3 Sector Leader Dogs Seek 11.5% To 25% Upsides In June

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 |  Includes: AIRI, DRAD, GE, INTX, JE, NAT, NMFC, NRP, NTLS, PER, RSO, VGR, WMC
by: Fredrik Arnold

Summary

7 sector leading dividend dogs showed notable 1 yr. analyst mean target price upsides averaging 12.21% as of June 5. One displayed 29.3% downside as bear bait.

Sector leading dogs showed bearish results as Dow dogs got mixed down after May.

Analysts projected average 25% 1 yr. net gains for NTLS, NRP, PER, NAT, WMC, NMFC, & GE, while RSO showed an 18.1% net loss.

Consider these stocks as starting points for your sector leader dog dividend stock purchase/sale research.

Yield (dividend / price) results from here verified by Yahoo Finance for sector leading stocks as of market closing prices June 5 were supplemented with analyst 1-yr target projections to reveal five actionable conclusions discussed below.

Wall Street Wizard Weightings

One-year mean target price set by brokerage analysts multiplied by the number of shares in a $1,111.11 investment revealed seven stocks showing the highest upside price potential into 2015 out of 18 selected by yield. The number of analysts providing price estimates was noted after the name for each stock. Three to nine analysts have provided the most accurate mean target price estimates.

Actionable Conclusion (1) Seven Sector Leader Dividend Dogs Pursued 2.37% to 25% Price Upsides While One Cast A 29% Downside

Twenty-Seven For the Money

This article revealed 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 Extracted Bargains

Three top sector-leading stocks by yield were culled from each of nine sectors to form the list of twenty-seven for this article. Funds, and preferred shares were excluded but Real Estate Investment Trusts made the list along with common shares and ADRs.

Nine sector-leading equities showing top yields, represented the best of each of the nine Yahoo market sectors: basic materials; consumer goods; financials; healthcare; industrial goods; services; technology; utilities; conglomerates. Top dog, Sandridge Permian Trust (NYSE:PER) represented the basic materials sector.

Eight trailing sector leaders were: Western Asset Mortgage Capital Corp (NYSE:WMC), financials; Intersections Inc (NASDAQ:INTX), Services; NTELOS Holdings Corp (NASDAQ:NTLS), technology; Just Energy (NYSE:JE), utilities; New Mountain Finance Corp. (NYSE:NMFC), conglomerates; Vector Group (NYSE:VGR), consumer goods; Air Industries Group Inc. (NYSEMKT:AIRI), industrial goods; Digirad Corporation (NASDAQ:DRAD), Healthcare. By yield, those nine topped the June 5 sector leader dog list.

Actionable Conclusion (2): Sector Leader Dogs Retreated As Dow Dogs Got Mixed Down

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The top nine sector dogs increased in dividend 7.2% since May while total single share price of the nine dropped 45.8% for the period to create a bear signal.

The Dow dogs dithered as projected annual dividend from $10k invested as $1K in each of the top ten declined 0.08% since May. At the same time aggregate single share price also slumped 3% to confirm the dither down. 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, grew to $160 or 43% in March, shrunk again to $75 or 18.5% for April, expanded to $187 or 51% in May, then dropped to $170 or 46% for June.

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, the analyst mean price target estimate became another tool used to dig out bargains.

Actionable Conclusion (3): Wall St. Wizards Wrestled A 12.5% 1 yr. Net Gain from Top 18 Sector Leaders by June 2015

Top 18 dogs on the sector leader stock list were graphed below to show relative strengths by dividend and price as of June 5, 2014 and those projected by analyst mean price target estimates to the same date in 2015.

A hypothetical $1111.11 investment in each equity was divided by the current share price to find the number of shares purchased. The number of shares were then multiplied by projected annual 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 $1111.11 invested in each of the ten highest yielding stocks and the aggregate single share prices of those eighteen stocks divided by 2 created the data points for 2014. Projections based on estimated increases in dividend amounts from $1111.11 invested in the eighteen 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.

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Yahoo numbers showed 0.56% lower dividend from $10K invested as $1111.11 in the nine of this group of while aggregate single share price of those nine was projected to increase by over 2.7% 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 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): Wall St. Analysts See Net Gains of 10.5% to 40.7% for 7 Sector Leaders by May, 2015

Four of the seven top dividend yielding sector leader dogs were verified as being among the ten gainers out of 18 for the coming year based on analyst 1-year target prices. So this time the dog strategy for this collection as graded by Wall St. wizards was 57% accurate.

Seven probable profit generating trades were revealed by Thompson/First Call in Yahoo Finance into 2015. Note that neither utilities, consumer goods, nor industrial goods sectors placed a representative the top seven by upside or net gain. Basic materials, and conglomerates both had two representative stocks in the top seven.

NTELOS Holdings Corp , from the technology sector, netted $407.35 based on dividends plus mean target price estimate from five analysts less broker fees. The Beta number showed this estimate subject to volatility 10% more than the market as a whole.

National Resource Partners (NYSE:NRP), from basic materials, netted $368.40 based on a mean target price estimate from three analysts combined with projected annual dividend less broker fees. The Beta number showed this estimate subject to volatility 34% less than the market as a whole.

Sandridge Permian Trust , from basic materials, netted $264.79, based on dividend plus mean target price estimates from two analysts less broker fees. The Beta number showed this estimate subject to volatility equal to the market as a whole.

Nordic American Tankers (NYSE:NAT), from services, netted $228.37 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 80% greater than the market as a whole.

Western Asset Mortgage Capital Corp , a financial sector representative, netted $213.51 based on estimates from six analysts plus dividends less broker fees. The Beta number showed this estimate subject to volatility 35% less than the market as a whole.

New Mountain Finance Corp. , a conglomerate, netted $167.68 based on dividends plus a mean target price estimate from four analysts less broker fees. The Beta number showed this estimate subject to volatility 88% less than the market as a whole.

General Electric (NYSE:GE), another conglomerate, netted $104.93 based on dividends plus the mean of annual price estimates from ten analysts less broker fees. The Beta number showed this estimate subject to volatility 17% more than the market as a whole.

The average net gain in dividend and price was 25% on $10k invested as $1k in each of these seven Sector Leader dogs. This gain estimate was subject to average volatility 7% less than the market as a whole.

Actionable Conclusion (5): (Bear Alert) Analysts Forecast RSO to Post Net Loss of 18.1% By June 2015

A probable losing trade revealed by analysts reported by Thompson/First Call in Yahoo Finance for 2015 was:

Resource Capital Corp. (NYSE:RSO) was projected to lose $181.48 based on dividend and a mean target price estimate from two analysts including $20 of broker fees. The Beta number showed this estimate subject to volatility 18% less than the market as a whole.

The stocks listed above were suggested only as decent starting points for a sector leader dog dividend stock purchase/sale research process in June, 2014. These were not recommendations.

Gains as reported do not factor-in any tax problems resulting from dividend, profit, or return of capital distributions. Consult your tax advisor regarding the source and consequences 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.

Graphs and charts were compiled by Rydlun & Co., LLC from data derived from www.indexarb.com; www.dividend.com; finance.yahoo.com; analyst mean target price by Thompson/First Call in Yahoo Finance.

Disclosure: I am long GE, CSCO, CVX, 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.

Editor's Note: This article covers one or more stocks 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.