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Summary

  • 8 sector-leading dividend dogs showed expanding 1-yr. analyst mean target price upsides averaging 9.5% as of August 11.
  • Sector-leading dogs showed bullish results, while Dow dogs retreated from bears after July.
  • Analysts projected average 21.3% 1-yr. net gains for NTLS, RSO, WMC, SDRL, STB, NMFC, NMM, and SPH.
  • Consider these stocks as starting points for your business sector leader dog dividend stock purchase research.

Yield (dividend / price) results from here verified by Yahoo Finance for sector leading stocks as of market closing prices August 11 were supplemented with analyst 1-yr target projections to reveal four 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): 8 Sector Leader Dividend Dogs Chased 2.1% to 35.88% Price Upsides With No Downsides

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 unique industry were culled by yield from each of nine sectors to create the list of twenty-seven for this article. Funds and preferred shares were excluded, but Real Estate Investment Trusts and Business Development Cos. made the list, along with common shares and ADRs.

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.

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 Whiting USA Trust II (NYSE:WHZ) represented the basic materials sector.

Eight remaining sector leaders were: Western Asset Mortgage Capital Corp (NYSE:WMC), financials; NTELOS Holdings Corp (NASDAQ:NTLS), technology; StoneMor Partners L.P. (NYSE:STON), Services; New Mountain Finance Corp. (NYSE:NMFC), conglomerates; Suburban Propane L.P. (NYSE:SPH), utilities; 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 August 11 sector-leader dog pound.

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

(click to enlarge)

The top nine sector dogs dropped in dividend 9% after July, while total single share price of the nine hopped up 66% for the period to create a strong bull signal.

Meanwhile, Dow dogs reversed and retreated by showing bigger annual dividends from $10k invested as $1K in each of the top ten ascending 4.2% after July, while aggregate single share price dropped 3.4%.

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) declined from its new high. 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 $215 or 59% for July; then fell back to $186 or 50% in August.

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 Wanted 14.2% 1-yr. Net Gain from Top 18 Sector Leaders by August 2015

The top 18 dogs on the sector leader stock list were graphed below to show relative strengths by dividend and price as of August 11, 2014 against those projected by analyst mean price target estimates to the same date in 2015.

A hypothetical $1,111.11 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 $1,111.11 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 $1,111.11 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.

(click to enlarge)

Yahoo numbers showed 3.7% lower dividends from $10K invested as $1,111.11 in this group of nine, while aggregate single share price of those nine was projected to increase by over 3.2% 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 Augur Net Gains of 11% to 53% for 8 Sector Leaders by August, 2015

Five of the eight top dividend yielding sector leader dogs were verified as being among the nine 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 62.5% accurate.

Eight probable profit-generating trades were revealed by Thompson/First Call in Yahoo Finance into 2015. Note that no consumer goods, healthcare, nor industrial goods sectors placed a representative the top eight by upside or net gain. However, financials, and services both had two representative stocks in the top eight.

NTELOS Holdings Corp., from the technology sector, netted $532.76 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.

Resource Capital (NYSE:RSO), from financials, netted $251.60, based on dividend plus mean target price estimates from three analysts less broker fees. The Beta number showed this estimate subject to volatility 20% less than the market as a whole.

Western Asset Mortgage Capital Corp., another financial sector representative, netted $205.24 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.

Seadrill Limited (NYSE:SDRL), from basic materials, netted $205.23 based on a mean target price estimate from twelve analysts combined with projected annual dividend less broker fees. The Beta number showed this estimate subject to volatility 42% greater than the market as a whole.

Student Transportation Inc (NASDAQ:STB), from the services sector, netted $163.63 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 22% less than the market as a whole.

New Mountain Finance Corp., a conglomerate, netted $122.22 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.

Navios Maritime Partners (NYSE:NMM), from services, netted $112.86 based on a mean target price estimate from nine analysts combined with projected annual dividend less broker fees. The Beta number showed this estimate subject to volatility 81% greater than the market as a whole.

Suburban Propane L.P., the lone utility representative, netted $112.12 based on estimates from seven analysts plus dividends less broker fees. The Beta number showed this estimate subject to volatility 37% less than the market as a whole.

The average net gain in dividend and price was 21.3% on $8k invested as $1k in each of these eight Sector Leader dogs. This gain estimate was subject to average volatility 9% 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 research process in August 2014. These were not recommendations.

Gains or losses 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 with data from: www.indexarb.com; www.dividend.com; finance.yahoo.com; analyst mean target price by Thompson/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.

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.

Source: 4 Prime Sector Dividend Dogs Seek 8.6% To 35.7% August Upsides