Analyst ratings are a great start when searching for companies with exciting prospects, but finding groups of analysts that have a history of predicting stock performance is even better.
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 dividend stocks from the S&P 500 into three monthly time periods, and identified the groups of analysts that have shown predictive value over two consecutive time periods.
We further narrowed down the list by only focusing on those stocks that have seen bullish trends in recent analyst opinion.
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 top six 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.
Click to enlarge
Do you think these stocks will outperform like analysts expect? Use this list as a starting point for your own analysis.
List sorted by dividend yield.
1. Molex Inc. (MOLX): Manufactures and sells electronic components worldwide. Market cap of $4.09B. Dividend yield at 3.44%, payout ratio at 43.24%. Mean average rating changed from 2.62 to 2.53 between 08/29/11 and 09/28/11 (bullish change). Analysts correctly predicted the direction of the stock over the next month, with the stock generating an alpha of 9.07%. Analysts also got it right between 09/28/11 and 10/28/11, with the mean rating changing from 2.53 to 2.6 (bearish change). Over the following month, the stock generated an alpha of -1.48% relative to the S&P 500 index, as predicted by analysts. This same group of analysts now expect the stock to outperform in the future, with the mean rating changing from 2.6 to 2.56 between 10/28/11 and 11/27/11 (i.e. bullish change). The stock has performed poorly over the last month, losing 10.12%.
2. Northeast Utilities (NU): Provides electric and natural gas energy delivery services to residential, commercial and industrial customers in Connecticut, New Hampshire and western Massachusetts. Market cap of $5.91B. Dividend yield at 3.29%, payout ratio at 45.95%. Mean average rating changed from 2.53 to 2.6 between 08/29/11 and 09/28/11 (bearish change). Analysts correctly predicted the direction of the stock over the next month, with the stock generating an alpha of -9.12%. Analysts also got it right between 09/28/11 and 10/28/11, with the mean rating changing from 2.6 to 2.53 (bullish change). Over the following month, the stock generated an alpha of 3.79% 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 2.53 to 2.19 between 10/28/11 and 11/27/11 (i.e. bullish change). The stock has gained 9.65% over the last year.
3. Medtronic, Inc. (MDT): Manufactures and sells device-based medical therapies worldwide. Market cap of $36.71B. Dividend yield at 2.79%, payout ratio at 29.29%. Mean average rating changed from 2.42 to 2.44 between 08/29/11 and 09/28/11 (bearish change). Analysts correctly predicted the direction of the stock over the next month, with the stock generating an alpha of -6.49%. Analysts also got it right between 09/28/11 and 10/28/11, with the mean rating changing from 2.44 to 2.43 (bullish change). Over the following month, the stock generated an alpha of 5.17% relative to the S&P 500 index, as predicted by analysts. This same group of analysts now expect the stock to outperform in the future, with the mean rating changing from 2.43 to 2.34 between 10/28/11 and 11/27/11 (i.e. bullish change). The stock has gained 5.21% over the last year.
4. U.S. Bancorp (USB): Provides various banking and financial services in the United States. Market cap of $47.18B. Dividend yield at 2.02%, payout ratio at 18.63%. Mean average rating changed from 2.29 to 2.32 between 08/29/11 and 09/28/11 (bearish change). Analysts correctly predicted the direction of the stock over the next month, with the stock generating an alpha of -0.17%. Analysts also got it right between 09/28/11 and 10/28/11, with the mean rating changing from 2.32 to 2.26 (bullish change). Over the following month, the stock generated an alpha of 2.17% 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 2.26 to 2.14 between 10/28/11 and 11/27/11 (i.e. bullish change). The stock has gained 4.3% over the last year.
5. KeyCorp (KEY): Operates as a holding company for KeyBank National Association that provides various banking services in the United States. Market cap of $6.50B. Dividend yield at 1.76%, payout ratio at 8.02%. Mean average rating changed from 2.81 to 2.76 between 08/29/11 and 09/28/11 (bullish change). Analysts correctly predicted the direction of the stock over the next month, with the stock generating an alpha of 14.95%. Analysts also got it right between 09/28/11 and 10/28/11, with the mean rating changing from 2.76 to 2.7 (bullish change). Over the following month, the stock generated an alpha of 0.24% 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 2.7 to 2.52 between 10/28/11 and 11/27/11 (i.e. bullish change). The stock has lost 10.14% over the last year.
6. CVS Caremark Corporation (CVS): Operates as a pharmacy services company in the United States. Market cap of $48.65B. Dividend yield at 1.34%, payout ratio at 18.14%. Mean average rating changed from 1.83 to 1.88 between 08/29/11 and 09/28/11 (bearish change). Analysts correctly predicted the direction of the stock over the next month, with the stock generating an alpha of -3.35%. Analysts also got it right between 09/28/11 and 10/28/11, with the mean rating changing from 1.88 to 1.83 (bullish change). Over the following month, the stock generated an alpha of 8.67% relative to the S&P 500 index, as predicted by analysts. This same group of analysts now expect the stock to outperform in the future, with the mean rating changing from 1.83 to 1.75 between 10/28/11 and 11/27/11 (i.e. bullish change). The stock has gained 20.58% over the last year.
7. SunTrust Banks, Inc. (STI): Operates as the holding company for SunTrust Bank, which provides various financial services to consumer and corporate customers in the United States. Market cap of $9.05B. Dividend yield at 1.19%, payout ratio at 7.82%. Mean average rating changed from 2.69 to 2.53 between 08/29/11 and 09/28/11 (bullish change). Analysts correctly predicted the direction of the stock over the next month, with the stock generating an alpha of 2.78%. Analysts also got it right between 09/28/11 and 10/28/11, with the mean rating changing from 2.53 to 2.61 (bearish change). Over the following month, the stock generated an alpha of -11.12% relative to the S&P 500 index, as predicted by analysts. This same group of analysts now expect the stock to outperform in the future, with the mean rating changing from 2.61 to 2.6 between 10/28/11 and 11/27/11 (i.e. bullish change). It has been a rough couple of days for the stock, losing 6.85% over the last week.
*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.
