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Summary

  • Ten top Utilities dividend dogs projected 7.2% average 1-year upsides into August 2015.
  • Dividend popped as price dropped giving bearish August signals for top ten Utilities and Dow dogs.
  • Analysts project average 10.45% 1-year net gains for TAC, VEP, UIL, SXE, OTTR, PPL, SPH, NIP, UTL, & DUK. But AT lost 14.5% as bear bait.
  • Consider these stocks starting points for your Utilities dog August dividend stock purchase/sale research.

Yield (dividend / price) results from here verified by Yahoo Finance for utilities sector leading stocks as of market closing prices August 19 were supplemented with analyst 1-year 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 $1k investment revealed ten stocks showing the highest upside price potential into 2015 out of 20 selected by yield. The number of analysts providing price estimates was noted after the name for each stock. Three to nine analysts have usually provided the most accurate mean target price estimates.

Actionable Conclusion (1) Top Ten Utilities Dividend Dogs Traced 2.4% to 11.7% August Upsides; One Was 22% Down

Thirty For the Money

Since late 2011, this report series has applied dog dividend methodology to uncover possible buy opportunities in each of eight major market sectors listed by Yahoo Finance: basic materials (BasMats), consumer goods (ConGo), financials (Fins), healthcare (Heal), industrial goods (IndiGo), services (Svcs), technology (Tec), and utilities (Utes). In the past two years the series expanded to report (1) dividend yield; (2) price upside; (3) net gain results based on analyst 1-year target projections.

Dog dividend methodology is 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. Now named Dogs of the Dow, O'Higgins system also works to find bargains in any collection of dividend paying stocks. Utilizing analyst price upside estimates has expanded the stock lists to include popular growth equities, if desired.

Dog Metrics Screened Utilities Stocks by Yield

Utilities sector stocks that showed the biggest dividend yields into August, per Yahoo Finance data, represented three industries: electric, gas, and diversified. Tops by yield was the most downtrodden electric firm, Atlantic Power Corporation (NYSE:AT).

One of two gas firms placed second, Suburban Propane Partners (NYSE:SPH). The other gas firm, UIL Holdings (NYSE:UIL), placed tenth.

One of four diversified utilities, Just Energy Group, Inc. [Canada] (NYSE:JE), placed third. The other diversified firms placed fourth, fifth, and sixth: Southcross Energy Partners, L.P. (NYSE:SXE); TransAlta Corp. (NYSE:TAC); Brookfield Renewable Energy Partners LP (NYSE:BEP).

Three electric firms claimed slots seven through nine: Hawaiian Electric Industries (NYSE:HE); TECO Energy, Inc. (NYSE:TE); Southern Company (NYSE:SO). These completed the August top ten Utilities dog list.

Dividend vs. Price Results Compared to Dow Dogs

Graphs below as of market close 8/19/2014 compared relative strengths of the top ten utilities sector dogs by yield with those of the Dow industrials index. Annual dividend history from $10,000 invested as $1k in each of the ten highest yielding stocks along with the total single share price of those ten stocks made the data points shown in green for price and blue for dividends.

(click to enlarge)

Actionable Conclusion (2): Utilities & Dow Dogs Chased Bulls

As of August 19, Utilities dividend from $10k invested as $1k in each of the top ten stocks jumped, while aggregate single share price of those ten fell. Dividend increased at a rate of 1.3% into August, while total single share price swooned 18%.

Meanwhile, Dow dogs reversed and retreated by showing 3.5% bigger annual dividend from $10k invested as $1K in each of the top ten July, while aggregate single share price dropped 2.8%.

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 $190 or 51% 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 Street Wizards Wanted 6.7% Net Gain from Top 20 Utilities Dogs By August 2015

Top twenty dogs for the utilities sector were graphed below to show relative strengths by dividend and price as of August 19, 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 2015.

Historic prices and actual dividends paid from $20,000 invested as $1k in each of the 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 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 dividend.

(click to enlarge)

Yahoo projected a 1.2% lower dividend from $10K invested in this group, while aggregate single share price was projected to increase by 3.9% 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 market direction.

Actionable Conclusion (4): Analysts Assess Ten Utilities DiviDogs to Net 7.38% to 15.36% by August 2015

Five of the ten top dividend yielding utilities 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 for this sector as graded by Wall St. wizards was 50% accurate.

Ten probable profit generating trades were revealed by Thomson/First Call in Yahoo Finance by 2015:

TransAlta Corp. netted $153.62 based on dividends plus a mean target price estimate from two analysts less broker fees. The Beta number showed this estimate subject to volatility 88% less than the market as a whole.

Brookfield Renewable Energy Partners LP netted $127.78 based on estimates from three analysts plus dividends less broker fees. The Beta number showed this estimate subject to volatility 57% less than the market as a whole.

UIL Holdings netted $122.78 based on dividends plus a mean target price estimate from nine analysts less broker fees. The Beta number showed this estimate subject to volatility 69% less than the market as a whole.

Southcross Energy Partners, L.P. netted $113.21, based on dividend plus mean target price estimates from six analysts less broker fees. The Beta number showed this estimate subject to volatility 40% more than the market as a whole.

Otter Tail Corp. (NASDAQ:OTTR) netted $112.16 based on estimates from two analysts plus dividends less broker fees. The Beta number showed this estimate subject to volatility 11% less than the market as a whole.

PPL Corporation (NYSE:PPL) netted $103.53 based on estimates from fifteen analysts plus dividends less broker fees. The Beta number showed this estimate subject to volatility 84% less than the market as a whole.

Suburban Propane L.P. netted $82.77 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.

Brookfield Infrastructure Partners L.P. (NYSE:BIP) netted $78.69 based on estimates from seven analysts plus dividends less broker fees. The Beta number showed this estimate subject to volatility 49% less than the market as a whole.

Unitil Corp. (NYSE:UTL) netted $76.88 based on estimates from three analysts plus dividends less broker fees. The Beta number showed this estimate subject to volatility 72% less than the market as a whole.

Duke Energy (NYSE:DUK) netted $73.87 based on estimates from seventeen analysts plus dividends less broker fees. The Beta number showed this estimate subject to volatility 95% less than the market as a whole.

The average net gain in dividend and price was 10.45% on $10k invested as $1k in each of these ten utilities dogs. This gain estimate was subject to average volatility 52% less than the market as a whole.

Actionable Conclusion (5): (Bear Alert) Analysts Forecast AT DiviDog to Post Net Loss of 14.5% By August 2015

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

Atlantic Power Corporation was projected to lose $145.00 based on dividend and a mean target price estimate from four analysts, including $20 of broker fees. The Beta number showed this estimate subject to volatility 58% less than the market as a whole.

The net gain/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 sector 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: 6 Ultra Utilities Dogs Generate 6.2% To 11.7% August Upsides