6 Decent Dividend Kickers: 12% To 16% July Upsides Top CCC Index

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

Summary

10 top dividend dogs paying increasing dividends five years or more discharged 1 yr. analyst mean target price upsides averaging 11.2% while one poor pup paled 10.6%.

Bears bushwhacked the composite index of champion, contender & challenger (CCC) dogs & those of the Dow index as of July 31.

Analysts projected average 19.4% 1 yr. net gains for PMT, EVEP, WPZ, SDRL, ORI, BBEP, STWD, TCAP, APU, & KMP; and a net loss of 7.6% for MCY.

Consider these stocks as likely starting points for your CCC Index dividend dog stock purchase or sale research.

Yield (dividend/price) results from David Fish's Dividend Champions, Contenders, & Challengers [CCC] Index members as of July 31 market close were compared with analyst mean target gain results one year out. The chart from that data below showed six challengers, three contenders and one champion representing three business sectors posting 4% to 16% price upsides.

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

Actionable Conclusion (1): 10 CCC Composite Dogs Hounded 11.2% Average Upsides Come July 2015; But 1 Pup Lagged nearly 11%

The above chart used one year mean target prices set by brokerage analysts matched against July 31 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, Contenders, & Challengers Combined; Global. Bonus reports covered, Sindex AllStars, and Sector Leaders.

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 July 31 composite of 10 Champions, 10 Contenders, and 10 Challengers list contained stocks distinguished as having paid increasing dividends. Four challengers (those raising dividends 5 to 9 straight years), three contenders (raising dividends 10 to 24 straight years), and three champions (raising dividends 25 or more years running) as ranked by yield were selected to compose the top ten.

The selected ten CCC dogs represented five of nine market sectors: financials (3); services (2); basic materials (3); utilities (1); consumer goods (1). Top dog was PennyMac Mortgage Investment Trust (NYSE:PMT), the best of three financial firms on the list. The remaining two financial firms, Universal Health Realty Income Trust (NYSE:UHT), and HCP Inc. (NYSE:HCP), placed ninth and tenth.

SeaDrill Limited (NYSE:SDRL), the best of two basic materials companies placed second. The other basic materials firm took slot eight: Holly Energy Partners (NYSE:HEP).

Two services sector representatives, StoneMor Partners LP (NYSE:STON), and Navios Maritime Partners LP (NYSE:NMM), were third and fifth dogs.

Consumer goods and utilities sector firms filled out the top ten CCC Index dogs list. Vector Group Ltd. (NYSE:VGR) the consumer goods tobacco firm was sixth, while AmeriGas Partners LP (NYSE:APU), the lone utility placed seventh and completed the top ten CCC Composite list by yield.

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 7/31/2013 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)Click to enlarge

Actionable Conclusion (2): Both CCC & Dow Dogs Retreated Bearishly In July

Aggregate single share price of the top ten CCC Composite list by yield dropped 20.6% in July. Meanwhile dividend from $10k invested as $1k in each of those top ten dogs rose 6.6% for that period. The result was an aggressive bear signal for July.

Meanwhile, Dow dogs also retreated bearishly by showing higher annual dividend from $10k invested as $1K in each of the top ten Dow dogs, rising 3% since June, while aggregate single share price fell 2%. As a result, the Dow dogs overbought condition (in which aggregate single share price of the ten exceeded projected annual dividend from $10k invested as $1k each in those ten) shrank some. The overhang was $145 or 38% for January; retreated to $125 or 33% in February; swelled to $149 or 40% in March; expanded to $173 or 47% in April; shrank to $170 or 46% come May; swelled to a record $212 or 58% for June; receded to $189 or 50% in July.

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 Wished An 11.43% Net Gain from Top 20 Dividend CCC Composite Index Dogs By July 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 July 31, 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)Click to enlarge

Yahoo projected a 5.6% lower dividend from $10K invested in this group ($1k each) while aggregate single share price was projected to increase nearly 5% 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 Assess 10 Dividend CCC Composite Dogs to Net 9% to 22% By July 2015

Seven 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 70% 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 $222.88 based on estimates from eight analysts plus dividends 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 $209.95 based on dividends plus mean target price estimate from nine analysts less broker fees. The Beta number showed this estimate subject to volatility 65% less than the market as a whole.

Williams Partners LP (NYSE:WPZ) netted $209.86 based on estimates from fourteen analysts plus dividends less broker fees. The Beta number showed this estimate subject to volatility 60% less than the market as a whole.

SeaDrill Limited netted $205.04 based on dividends plus a mean target price estimate from twelve analysts less broker fees. The Beta number showed this estimate subject to volatility 42% greater than the market as a whole.

Old Republic International (NYSE:ORI) netted $194.73 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 13% less than the market as a whole.

Breitburn Energy Partners (BBEP) netted $181.80 based on dividends plus mean target price estimate from twelve analysts less broker fees. The Beta number showed this estimate subject to volatility 33% less than the market as a whole.

Starwood Property Trust (NYSE:STWD) netted $179.15 based on dividends plus mean target price estimate from eight analysts less broker fees. The Beta number showed this estimate subject to volatility 19% less than the market as a whole.

Triangle Capital Corp. (NYSE:TCAP) netted $159.59 based on dividends plus a mean target price estimate by three analysts less broker fees. The Beta number showed this estimate subject to volatility 29% less than the market as a whole.

AmeriGas Partners LP netted $96.84 based on dividends plus a mean target price estimate by seven analysts less broker fees. The Beta number showed this estimate subject to volatility 74% less than the market as a whole.

Kinder Morgan Energy Partners (NYSE:KMP) netted $90.10 based on dividend plus mean target price estimates from thirteen analysts less broker fees. The Beta number showed this estimate subject to volatility 55% less than the market as a whole.

The average net gain in dividend and price was 19.4% on $1k invested in each of these ten dogs. This gain estimate was subject to average volatility 27% less than the market as a whole.

Actionable Conclusion (5): (Bear Alert) Analysts Forecast 1 Champion Dog to Post A Net Loss of 7.6% By 2015

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

Mercury General Corp. (NYSE:MCY), a champion, lost $76.07 based on dividend and a mean target price estimate from two 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 average net loss in dividend and price was nearly 5.2% on $2k invested as $1k in each of these two dogs. This loss estimate was subject to average volatility 55% 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 CCC 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.

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

Disclosure: The author is long CSCO, GE, INTC, MSFT, PFE, T, VZ. The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.