Yield (dividend / price) results from here, verified by Yahoo Finance for small, mid, & large cap Financial stocks as of market closing prices on March 21, compared with analyst 1-yr target projections, led to five 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 were optimal for a valid mean target price estimate.
Actionable Conclusion (1) Ten Healthcare March Dividend Dogs Chased 6.25% to 15.58% 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 Gauged Health Stocks by Yield
Top ten healthcare sector dogs showing the biggest dividend yields by this screen as of March 21 represented just three industries: drug manufacturers - major; diagnostic substances; hospitals. Top healthcare sector stocks were four of eight drug manufacturers - major on this list, GlaxoSmithKline (NYSE:GSK) and AstraZeneca PLC (NYSE:AZN) were the top two. In third and fourth place, were Sanofi SA (NYSE:SNY), & Eli Lilly and Company (NYSE:LLY). Diagnostic substances firms were represented in fifth place by Meridian Bioscience, Inc. (NASDAQ:VIVO). Select Medical Holdings Corporation (NYSE:SEM) in sixth was the lone hospitals representatives. The remaining four major drug manufacturers placed seventh through tenth: Pfizer (NYSE:PFE); Merck & Co. Inc. (NYSE:MRK); AbbVie Inc. (NYSE:ABBV); Johnson & Johnson (NYSE:JNJ) to complete the top ten healthcare dogs.
Sector Leader Dividend vs. Price Results Compared to Dow Index Dogs
Graphs below compared relative strengths of the top ten healthcare sector dogs by yield as of market close 3/21/2014, 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.
Actionable Conclusion (2): Healthcare And Dow Dogs Both Bullish
The Healthcare collection of dividend payers tapered its bullish course after February, as total single share price crept up just 0.5% and aggregate dividend from $10k invested as $1k in each of the top ten healthcare dogs dropped at a rate of 1.5%. The healthcare pack again expanded in overbought territory as aggregate single share price moved ever higher than 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%; March saw the gap widen to $141 or 40%.
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 Willed Over 6.2% Net Gain from Top 20 Healthcare Dogs Come March 2015
Top twenty dogs from the Healthcare sector 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 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 two 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 two created the 2015 data points green for price and blue for dividend graphed from the plus row in the chart below exhibiting the 6.71% net gain.
Factoring in a .51% loss from the one negative net stock introduced above, a net gain of 6.2% results.
Yahoo projected a 4.8% 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 5.4% 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 (4): Analysts Forecast Ten Healthcare DiviDog Net Gains Range 7.8% to 15.7% by March 2015
Six of the ten top dividend yielding healthcare dogs were verified as being among the ten gainers for the coming year based on analyst one year target prices. So this month the dog strategy for the financial sector as graded by Wall St. wizards was 60% accurate.
Ten probable profit generating trades were revealed by Thompson/First Call in Yahoo Finance for 2015:
HealthSouth Corp (NYSE:HLS) netted $157.52 based on estimates from ten analysts plus dividends less broker fees. The Beta number showed this estimate subject to volatility 117% more than the market as a whole.
Teva Pharmaceutical (NYSE:TEVA) netted $143.59, based on mean target price estimates from twenty analysts plus dividends less broker fees. The Beta number showed this estimate subject to volatility 7% less than the market as a whole.
Sanofi netted $132.72, based on dividends plus mean target price estimate from three analysts less broker fees. The Beta number showed this estimate subject to volatility 17% more than the market as a whole.
Baxter International, Inc. (NYSE:BAX) netted $120.85 based on estimates from thirteen analysts plus dividends less broker fees. The Beta number showed this estimate subject to volatility 47% less than the market as a whole.
GlaxoSmithKline PLC netted $115.59 based on dividends plus a mean target price estimate from three analysts less broker fees. The Beta number showed this estimate subject to volatility 29% less than the market as a whole.
Johnson & Johnson netted $98.15 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 42% less than the market as a whole.
Pfizer netted $79.87 based on dividends plus mean target price estimate from seventeen analysts less broker fees. The Beta number showed this estimate subject to volatility 23% less than the market as a whole.
AbbVie Inc. netted $78.76 based on dividends plus the mean of annual price estimates from eleven analysts less broker fees. A Beta number was not available for ABBV.
Eli Lilly netted $78.71 based on dividend plus a mean target price estimate from seventeen analysts less broker fees. The Beta number showed this estimate subject to volatility 70% less than the market as a whole.
Abbott Labs (NYSE:ABT) netted $78.43 based on dividends plus the mean of annual price estimates from seventeen analysts less broker fees. The Beta number showed this estimate subject to volatility 28% less than the market as a whole.
Average net gain in dividend and price was 10.8% on $10k invested as $1k in each of these ten dogs. This gain estimate was subject to average volatility 12% less than the market as a whole.
Actionable Conclusion (5): (Bear Alert) Analysts Forecast KND Healthcare DiviDog to Post Net Loss of 10.2% By 2015
One probable losing trade revealed by Yahoo Finance for 2015 was:
Kindred Healthcare, Inc. (NYSE:KND) lost $101.96 based on dividend and a mean target price estimate from eight analysts including broker fees. The Beta number showed this estimate subject to volatility 176% greater than 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.
Disclosure: I am long PFE, CSCO, CVX, GE, INTC, MCD, 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.