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

Summary

  • 9 S&P 500 dividend dogs averaged 5% 1 yr. upside on June 16. Two showed 8.8% average downside as bear bait. 10 S&P 500 Aristocrats averaged 6.7% upsides; no bear treats.
  • A continuing bull run pinned many top-yielding S&P 500 index and Dow dogs to their upside price limits. Meanwhile, top Aristocrats dithered up in both price and dividend.
  • Analyst 10.5% net gains favored S&P 500s: VZ; PPL; KMI; DUK; VTR; DRI; T; TEG; ED; while Aristocrats averaged 8.1%: NUE; PG; KP; GPC; PEP; ABBV; MCD; CINF; T; ED.
  • Consider these stocks as possible starting points for your S&P 500 and S&P Aristocrats indices late June dividend dog stock purchase research.

This report presumed yield (dividend/price) dividend dog methodology applied to either index, and compared both indices side by side with the Dow. Below, Arnold top dog selections for June were disclosed step-by-step. Nine actionable conclusions were drawn.

Actionable Conclusion (1): 9 S&P 500 Dogs Sought 2.68% to 9.2% Upsides, Come May 2015; Two averaged 8.82% down

S&P 500 Index prices from Yahoo Finance tallied as of market closing June 16 were compared with analyst mean target gains one year hence. The results showcased 9 S&P 500 stocks sporting 2.66% to 9.21% price upsides, and 2 stocks over 8.5% down.

Sectors were represented by three technology firms; four utilities; a basic materials firm; a healthcare firm; a service firm; a consumer goods manufacturer.

Actionable Conclusion (2): 10 Aristocrat Dogs Chased 2.66% to 10.38% Upsides In June

Yahoo Finance June 16 closing prices for S&P 500 Aristocrats compared with analyst mean targets showcased the 10 stocks.

Sectors were represented by one basic materials firm; three consumer goods makers; two service firms; a healthcare firm; a financial concern; one utility; one technology firm.

One-year mean target price set by brokerage analysts matched against June 16 closing price were used to chart nine S&P 500 index stocks and ten Aristocrat stocks showing the highest upside price potential into 2015, out of 20 of each 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, Contenders, & Challengers Combined; Global. Bonus reports covered Sin stocks, Sindex AllStars, and Sector Leaders.

Sixty For the Money

Bargain stocks to buy and hold for at least one year are but one component in an ongoing series that has reported (1) dividend yield; (2) price upside; (3) net gain results based on analyst 1-yr. target projections.

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 S&P 500 & Aristocrat Indices Stocks by Yield

McGraw Hill Finance, publisher of the Dow Jones S&P 500 Index states:

"The S&P 500® is widely regarded as the best single gauge of large cap U.S. equities. There is over USD 5.58 trillion benchmarked to the index, with index assets comprising approximately USD 1.3 trillion of this total. The index includes 500 leading companies and captures approximately 80% coverage of available market capitalization."

Just four of nine sectors placed top dogs in this index by yield for June: technology; financial; utilities; basic materials. Top dog Windstream Corp. (NASDAQ:WIN) was one of four technology firms in the top ten. Other technology firms were Frontier Communications (NASDAQ:FTR), second; CenturyLink Inc. (NYSE:CTL), third; AT&T, Inc. (NYSE:T), fifth.

The fourth and sixth places were taken by financial firms, HCP, Inc. (NYSE:HCP) and Health Care REIT, Inc. (NYSE:HCN). Three utilities, TECO Energy (NYSE:TE), Southern (NYSE:SO), and Integrys Energy Group (NYSE:TEG), filled the seventh, eighth, and tenth slots with electricity and gas. Finally, a lone basic materials firm, Kinder Morgan, Inc. (NYSE:KMI), placed ninth and completed this S&P 500 top ten dogs by yield list.

Dog Metrics Stacked S&P 500 Aristocrats Index Stocks by Yield

McGraw Hill, publisher of this index, states:

"The S&P 500® Dividend Aristocrats index measures the performance of large cap, blue chip companies within the S&P 500 that have followed a policy of increasing dividends every year for at least 25 consecutive years."

Ten top June Aristocrats by yield included firms representing six of nine business sectors: financial; technology; utilities; services; consumer goods; basic materials. One of two financial firms, HCP, Inc., led the pack. The other financial, Cincinnati Financial (NASDAQ:CINF), placed fourth. A lone technology dog, AT&T, placed second. The singular utility, Consolidated Edison Inc. (NYSE:ED), was third.

At the middle and the bottom, two service sector firms, Target Corp. (NYSE:TGT) and McDonald's Corp. (NYSE:MCD), placed fifth and tenth. Three consumer goods firms placed sixth, eighth, and ninth: Leggett & Platt (NYSE:LEG), Clorox Co. (NYSE:CLX), & Procter & Gamble (NYSE:PG). A lone Basic Materials representative, Chevron Corp. (NYSE:CVX), placed seventh to complete this top ten S&P 500 Aristocrats dogs list for June.

Dividend vs. Price Results Compared to Dow Dogs

Relative strengths of the top ten S&P 500 dogs and the Aristocrat dogs by yield as of market close 6/16/2014 compared to those of the Dow were graphed below. Projected annual dividend history from $10,000 was 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 dividend.

(click to enlarge)

(click to enlarge)

Actionable Conclusion (3 & 4): S&P 500 & Dow were Bullish; Aristocrats Were Mixed Up

The June S&P 500 dividend dogs sent another bullish signal, as price increased while dividend sank. In the past month, S&P 500 top ten dogs' annual dividend from 10k invested as $1k in each dog fell 0.43%, while aggregate single-share price of the ten inclined 0.75%, to confirm the bullish sign.

Dow dogs frolicked as projected annual dividend from $10k invested as $1K in each of the top ten fell 1.17% since May. At the same time, aggregate single-share price moved up 0.97%, to confirm the bullish monthly turn. 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, increased. The overhang of $111, or 29%, in December/January, grew to $132, or 35%, in February, expanded to $136, or 36%, in March, widened again to $180, or 49%, for April, retreated to $167, or 43%, in May, then expanded to $193, or 53%, for June.

The June Aristocrats collection of dividend payers got mixed up. S&P Aristocrats' total single-share price increased 1.2% since May, and also aggregate dividend from $10k invested as $1k in each of the top ten S&P Aristocrats increased 4%, which combined to send the mixed-up message. The Aristocrats' overbought condition, in which aggregate single-share price of the ten exceeded projected annual dividend from $1k invested in each, grew after May. Their overhang was a record $244, or 64%, in December, fell to $187, or 47%, for January, nudged up to $189, remaining at 47% in February, swelled to $213, or 55%, in March; set an all-time high of $281, or 73%, through April; shrank to $256, or 66%, in May; grew to $277, or 71%, 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, analyst mean price target estimates provided another tool to dig out bargains.

Actionable Conclusion (5 & 6): Wall St. Wizards Wrung 5.6% Net Gains from Top 20 S&P 500 Dogs and 5.74% Net Gains from Top 20 Aristocrats by June 2015

Top twenty dogs from the S&P 500 and Aristocrat indices graphed below showed relative strengths by dividend and price as of June 16, 2014 against 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 share 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 $1k in each of 20 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 0.67% lower dividend from $10K invested in this group, while aggregate single-share price was projected to increase 1.63% in the coming year.

(click to enlarge)

Yahoo projected a 3% lower dividend from $10K invested in this group, while aggregate single-share price was projected to increase by nearly 3.3% in the coming year. Notice that price exceeded dividend, signaling an analyst predicted overbought S&P Aristocrats 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 above charts. Three-to-nine analysts was considered optimal for a valid estimate.

A beta (risk) ranking for each stock was provided in the far right column on the charts. 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. Negative beta numbers indicated the degree of a stock's movement opposed to market direction.

Actionable Conclusion (7): Analysts Envisioned 9 S&P 500 Dogs Netting 5.7% to 11.5% By June 2015

Three of nine of the top-yielding dividend S&P 500 dogs were verified as top gainers for the coming year by analyst 1-year target prices. So this month, the dog strategy, as graded by Wall Street wizards, was 33% accurate.

The nine probable profit-generating trades revealed by analysts reported by Thomson/First Call in Yahoo Finance into 2015 were:

Verizon Corporation (NYSE:VZ) netted $115.06 based on a mean target price estimate from twenty-six analysts, combined with projected annual dividend less broker fees. The Beta number showed this estimate subject to volatility 96% less than the market as a whole.

PPL Corporation (NYSE:PPL) netted $101.10 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 84% less than the market as a whole.

Kinder Morgan netted $93.34 based on estimates from fourteen analysts plus dividends less broker fees. The Beta number showed this estimate subject to volatility 40% less than the market as a whole.

Duke Energy (NYSE:DUK) netted $93.33 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 95% less than the market as a whole.

Ventas, Inc. (NYSE:DRI) netted $91.92 based on estimates from nine analysts plus dividends less broker fees. The Beta number showed this estimate subject to volatility 55% less than the market as a whole.

Darden Restaurants netted $64.87 based on estimates from twenty-two analysts plus dividends less broker fees. The Beta number showed this estimate subject to volatility 1% more than the market as a whole.

AT&T netted $59.19 based on a mean target price estimate from twenty-two analysts, combined with projected annual dividend less broker fees. The Beta number showed this estimate subject to volatility 71% less than the market as a whole.

Integrys Energy Group netted $57.24 based on estimates from six analysts plus dividends less broker fees. The Beta number showed this estimate subject to volatility 51% less than the market as a whole.

Consolidated Edison netted $57.17 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 slightly under 10.5% on $9k invested as $1k in each of these nine dogs. This gain estimate was subject to average volatility 56% less than the market as a whole.

Actionable Conclusion (8): (Bear Alert) Analysts Forecast Two S&P 500 DiviDogs to Post Net Losses Averaging 5.7% By June 2015

Two probable losing trades revealed by analysts reported by Thomson/First Call in Yahoo Finance for 2015 were:

Reynolds American (NYSE:RAI) was projected to lose $64.08 based on dividend and a mean target price estimate from seven analysts, including $20 of broker fees. The Beta number showed this estimate subject to volatility 72% less than the market as a whole.

CenturyLink was projected to lose $498.68 based on dividend and a mean target price estimate from ten analysts, including $20 of broker fees. The Beta number showed this estimate subject to volatility 28% less than the market as a whole.

The average net loss in dividend and price was nearly 5.7% on $2k invested as $1k in each of these two dogs. This loss estimate was subject to average volatility 50% less than the market as a whole.

Actionable Conclusion (9): Analysts Assert 10 S&P 500 Dividend Aristocrat Dogs To Net 5.7% to 11.3% By June 2015

Five of the top-yielding dividend S&P 500 Aristocrat dogs were verified as being among the top ten gainers for the coming year by analyst 1-year target prices. So this month, the dog strategy, as graded by Wall St. wizards, was 50% accurate.

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

Nucor Corp. (NYSE:NUE) netted $113.16 based on dividends plus a mean target price estimate from seventeen analysts less broker fees. The Beta number showed this estimate subject to volatility 42% more than the market as a whole.

Procter & Gamble netted $108.00 based on dividends plus a mean target price estimate from nineteen analysts less broker fees. The Beta number showed this estimate subject to volatility 60% less than the market as a whole.

Coca-Cola Co. (NYSE:KO) netted $106.66 based on dividends plus a mean target price estimate from twenty analysts less broker fees. The Beta number showed this estimate subject to volatility 66% less than the market as a whole.

Genuine Parts Co. (NYSE:GPC) netted $92.44 based on dividends plus a mean target price estimate from eight analysts less broker fees. The Beta number showed this estimate subject to volatility 32% less than the market as a whole.

PepsiCo Inc. (NYSE:PEP) netted $79.39, based on dividend plus mean target price estimates from eighteen analysts less broker fees. The Beta number showed this estimate subject to volatility 65% less than the market as a whole.

AbbVie Inc. (NYSE:ABBV) netted $68.52 based on target price estimates from ten analysts plus dividends less broker fees. The Beta number showed this estimate subject to volatility 93% more than the market as a whole.

McDonald's Corp. netted $67.34 based on dividends plus a mean target price estimate from twenty-two analysts less broker fees. The Beta number showed this estimate subject to volatility 64% less than the market as a whole.

Cincinnati Financial Corp. netted $61.73 based on target price estimates from five analysts plus dividends less broker fees. The Beta number showed this estimate subject to volatility 22% less than the market as a whole.

AT&T netted $59.19 based on a mean target price estimate from twenty-two analysts, combined with projected annual dividend less broker fees. The Beta number showed this estimate subject to volatility 71% less than the market as a whole.

Consolidated Edison Inc. netted $57.17 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% opposite the market as a whole.

The average net gain in dividend and price was 8.1% on $10k invested as $1k in each of these ten dogs. This gain estimate was subject to average volatility 35% less than the market as a whole.

All 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.

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

Source: S&P 500 And Aristocrat Dividend Dogs Track 2.6% To 10% June Upsides