Healthcare SML Dog Diagnostics
Yield (dividend / price) results from here verified by Yahoo Finance were calculated as of January 7, 2016 for Small, Mid, & Large cap Technology stocks. Small cap firms were valued at $200M(illion) to $2B(illion); Mid cap firms were worth $2B to $10B; Large caps were valued above $10B. Those yield results led to the actionable conclusions discussed below.
Fifty Got Ready
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.
This article intended to reveal bargain stocks to buy and hold for up to one year. See the Dow 30 article for explanation of the term "dogs" for stocks reported, based on Michael B. O'Higgins' book "Beating The Dow" (HarperCollins, 1991), now 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, as desired.
Dog Metrics Ordered Healthcare Stocks by Yield
Actionable Conclusion (1): 2 Biotechnology Firms Tops by Yield, Though 4 Manufacturers Make The Most
Top ten healthcare sector dogs showing the biggest dividend yields by this screen as of January 7 represented six industries: (1) biotechnology; (2) drug manufacturers - major; (3) long-term care facilities; (4) drug delivery; (5) diagnostic substances; and (6) hospitals.
The best one of four drug manufacturers - major placed third, GlaxoSmithKline PLC (NYSE:GSK) . The other three drug manufacturers found themselves in fifth, eighth, and tenth places: AstraZeneca (NYSE:AZN) , Sanofi SA (NYSE:SNY) , and Pfizer (NYSE:PFE) , respectively.
One long-term care facility concern placed fourth, Kindred Healthcare, Inc. (NYSE:KND) . The single drug delivery firm placed sixth, PetMed Express (NASDAQ:PETS) . A lone substances firm placed firm placed seventh, Meridian Bioscience, Inc. (NASDAQ:VIVO) (7). Finally, a hospital group placed ninth, Select Medical Holdings Corporation (NYSE:SEM) , completing the top ten January healthcare dogs by yield.
Healthcare Dividend vs. Price Outcomes Contrasted With Dow Dogs
The graphs below compared relative strengths of the top ten Healthcare sector dogs by yield as of market close on 1/7/2016 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.
Actionable Conclusions: (2) Healthcare Dogs Still Retreated Bearishly As (3) Dow Dogs Mixed Down Into January
The Healthcare collection of dividend payers continued their bearish ways into 2016 as dividends increased while prices decreased. The aggregate dividend from $10k invested as $1k in each of the top ten healthcare dogs rose 4.2% after November, while their single-share price tumbled 12.6%, to send a bearish signal.
Meanwhile, Dow dogs mixed down in dividend and price for the period. Projected annual dividend from $10k invested as $1K in each of the top ten fell 1.35%. At the same time, the aggregate single-share price dropped 6.3% to confirm the mixed down motion.
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) narrowed.
[I invite you to sign on to my premium site, The Dividend Dog Catcher, to share my discussion about how the Dow (short of tossing out IBM) could return to a normal balance where dividends from 10 $1k investments can again exceed the aggregate single-share price of those top ten stocks.]
Actionable Conclusion (4): Dow Dogs Remain Overbought
The overhang was $239 or 62% for February; widened to a record gap of $388 or 102% in March; shrank back to $291 or 79% for April; widened to $320 or 90% to begin May; soared to the new record $406 or 112% in June. The Dow bubble deflated as DuPont (NYSE:DD) replaced IBM in the ten slot of the top ten for July to peg the gap at $269 or 71%, then inflated again as IBM replaced Pfizer (NYSE:PFE) to widen the gap to $331 or 85% for August.
September brought some sanity back to the runaway Dow, when the gap stood at $279, or 67%. October increases in price by CVX and XOM pushed the gap to $334, or 85%. November changed out McDonald's (NYSE:MCD) for Wal-Mart (NYSE:WMT) and General Electric (NYSE:GE) for Coca-Cola (NYSE:KO). The resulting price over dividend gap went to $303, or 78%. Come January, and GE bumped WMT out of the ten slot to drop both price and dividend of the ten top dogs, and the gap went down to $256, or 66%.
This gap between high share price and low dividend per $1k invested defines the Dow's overbought condition. Meaning, these are low-risk and low-opportunity Dow dog stocks.
Conversely, the Healthcare dog chart shows them to be higher-risk, but prime potential healthy gain pups as compared to those of the Dow. As U.S. health payment options consolidate, these dogs can reach a buy point.
Wall Street Wizard Weightings And Dog Metrics Revealed Upside And Gains
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 2017 out of 30 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: (5) Analysts Alleged 41.25% Average Price Upsides For Top Ten January Healthcare Dogs
Actionable Conclusions: Wall St. Wizards Predicted The Top 30 January Healthcare Dogs Show (6) 22.65% Average Upside; (7) 18.58% Average 1-year Net Gain
Healthcare sector dogs were graphed below to show relative strengths by dividend and price as of January 7, 2016 and those as projected by analyst median price target estimates to the same date in 2017.
A hypothetical $1000 investment in each equity was divided by the current share price to find the number of shares purchased. The number of shares was then multiplied by the projected annual per share dividend amounts to find the dividend return. Thereafter, the analyst median target price was used to gauge the stock upside to 2017.
Historical prices and actual dividends paid from $1000 invested in each of the thirty highest-yielding stocks and the aggregate single-share prices of those thirty stocks divided by 3 created the data points for 2016. Projections based on estimated increases in dividend amounts from $1000 invested in the thirty highest-yielding stocks and aggregate one-year analyst target share prices from Yahoo Finance divided by 3 created the data points for 2017 shown in green for price and blue for dividends.
Analyst targets reported by Yahoo Finance forecast 18.75% less dividend from $10K invested as $1k in ten dogs in this group, while the aggregate single-share price for those ten was projected to increase by 20.3% in the coming year.
Notice that the forecast shows price moving higher than dividend. So, the analyst forecast predicted Healthcare dogs moving into an overbought condition one year out.
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 have historically provided the most accurate estimates. Estimates provided by one analyst were not applied (n/a).
A beta (risk) ranking for each stock was provided in the far right column of 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's movement opposite of market direction.
Actionable Conclusion (5): Analysts Alleged 27% to 106.64% Net Gains By Ten Healthcare Dividend Dogs As Of January 2017
Just three of ten top dividend yielding healthcare dogs were among the ten top gainers for the coming year, based on analyst 1-year target prices. So this month, the dog strategy for the Healthcare sector as graded by Wall St. wizards was only 30% accurate.
Ten probable profit-generating trades were revealed by Thomson/First Call in Yahoo Finance for 2017:
Trinity Biotech plc (NASDAQ:TRIB) netted $1,066.38, based on dividends plus the median of annual price estimates from five analysts less broker fees. The Beta number showed this estimate subject to volatility 3% less than the market as a whole.
PDL BioPharma, Inc. netted $921.90, based on mean target price estimates from two analysts plus dividends less broker fees. The Beta number showed this estimate subject to volatility 51% less than the market as a whole.
AbbVie Inc. (NYSE:ABBV) netted $326.62, based on dividend plus a median target price estimate from fifteen analysts less broker fees. The Beta number showed this estimate subject to volatility 62% more than the market as a whole.
Anthem, Inc. (Wellpoint) (NYSE:ANTM) netted $325.57, based on dividends plus median target price estimate from eighteen analysts less broker fees. The Beta number showed this estimate subject to volatility 450% less than the market as a whole.
MSA Safety Incorporated (NYSE:MSA) netted $307.79, based on estimates from four analysts plus dividends less broker fees. The Beta number showed this estimate subject to volatility 88% more than the market as a whole.
Kindred Healthcare, Inc. netted $307.64, based on estimates from eight analysts plus dividends less broker fees. The Beta number showed this estimate subject to volatility 16% less than the market as a whole.
Sanofi SA netted $303.48, 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 3% more than the market as a whole.
HealthSouth Corp. (NYSE:HLS) netted $280.65, based on dividends plus the mean of annual price estimates from twelve analysts less broker fees. The Beta number showed this estimate subject to volatility 47% less than the market as a whole.
Novartis (NYSE:NVS) netted $274.62, based on dividends plus a mean target price estimate from four analysts less broker fees. The Beta number showed this estimate subject to volatility 40% less than the market as a whole.
Amgen (NASDAQ:AMGN) netted $270.00, based on median target prices from twelve analysts less broker fees. The Beta number showed this estimate subject to volatility 23% more than the market as a whole.
The average net gain in dividend and price was 43.85% on $10k invested as $1k in each of these ten dogs. This gain estimate was subject to average volatility 3% less than the market as a whole.
Dog Metrics Extracted More Bargains From the Five Lowest-Priced Highest-Yield Healthcare Dogs
Ten small, mid, and large cap healthcare equities were culled by yield from here. Yield (dividend / price) results verified by Yahoo Finance did the ranking.
Actionable Conclusions: (1) Analysts Assert 5 Lowest-Priced of Top Ten Highest-Yield Healthcare Dividend Dogs Generate 28.90% Vs. (2) 24.09% Net Gains by All Ten by January 2017
$5000 invested as $1k in each of the five lowest-priced stocks of the top ten healthcare dividend kennel by yield were predicted by analyst 1-year targets to deliver 19.97% more net gain than $5,000 invested as $.5k in all ten. The very lowest-priced healthcare dividend dog, PDL BioPharma, Inc., was projected to deliver the best net gain of 92.19%.
The five lowest-priced healthcare dividend dogs for January 7 were: PDL BioPharma, Inc., Theravance Inc., Kindred Healthcare, Inc., Select Medical Holdings Corporation, and PetMed Express Inc., with prices ranging from $3.27 to $17.00.
Five higher-priced healthcare dividend dogs for January 7 were: Meridian Bioscience, Inc., Pfizer, AstraZeneca, GlaxoSmithKline PLC, and Sanofi SA, whose prices ranged from $19.24 to $41.27.
This distinction between the five low-priced dividend dogs and the general field of ten reflects the "basic method" Michael B. O'Higgins employed for beating the Dow. The same technique, you now see, can also be used to find the more rewarding dogs in the Healthcare kennel.
The added scale of projected gains based on analyst targets contributed a unique element of "market sentiment" gauging upside potential. It provided a "here and now" equivalent of waiting a year to find out what might happen in the market. It's also the work analysts got paid big bucks to do.
A caution is advised, however, as analysts are historically 20% to 80% accurate on the direction of change and about 0% to 20% accurate on the degree of the change.
The net gain and 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.
See my instablog for specific instructions about how to best use the dividend dog data featured in this article. - Fredrik Arnold
The stocks listed above were suggested only as possible starting points for your Healthcare 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.
Disclosure: I am/we are long GE, PFE, VZ.
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.