4 Challenger Dog 11% To 16% May Upsides Top Champs And Contenders

|
 |  Includes: APU, BBEPQ, ED, EVEP, HCP, KMP, MCY, NMM, PMT, SDRL, STON, TCAP, UHT, VGR, WPZ
by: Fredrik Arnold

Summary

10 top dividend dogs paying increasing dividends five years or more brandished 1 yr. analyst mean target price upsides averaging 9.17% while one poor dog lost 9.86%.

A bull chased a composite index of Champion, Contender & Challenger dogs while Dow index dogs became mixed down as of May 30.

Analysts projected average 15.7% 1 yr. net gains for PMT, STON, EVEP, TCAP, KMP, SDRL, NMM, BBEP, WPZ, & ED.

Consider these stocks as possible starting points for your Challenger, Contender and Champion index dividend dog stock purchase research.

Yield (dividend/price) results from David Fish's Dividend Champions, Contenders, & Challengers Index members as of May 30 market close were compared with analyst mean target gain results one year out. A chart from that data displayed below showed seven Challengers, two Contenders and one Champion from four market sectors posted 4.43% to 15.79% price upsides.

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

Actionable Conclusion (1): 10 CCC Composite Dogs Point To 9.17% Average Upsides Come May 2015; 1 Pup Fell Back 9.9%

The above chart used one year mean target prices set by brokerage analysts matched against May 30 closing price to compare ten CCC composite index stocks showing the highest upside price potential into 2015 out of 30 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 & Aristocrats; Russell 2000 & 1000; NASDAQ 100; Champions; Challengers; Contenders; Global. A recent bonus report covered Sin stocks: Sindex AllStars.

Thirty For the Money

This article was written 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 Measured CCC Index Stocks by Yield

David Fish's May 30 composite of 10 Champions, 10 Contenders, and 10 Challengers list contained stocks distinguished by having paid increasing dividends for 5 or more straight years. Four challengers, three contenders, and three champions as ranked by yield were selected to compose the top ten.

The selected ten CCC dogs included firms representing five of nine market sectors: financials (4); basic materials (3); services (2); consumer goods (1); utilities (1). Top dog was PennyMac Mortgage Investment Trust (NYSE:PMT), the best of four financial firms represented. The remaining three financial firms, Universal Health Realty Trust (NYSE:UHT), HCP Inc. (NYSE:HCP), and Mercury General Corp (NYSE:MCY) placed eighth through tenth.

SeaDrill Limited (NYSE:SDRL), the best of two basic materials companies placed second. The other basic materials firm took slot seven: Kinder Morgan Energy Partners (NYSE:KMP).

Services, consumer goods and utilities sector firms filled out the top ten Challengers dogs list. Two services sector representatives, StoneMor Partners LP (NASDAQ:STON), and Navios Maritime Partners LP (NYSE:NMM), were third and fourth dogs. Vector Group Ltd. (NYSE:VGR) the consumer goods tobacco firm placed fifth, and AmeriGas Partners LP (NYSE:APU), the lone utility in sixth place completed the top ten CCC Composite list by yields.

Dividend vs. Price Results Compared to Dow Dogs

Periodic strength of ten top CCC select dogs by yield was graphed below as of market closing prices through 5/30/2013 and compared to those of the Dow. Projected 2014 dividend history from $10,000 invested as $1k in each of the ten high yielding stocks and the total single share price of those ten stocks created the data points shown in green for price and blue for dividend.

Click to enlarge

Actionable Conclusion (2): CCC Romped as Dow Dogs Went Down

Aggregate single share price of the top ten CCC Composite list by yield improved 3.3% since April. Meanwhile dividend from $10k invested as $1k in each of those top ten dogs declined 0.165% for that period. The result was a Bull signal for May.

Dow dogs dithered down as projected annual dividend from $10k invested as $1K in each of the top ten Dow dogs fell 0.63% since April. Aggregate single share price dropped 2.84% to confirm the dither down. The Dow dogs overbought condition (wherein aggregate single share price of the top ten exceeded projected annual dividend from $1k invested in each of those ten) shrank a bit. The overhang was $145 or 38% for January, then retreated to $125 or 33% in February, swelled to $149 or 40% in March, expanded to $173 or 47% in April, then went to $174 or 47.5% come May. All of this recent stress on the Dow was triggered by general price declines coupled with indexarb.com projecting higher dividends for PFE; INTC; CVX; MSFT.

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 provided another tool to dig out bargains.

Actionable Conclusion (3): Wall St. Wizards Wonk A 10.3% Net Gain from Top 20 Dividend CCC Composite Index Dogs By May 2015

Top twenty dogs from David Fish's Dividend CCC Composite index were graphed below to show relative strengths by dividend and price as of May 30, 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 2014.

Historic prices and actual dividends paid from $1000 invested in the twenty 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.

Click to enlarge

Yahoo projected a 3.8% lower dividend from $10K invested in this group ($1k each) while aggregate single share price was projected to increase nearly 2.6% 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 opposite of market direction.

Actionable Conclusion (4): Analysts Forecast 10 Dividend CCC Composite Dogs to Net 7.1% to 24.37% By May 2015

Eight of the ten top dividend yielding CCC Composite dogs were verified as being among the ten gainers for the coming year based on analyst 1 year target prices. So this month the dog strategy was deemed 80% accurate by Wall St. wizard projected 1 year mean target prices.

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

PennyMac Mortgage Investment Trust netted $243.73 based on estimates from nine analysts plus dividends less broker fees. The Beta number showed this estimate subject to volatility 40% less than the market as a whole.

StoneMor Partners LP netted $238.95 based on dividends plus a mean target price estimate from two analysts less broker fees. The Beta number showed this estimate subject to volatility 40% less than the market as a whole.

EV Energy Partners LP (NASDAQ:EVEP) netted $184.71 based on dividends plus mean target price estimate from ten analysts less broker fees. The Beta number showed this estimate subject to volatility 65% less than the market as a whole.

Triangle Capital Corp. (NYSE:TCAP) netted $172.00 based on dividends plus mean target price estimate from four analysts less broker fees. The Beta number showed this estimate subject to volatility 29% less than the market as a whole.

Kinder Morgan Energy Partners netted $161.33 based on dividend plus mean target price estimates from fourteen analysts less broker fees. The Beta number showed this estimate subject to volatility 55% less than the market as a whole.

SeaDrill Limited netted $155.53 based on dividends plus a mean target price estimate by twelve analysts less broker fees. The Beta number showed this estimate subject to volatility 42% more than the market as a whole.

Navios Maritime Partners LP netted $137.18 based on estimates from nine analysts plus dividends less broker fees. The Beta number showed this estimate subject to volatility 81% greater than the market as a whole.

Breitburn Energy Partners (BBEP) netted $117.13 based on dividends plus mean target price estimate from fourteen analysts less broker fees. The Beta number showed this estimate subject to volatility 33% less than the market as a whole.

Williams Partners LP (NYSE:WPZ) netted $92.90 based on a mean target price estimate from fifteen analysts combined with projected annual dividend less broker fees. The Beta number showed this estimate subject to volatility 60% less than the market as a whole.

Consolidated Edison (NYSE:ED) netted $71.07 based on a mean target price estimate from fourteen analysts combined with projected annual dividend less broker fees. The Beta number showed this estimate subject to volatility 4% opposed to the market as a whole.

The average net gain in dividend and price was nearly 21.2% on $1k invested 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 1 Champion Dog to Post A Net Loss of 6.6% By 2015

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

Mercury General Corp. lost $66.45 based on dividend and a mean target price estimate from seven analysts including $20 in estimated broker fees. The Beta number showed this estimate subject to volatility 61% less 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 champions, contenders, and challengers composite 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.

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.