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Summary

  • Six top Basic Materials dividend dogs showed hardy 1 yr. upsides of 23.01% to 37.17% after St. Patrick Day while four laggards showed double digit results averaging 17.02%.
  • Dividend dropped as price rose and showed a bullish trend for top ten Basic Materials and Dow dogs.
  • Analysts projected average 32.5% 1 yr. net gains for NDRO, EROC, LNCO, PER, SDRL, EVEP, EPB, LINE, MCEP, & CLMT.
  • Consider these stocks as possible starting points for your Basic Materials dividend dog stock purchase research.

Yield (dividend / price) results from here verified by Yahoo Finance for small, mid and large cap Basic Materials stocks as of market closing prices as of March 21 compared with analyst 1-yr target projections led to four actionable conclusions discussed below.

Wall Street Wizard Weights

One-year mean target price set by brokerage analysts multiplied by the number of shares in a $1k investment were used to compare ten 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 was considered optimal for a valid mean target price estimate.

Actionable Conclusion (1) Ten Basic Materials March Dividend Dogs Track 15.99% to 37.17% Upsides

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 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.

Dog Metrics Sorted Basic Materials Sector Stocks by Yield

Nine of the top ten basic materials stocks showing the biggest dividend yields as of March 21 represented oil and/or gas (o&g) industries. The exception was a major chemical firm, PetroLogistics LP (NYSE:PDH) which placed second out of ten. Top dog, Sandridge Permian Trust (NYSE:PER) was one of six independent o&g firms. The others were slotted five, and seven through ten: LRR Energy L.P. (NYSE:LRE); Calumet Specialty Products L.P (NASDAQ:CLMT); Atlas Resource Partners, L.P. (NYSE:ARP); QR Energy LP (NYSE:QRE); LinnCo LLC (NASDAQ:LNCO). Two o&g refiners and marketers, BP Prudhoe Bay Royalty Trust (NYSE:BPT), and Eagle Rock Energy Partners L.P. (NASDAQ:EROC) placed third and sixth. Seadrill Limited (NYSE:SDRL), the lone driller, placed fourth to complete the top ten.

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

The graph below of the relative strengths of the top ten basic materials dogs by yield was plotted as of market close 3/21/2014 compared to those of the Dow. Historic 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 dividends.

(click to enlarge)

Actionable Conclusion (2): Basic Materials Top Ten And Dow Dogs Got Bullish for March

Dividend from $10k invested as $1k in each basic material top ten dog fell while the aggregate single share price of those ten increased since February. Dividend dropped at a rate of 10% while total single share price increased 10.25% in that period. The bullish market signal was mainly propelled by two higher priced stocks moving 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 dropped 0.2% since February while aggregate single share price rose 0.7%. 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% in February, and $136 or 36% into March.

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 Weighed A 21.4% Net Gain from Top 20 Basic Materials Dogs By March 2015

Top twenty sector dogs were graphed below to show relative strengths by dividend and price as of March 21, 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 upsides to 2015.

Historic prices and actual dividends paid from $1000 invested in each of the ten highest yielding stocks and the aggregate single share prices of those twenty stocks divided by 2 created the 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.

(click to enlarge)

Yahoo projected 12% lower dividend from $10K invested in this group while aggregate single share price was projected to increase by 13.5% 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 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 10 Basic Materials Sector Dogs to Net 24.9% to 44.5% By 2015

Five of the ten top dividend yielding basic materials dogs were verified as being among the top gainers for the coming year based on analyst 1 year target prices. So this month the dog strategy for basic materials as graded by Wall St. wizards was 50% accurate.

Ten probable profit generating trades revealed by Yahoo Finance into 2015 were:

Enduro Royalty Trust (NYSE:NDRO) netted $445.38, based on dividends plus a mean target price estimate from four analysts less broker fees. The Beta number showed this estimate was subject to volatility 69% less than the market as a whole.

Eagle Rock Energy Partners netted $369.00 based on dividends plus mean target price estimate from three analysts less broker fees. The Beta number showed this estimate subject to volatility 21% less than the market as a whole.

LinnCo LLC netted $359.92 based on a mean target price estimate from nine analysts combined with projected annual dividend less broker fees. No Beta number was available for LNCO.

Sandridge Permian Trust netted $352.33 based on estimates from two analysts plus dividends less broker fees. The Beta number showed this estimate subject to volatility 1% greater than the market as a whole.

Seadrill Limited netted $351.45, based on dividend plus mean target price estimates from fourteen analysts less broker fees. The Beta number showed this estimate subject to volatility 37% greater than the market as a whole.

EV Energy Partners L.P. (NASDAQ:EVEP) netted $305.94 based on estimates from nine analysts plus dividends less broker fees. The Beta number showed this estimate subject to volatility 64% less than the market as a whole.

El Paso Partners Pipeline, LP (NYSE:EPB) netted $298.79 based on estimates from twelve analysts plus dividends less broker fees. The Beta number showed this estimate subject to volatility 83% less than the market as a whole.

Linn Energy LLC. (NASDAQ:LINE) netted $265.96, based on dividends plus a mean target price estimate by thirteen analysts less broker fees. The Beta number showed this estimate subject to volatility 33% less than the market as a whole.

Mid-Con Energy Partners (NASDAQ:MCEP) netted $252.44 based on a mean target price estimate from seven analysts combined with projected annual dividend less broker fees. The Beta number showed this estimate subject to volatility 57% greater than the market as a whole.

Calumet Specialty Products netted $249.14 based on dividends plus the mean of annual price estimates from eight analysts less broker fees. The Beta number showed this estimate subject to volatility 3% less than the market as a whole.

Average net gain in dividend and price was over 32.5% on $10k invested as $1k in each of these ten dogs. This gain estimate was subject to average volatility 21% less than the market as a whole.

The stocks listed above were suggested only as decent starting points for your basic materials sector dog dividend stock purchase research process. These were not recommendations.

These gains as reported do not factor-in any tax problems resulting from distributions. Consult your tax advisor regarding the source of "dividends" from any investment.

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: 6 Basic Materials Dogs Hunt 23% To 37% March Upsides