3 High Dividend Yield Stocks Predictive Analysts Expect to Outperform

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 |  Includes: ARLP, FITB, HON
by: Kapitall

Although it is helpful to search for companies that analysts are bullish on, it is also helpful to search for groups of analysts that are historically correct. If those analysts are bullish on a company, it is probably worthwhile to take a second look.

Using analyst ratings from Reuters that are presented on a linear scale (with 1 = "Strong Buy" and 5 = "Strong Sell"), we sliced the ratings data of stocks paying dividend yields above 3% into three time periods separated by a month, and identified the groups of analysts that have shown predictive value, i.e. been able to accurately predict the direction of stock moves for two consecutive time periods.

We further narrowed down the list by only focusing on those stocks that have seen bullish trends in analyst opinion. In other words, predictive analysts, with a proven (short-term) track record of predicting their stock's direction, think these stocks are due for a rebound.

Although past performance is no guarantee of future results, the recent accuracy of these analyst ratings suggests their opinions may be a helpful starting-off point for your own analysis.

Interactive Chart: Press Play to compare changes in analyst ratings over the last two years for the stocks mentioned below. Analyst ratings sourced from Zacks Investment Research.

We also created a price-weighted index of the stocks mentioned below, and monitored the performance of the list relative to the S&P 500 index over the last month. To access a complete analysis of this list's recent performance, click here.



Do you think these stocks will outperform? Use this list as a starting-off point for your own analysis.

List sorted by dividend yield.

1. Alliance Resource Partners LP (NASDAQ:ARLP): Produces and markets coal to utilities and industrial users. Market cap of $2.42B. Dividend yield at 5.61%, payout ratio at 46.25%. Mean average rating changed from 2.7 to 2.3 between 06/30/11 and 07/30/11 (bullish change). Analysts correctly predicted the direction of the stock over the next month, with the stock generating an alpha of 0.6%. Analysts also got it right between 07/30/11 and 08/29/11, with the mean rating changing from 2.3 to 2.4 (bearish change). Over the following month, the stock generated an alpha of -4.16% relative to the S&P 500 index, as predicted by the analysts. This same group of analysts now expect the stock to outperform in the future, with the mean rating changing from 2.4 to 2.36 between 08/29/11 and 09/28/11 (i.e. bullish change). It's been a rough couple of days for the stock, losing 6.05% over the last week.

2. Fifth Third Bancorp (NASDAQ:FITB):
Operates as a diversified financial services holding company in the United States. Market cap of $9.28B. Dividend yield at 3.17%, payout ratio at 14.65%. Mean average rating changed from 2.03 to 2.06 between 06/30/11 and 07/30/11 (bearish change). Analysts correctly predicted the direction of the stock over the next month, with the stock generating an alpha of -10.05%. Analysts also got it right between 07/30/11 and 08/29/11, with the mean rating changing from 2.06 to 2.03 (bullish change). Over the following month, the stock generated an alpha of 0.88% relative to the S&P 500 index, as predicted by the analysts. This same group of analysts now expect the stock to outperform in the future, with the mean rating changing from 2.03 to 2 between 08/29/11 and 09/28/11 (i.e. bullish change). This is a risky stock that is significantly more volatile than the overall market (beta = 2.22). The stock has lost 13.69% over the last year.

3. Honeywell International Inc. (NYSE:HON):
Operates as a diversified technology and manufacturing company worldwide. Market cap of $34.64B. Dividend yield at 3.0%, payout ratio at 40.34%. Mean average rating changed from 1.88 to 1.95 between 06/30/11 and 07/30/11 (bearish change). Analysts correctly predicted the direction of the stock over the next month, with the stock generating an alpha of -5.45%. Analysts also got it right between 07/30/11 and 08/29/11, with the mean rating changing from 1.95 to 2.1 (bearish change). Over the following month, the stock generated an alpha of -0.93% relative to the S&P 500 index, as predicted by the analysts. This same group of analysts now expect the stock to outperform in the future, with the mean rating changing from 2.1 to 2.05 between 08/29/11 and 09/28/11 (i.e. bullish change). The stock has gained 3.07% over the last year.

*Analyst ratings sourced from Reuters, price data sourced from Yahoo Finance, all other data sourced from Finviz.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.