Seeking Alpha
Dividend investing, growth, momentum
Profile| Send Message|
( followers)  

Summary

  • 5 top Champion index stocks showed benign 1 yr. upsides averaging 6.6% as of April 9 (per analyst mean target price) while one champ dog was down 6.25%.
  • Top ten Champion index dogs (by yield) sent a bullish sign when dividend dropped while price rose. Meanwhile a bear mauled the dogs of the Dow.
  • Analysts projected average 6.6% 1 yr. net gains for: MSEX, CVX, MCD, MO & ED.
  • Consider these stocks as possible starting points for your Champion index dividend dog stock purchase research.

Results from David Fish's Dividend Champions Index members from Yahoo Finance tallied as of market closing prices April 9, 2014 were compared with analyst mean target gain results one year out. The resulting chart of that data below displayed five stocks averaging 6.57% price upsides. The five included two utilities at the top and bottom; a basic materials dog second; one services representative in the middle; a consumer goods firm in fourth place.

Below, Arnold top dog selections for April by yield, price upsides, and net gain upsides were disclosed step by step. Five actionable conclusions were drawn.

Actionable Conclusion (1): 8 Champion Dogs Go After 2.44% to 11.48% Upsides Come 2015

The chart above used one year mean target prices set by brokerage analysts matched against April 9 closing price to compare ten Champions 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

This article was posted to reveal bargain stocks to buy and hold for at least one year. 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 same index, named Dogs of the Dow. O'Higgins system works to find bargains in any collection of dividend paying stocks. Utilizing analyst price upside estimates expanded the stock universe to include popular growth equities, if desired.

Dog Metrics Sorted Dividend Champions Index Stocks by Yield

David Fish's Champions list of companies paying increasing dividends for 25 consecutive years or more was sorted by yield as of April 9 to reveal the top ten.

Ten Champion dogs that promised the biggest dividend yields through February included firms representing five of nine market sectors: financial; technology; consumer goods; utilities; services. The top stock, Universal Health Realty Trust (NYSE:UHT), was one of five from the financial sector. The other financial firms, Mercury General Corp. (NYSE:MCY), HCP Inc. (NYSE:HCP), Old Republic International (NYSE:ORI), and United Bankshares Inc. (NASDAQ:UBSI) placed second, third, eighth, and tenth.

The balance of the top ten included one technology firm, AT&T Inc. (NYSE:T), in fourth; one consumer goods, Altria Group Inc. (NYSE:MO), in fifth place; Two utilities, Consolidated Edison (NYSE:ED), and WGL Holdings Inc. (NYSE:WGL), placed sixth, and seventh. Bowl America Class A (NYSEMKT:BWL.A) the lone service dog in ninth place completed the representation of market sectors in the champions index.

Dividend vs. Price Results Compared to Dow Dogs

Periodic strength of ten top Champions dogs by yield was graphed below as of market closing prices through 4/9/2014 and compared to those of the Dow. Projected annual dividend history from $10,000 invested as $1k in each of the ten highest yielding stocks and the total single share price history of those ten stocks created the data points shown in green for price and blue for dividend.

(click to enlarge)

Actionable Conclusion (2): Champions Were Bullish As Dow Dogs Retreated

Champions top dividend payers bullish signal was sent as dividend dropped while price increased after February. Champions top ten dog dividend fell 2% while price rose 1.6% .

Gloom continued for the Dow dogs as projected annual dividend from $10k invested as $1K in each of the top ten increased 5.5% since February/March. At the same time aggregate single share price fell 5.7% 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 decreased. The overhang was $145 or 38% for January, retreated to $125 or 33% in February/March, then shrunk again to $75 or 18.5% for April.

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 Guess 5% Net Gain from Top 20 Dividend Champions Index Dogs Into 2015

Top twenty dogs from David Fish's Dividend Champions index were graphed below as of April 9, 2014 compared to analyst mean price target estimates for 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.

(click to enlarge)

Yahoo projected 1% lower dividend from $20K invested as $1k in each stock in this group while aggregate single share price was projected to increase over 2% in the coming year. Notice that price exceeded dividend signaling an analyst predicted overbought Champions index into 2015. 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 stock price movement opposite of market direction.

Actionable Conclusion (4): Analysts Forecast Five Dividend Champion Dogs to Net 5% to 13% By April 2015

Two of the ten top dividend yielding Champion dogs were verified as belonging in the five net gainers for the coming year based on analyst 1 year target prices. So this month the dog strategy as graded by Wall St. wizards was 40% accurate. Aparently most Champions have reached the limits of analyst 1 yr mean price estimates as just five of twenty Champions showed upsides this month.

The five probable profit generating trades revealed by Yahoo Finance for 2015 were:

Middlesex Water Co. (NASDAQ:MSEX) netted $130.85 based on a mean target price estimate from two analysts combined with projected annual dividend less broker fees. The Beta number showed this estimate subject to volatility 39% less than the market as a whole.

Chevron Corp (NYSE:CVX) netted $107.62 based on dividends plus a mean target price estimate from twenty-one analysts less broker fees. The Beta number showed this estimate subject to volatility 8% more than the market as a whole.

Altria Group Inc. netted $72.03 based on a mean target price estimate from eleven analysts combined with projected annual dividend less broker fees. The Beta number showed this estimate subject to volatility 57% less than the market as a whole.

McDonald's Corp. (NYSE:MCD) netted $66.53 based on dividends plus mean target price estimate from twenty analysts less broker fees. The Beta number showed this estimate subject to volatility 65% less than the market as a whole.

Consolidated Edison netted $50.03 based on a mean target price estimate from five analysts combined with projected annual dividend less broker fees. The Beta number showed this estimate subject to volatility 1% opposite the market as a whole.

The average net gain in dividend and price was over 8.5% on $10k invested as $1k in each of these ten dogs. This gain estimate was subject to average volatility 51% less than the market as a whole.

Actionable Conclusion (5): (Bear Alert) Analysts Forecast 1 Champion Dog to Post A Net Loss of 4.7% By 2015

The probable losing trade revealed by Yahoo Finance for 2015 was:

Piedmont Natural Gas (NYSE:PNY) lost $46.79 based on dividend and a mean target price estimate from five analysts including broker fees. The Beta number showed this estimate subject to volatility 44% less than to 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 or 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.

Editor's Note: This article covers a stock trading at less than $1 per share and/or with less than a $100 million market cap. Please be aware of the risks associated with these stocks.

Source: 5 Champion Dogs Go For 2.44% To 11.5% April Upsides