S&P 500 And Aristocrat Dividend Dogs Tag 4.2% To 20.2% August Upsides

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 |  Includes: ABBV, CINF, CLX, CTL, CVX, DRI, DUK, ED, EMR, FTR, HCN, HCP, JNJ, KMB, KO, LEG, MCD, PEP, PG, PM, PPL, RAI, T, TE, TGT, VTR, VZ, WIN, XOM
by: Fredrik Arnold

Summary

Nine S&P 500 dividend dogs averaged 6.8% 1-year upside as of August 25. Ten S&P Aristocrats averaged 7.66% upside.

A continuing bull run pushed top-yielding S&P 500 index and Aristocrats toward their upside price limits. Dow dogs, however, turned bearish.

Analyst 9.8% S&P 500 average net gainers included: Verizon; Reynolds American; PPL Corp.; AT&T; Darden Restaurants; TECO Energy; Duke Energy; Ventas; Philip Morris. Aristocrat gains averaged 8.9% from: AbbVie; Coca-Cola; Emerson Electric; McDonald's; AT&T; Chevron; PepsiCo; Johnson & Johnson; Procter & Gamble.

Consider these stocks as possible starting points for your S&P 500 and S&P Aristocrats indices August 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 July were disclosed step-by-step. Eight actionable conclusions were drawn.

Actionable Conclusion (1): 9 S&P 500 Dogs Pursued 4.4% to 10.9% Upsides By August 2015

S&P 500 Index prices from Yahoo Finance tallied as of market closing August 25 were compared with analyst mean target gains one year hence. The results showcased 9 S&P 500 stocks averaging 6.8% price upsides.

Sectors were represented by two technology firms; two consumer goods manufacturers; three utilities; one service firm; one healthcare firm.

Actionable Conclusion (2): 10 Aristocrat Dogs Tracked 4.2% to 20.2% Upsides For August

Yahoo Finance August 25 closing prices for S&P 500 Aristocrats compared with analyst mean targets showcased 10 stocks.

Sectors were represented by one technology firm; two healthcare firms; three consumer goods makers; one industrial goods maker; one service firm; two basic materials firms.

One-year mean target price set by brokerage analysts matched against August 25 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, 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-year 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."

Five of nine sectors again placed top dogs in this index by yield for August: technology; utilities; financial; services; consumer goods. Top dog Windstream Corp. (NASDAQ:WIN) was one of four technology firms in the top ten. Other technology firms were Frontier Communications (NYSE:FTR), second; AT&T, Inc. (NYSE:T), third; CenturyLink Inc. (NYSE:CTL), fourth.

Fifth and eighth places were taken by utilities, TECO Energy (NYSE:TE) and Southern (NYSE:SO). Financial firms HCP, Inc. (NYSE:HCP) and Health Care REIT, Inc. (NYSE:HCN) filled the sixth and seventh slots. One service firm, Darden Restaurants (NYSE:DRI), claimed eighth place. Finally, a lone consumer goods firm, Reynolds American, Inc. (NYSE:RAI), placed tenth to complete these August S&P 500 top ten dogs by yield.

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

Three consumer goods firms placed fifth, ninth, and tenth: Leggett & Platt (NYSE:LEG), Clorox Co (NYSE:CLX), and Kimberly-Clark (NYSE:KMB). Two service sector firms, McDonald's Corp. (NYSE:MCD) and Target Corp. (NYSE:TGT), placed sixth and seventh. A lone Basic Materials representative, Chevron Corp. (NYSE:CVX), placed eighth to complete this top ten S&P 500 Aristocrats dog list for August.

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 8/25/2014 compared to those of the Dow were graphed below. Projected annual dividend history from $10,000 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.

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Actionable Conclusion (3 & 4): S&P 500 were Bullish, Dow was Bearish & Aristocrats Were Mixed in August

The July S&P 500 dividend dogs extended their bull path that started in January, as price increased while dividend sank. In the past month, S&P 500 top ten dog annual dividend from 10k invested as $1k in each dog fell 4.2%, while the aggregate single share price of the ten inclined 2.5% to specify the bullish mood.

Dow dogs panicked as projected annual dividend from $10k invested as $1K in each of the top ten jumped 3.2% since July. At the same time, aggregate single share price fell 2% to confirm the bearish month.

The Dow dogs' overbought condition (in which aggregate single share price of the ten exceeded the projected annual dividend from $1k invested in each of the ten) grew. The overhang of $136 or 36% in March widened again to $180 or 49% for April; retreated to $167 or 43% in May; expanded to $193 or 53% for June; grew to $220 or 61% for July; then shrank to $197 or 53% for August.

The August Aristocrats collection of dividend payers was mixed up. S&P Aristocrats' total single share price increased 2.9% since June, while the aggregate dividend from $10k invested as $1k in each of the top ten S&P Aristocrats also increased 0.43% to confirm the mixed up charge.

The Aristocrats' overbought condition, in which aggregate single share price of the ten exceeded projected annual dividend from $1k invested in each, expanded after June. Their overhang was a record $281 or 73% in April; shrank to $256 or 66% in May; grew to $277 or 71% for June; set a new high of $296 or 77% in July; and expanded the high to $313 or 81% 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 (5 & 6): Wall St. Wizards Wanted 6.7% Net Gains from The Top 20 S&P 500 Dogs & 8.18% Net Gains from Top 20 Aristocrats by August 2015

The top twenty dogs from the S&P 500 and Aristocrat indices graphed below displayed relative strengths by dividend and price as of August 25, 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 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 $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 shown in green for price and blue for dividends.

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Yahoo projected a 1.3% lower dividend from $10K invested in this group, while aggregate single share price was projected to increase 2.7% in the coming year.

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Yahoo projected a 3.3% lower dividend from $10K invested in this group, while aggregate single share price was projected to increase by over 4% in the coming year. Notice that price exceeded dividend, signaling an analyst-predicted overbought S&P Aristocrats index will continue 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. A 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 6.8% to 13.2% By August 2015

Four of ten 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 40% accurate.

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

Verizon Communications (NYSE:VZ) netted $131.98, based on estimates from twenty-four analysts plus dividends less broker fees. The Beta number showed this estimate subject to volatility 2% opposite the market as a whole.

Reynolds American (RAI) netted $110.86, based on a mean target price estimate from six analysts, combined with projected annual dividend less broker fees. The Beta number showed this estimate subject to volatility 76% less than the market as a whole.

PPL Corporation (NYSE:PPL) netted $95.68, 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 80% less than the market as a whole.

AT&T netted $81.71, based on estimates from twenty-two analysts plus dividends less broker fees. The Beta number showed this estimate subject to volatility 77% less than the market as a whole.

Darden Restaurants netted $78.84, based on estimates from twenty analysts plus dividends less broker fees. The Beta number showed this estimate subject to volatility 2% more than the market as a whole.

TECO Energy (TE) netted $75.88, based on estimates from twelve analysts plus dividends less broker fees. The Beta number showed this estimate subject to volatility 36% less than the market as a whole.

Duke Energy (NYSE:DUK) netted $69.75, 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 94% less than the market as a whole.

Ventas, Inc. (NYSE:VTR) netted $68.02, based on estimates from ten analysts plus dividends less broker fees. The Beta number showed this estimate subject to volatility 57% less than the market as a whole.

Philip Morris (NYSE:PM) netted $67.80, based on estimates from fourteen analysts plus dividends less broker fees. The Beta number showed this estimate subject to volatility equal to the market as a whole.

The average net gain in dividend and price was slightly over 9.7% on $9k invested as $1k in each of these nine dogs. This gain estimate was subject to average volatility 52% less than the market as a whole.

Actionable Conclusion (8): Analysts Augured 10 S&P 500 Dividend Aristocrat Dogs To Net 4.9% to 21.2% By August 2015

Three 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 30% accurate.

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

AbbVie Inc. (NYSE:ABBV) netted $211.61, based on target price estimates from eight analysts plus dividends less broker fees. The Beta number showed this estimate subject to volatility 93% more than the market as a whole.

Coca-Cola Co. (NYSE:KO) netted $104.85, based on dividends plus a mean target price estimate from nineteen analysts less broker fees. The Beta number showed this estimate subject to volatility 59% less than the market as a whole.

Emerson Electric Co. (NYSE:EMR) netted $100.87, based on dividends plus a mean target price estimate from nineteen analysts less broker fees. The Beta number showed this estimate subject to volatility 25% more than the market as a whole.

McDonald's Corp. netted $93.19, based on dividends plus a mean target price estimate from twenty analysts less broker fees. The Beta number showed this estimate subject to volatility 55% less than the market as a whole.

AT&T Inc. netted $81.71, 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 77% less than the market as a whole.

Chevron Corp. netted $75.35, based on target price estimates from twenty-two analysts plus dividends less broker fees. The Beta number showed this estimate subject to volatility 9% more than the market as a whole.

PepsiCo Inc. (NYSE:PEP) netted $57.91, based on dividend plus mean target price estimates from twenty analysts less broker fees. No Beta number was available for PEP.

Johnson & Johnson (NYSE:JNJ) netted $56.74, 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 46% less than the market as a whole.

Procter & Gamble (NYSE:PG) netted $55.05, based on dividends plus a mean target price estimate from seventeen analysts less broker fees. The Beta number showed this estimate subject to volatility 65% less than the market as a whole.

Exxon Mobil Corp. (NYSE:XOM) netted $49.87, based on a mean target price estimate from nineteen analysts, combined with projected annual dividend less broker fees. The Beta number showed this estimate subject to volatility 11% less than the market as a whole.

The average net gain in dividend and price was 8.87% on $10k invested as $1k in each of these ten dogs. This gain estimate was subject to average volatility 29% 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.

Disclosure: The author is long T, VZ, CSCO, GE, INTC, PFE.

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.