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Summary

  • Seven Basic Materials sector dividend dogs showed healthy 1 yr. upsides of 16.26% to 40.59% after Easter while three laggards (per analyst target prices) showed double digit results averaging 11.78%.
  • Dividend rose as price dropped to show a bearish trend for top ten Basic Materials dogs while Dow dogs chased bulls.
  • Analysts projected average 29.5% 1 yr. net gains for NDRO, EROC, LNCO, ARP, PER, SDRL, LINE, MCEP, EVEP, & LGCY.
  • 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, & large cap Basic Materials stocks as of market closing prices April 24 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 April Dividend Dogs Track 11.07% to 40.59% Upsides

Since the fall of 2011 this report series has 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 April 24 represented oil and/or gas (o&g) industries. The exception was a major chemical firm, PetroLogistics LP (NYSE:PDH) which placed seventh out of ten. Top dog, Sandridge Permian Trust (NYSE:PER) was one of five independent o&g firms. The other four were slotted four, six, nine, & ten: Atlas Resource Partners, L.P. (NYSE:ARP); LRR Energy L.P. (NYSE:LRE); QR Energy LP (NYSE:QRE); LinnCo LLC (NASDAQ:LNCO). Two o&g refiners and marketers, Eagle Rock Energy Partners L.P. (NASDAQ:EROC), and BP Prudhoe Bay Royalty Trust (NYSE:BPT) placed second, and third. Seadrill Limited, and Hugoton Royalty Trust (NYSE:HGT), two drillers, placed fifth, and eighth, 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 4/24/2014 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 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 Ran from Bears While Dow Dogs Got Bullish for March

Dividend from $10k invested as $1k in each basic material top ten dog rose while the aggregate single share price of those ten fell since March. Dividend increased at a rate of 0.8% while total single share price dropped 6.5% in that period. The April bearish market signal was mostly influenced by one very much lower priced stock replacing a higher priced member of 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 2.4% since March while aggregate single share price rose 6.9%. 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 $111 or 29% in December/January; expanded to $132 or 35% in February; swelled to $136 or 36% in March; then widened to $180 or 49% in April.

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 19.9% Net Gain from Top 20 Basic Materials Dogs By April 2015

Top twenty sector dogs were graphed below to show relative strengths by dividend and price as of April 24, 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 1.4% lower dividend from $10K invested in this group while aggregate single share price was projected to increase by 10.6% 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 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 18.8% to 47% 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 $469.98, 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 70% less than the market as a whole.

Eagle Rock Energy Partners netted $411.51 based on estimated restored dividends plus mean target price estimate from three analysts less broker fees. The Beta number showed this estimate subject to volatility 20% less than the market as a whole.

LinnCo LLC netted $359.31 based on a mean target price estimate from ten analysts combined with projected annual dividend less broker fees. The Beta number showed this estimate subject to volatility 88% less than the market as a whole.

Atlas Resource Partners netted $288.34 based on estimates from ten analysts plus dividends less broker fees. The Beta number showed this estimate subject to volatility 48% less than the market as a whole.

Sandridge Permian Trust netted $288.14 based on estimates from two analysts plus dividends less broker fees. The Beta number showed this estimate subject to volatility 2% greater than the market as a whole.

Seadrill Limited (NYSE:SDRL) netted $262.43, based on dividend plus mean target price estimates from twelve analysts less broker fees. The Beta number showed this estimate subject to volatility 37% greater than the market as a whole.

Linn Energy LLC. (NASDAQ:LINE) netted $259.41, based on dividends plus a mean target price estimate by fourteen analysts less broker fees. The Beta number showed this estimate subject to volatility 32% less than the market as a whole.

Mid-Con Energy Partners (NASDAQ:MCEP) netted $232.40 based on a mean target price estimate from eight analysts combined with projected annual dividend less broker fees. The Beta number showed this estimate subject to volatility 60% greater than the market as a whole.

EV Energy Partners L.P. (NASDAQ:EVEP) netted $190.02 based on estimates from nine analysts plus dividends less broker fees. The Beta number showed this estimate subject to volatility 59% less than the market as a whole.

Legacy Reserves L.P. (NASDAQ:LGCY) netted $188.01 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 5% greater than the market as a whole.

Average net gain in dividend and price was nearly 29.5% on $10k invested as $1k in each of these ten dogs. This gain estimate was subject to average volatility 13% 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: 7 Basic Materials Dogs Get After 16% To 40% April Upsides