plus mean target price estimate from ten analysts less broker fees. The Beta number showed this estimate subject to volatility 20% less than the market as a whole.
AT&T, Inc. netted $143.46 based on dividends plus mean target price estimate from twenty-four analysts less broker fees. The Beta number showed this estimate subject to volatility 72% less than the market as a whole.
Phillip Morris (NYSE:PM) netted $132.33 based on a mean target price estimate from seventeen analysts combined with projected annual dividend less broker fees. The Beta number showed this estimate subject to volatility 2% less than the market as a whole.
Reynolds American netted $104.57 based on estimates from nine analysts plus dividends less broker fees. The Beta number showed this estimate subject to volatility 75% less than the market as a whole.
Integrys Energy Group (NYSE:TEG) netted $97.44 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 49% less than the market as a whole.
CenturyLink netted $97.02 based on dividends plus the mean of annual price estimates from eleven analysts less broker fees. The Beta number showed this estimate subject to volatility 35% less than the market as a whole.
The average net gain in dividend and price was about 15% on $10k invested as $1k in each of these ten dogs. This gain estimate was subject to average volatility 45% less than the market as a whole.
Net gain estimates above did not factor-in any tax problems resulting from distributions. Consult your tax advisor regarding the source and consequences of "dividends" from any investment.
The stocks listed above were suggested only as decent 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.
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.