5 'Bad Boy' Fuel Dogs Fetch Top February Yields

|
Includes: CEQP, CFP, CHKR, CVRR, GLBL, KCAP, MFIN, PDLI, RRMS, SPH, SXCP, TROX, UAN
by: Fredrik Arnold

Summary

50 top super-sinner "Bad Boy All-Star" ("Bad-As") stocks ranged from 4.71% to 46.14% in dividend yield as of February 4. Top five were oil, gas or coal powered.

10 "bad-as" leader yields averaged 26.74%: GLBL; KCAP; CFP; TROX; UAN; CVRR; RRMS; SXCP; CHKR; CEQP. These retreated bearishly after December while Dow dogs mixed up.

Analyst 1-yr. targets pegged 10 top super-sinner "Bad Boy All-Star" ("Bad-As") stocks out of 30 with price upsides averaging 72.23% and net gains averaging 93.81% as of February 4.

Thirty "sinner" industry firms showed upsides averaging 30.54% and net gains averaging 41.31%. Top 10 gainers were GLBL, SPH, UAN, TAXI, SXCP, PDLI, KCAP, TROX, CEQP, & RRMS.

Consider these stocks as reference points for your "Bad-As" February Dog investment investigation.

How Bad Dogs Be Bad

These were not the worst of the worst. These were "Bad-As" stocks with high yields. The list of 50 bad dogs below was created by screening for industries populated by public companies that have allegedly committed acts, made substances, by-products, or devices that maim, kill, tempt, harm, addict, insult, and/or scam the public. These included corporate members of all nine business sectors: basic materials, consumer goods, financial, technology, conglomerates, health, services, utilities & industrial goods. Sorting and refining top stocks in each industry of interest by yield narrowed the field to 50 from over 1000 candidates. They may be bad but they all pay strong dividends! Furthermore, recent market price declines pushed those estimated annual dividends way higher. Perhaps we are seeing a peak as the first quarter of 2016 gets going.

Fifty For the Money

Yield (dividend / price) results from here verified by Yahoo Finance for super-sinner "Bad Boy All-Star" ("Bad-As") stocks as of market closing prices 2/4/16 revealed three actionable conclusions discussed below. See Dow 30 article for an 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 Sorted "Bad-As" Stocks by Yield

Click to enlarge

Fifty companies listed above were sorted by yield as of February 4 to reveal the top 10. Ten "bad-as" dogs that showed the biggest dividend yields for January included firms from just three of nine market sectors listed here:

Basic Materials ("BasMat") included all the exploitive mining companies, toxic, corrosive and genetically manipulative chemical firms, and explosives manufacturers, to name a few.

Financials ("Fins") included money manipulating, merger and acquisition managing, crisis creating, scamming and ill gotten gain laundering institutions and more.

Utilities ("Utes") meant regulated monopolies that regularly provide consumers blackouts, brown-outs, traffic delays, air pollution, toxic emissions, and insipid feel-good inflated billing notices.

Actionable Conclusions: (1): Top 5 Energy dogs, CEQP, CHKR, SXCP, RRMS, CVRR, Led By Yield

Those five bubbled to the top based on their low stock prices derived from the over supply of the basic materials they supply. Two more chemical firms on the list face the same fate.

These top seven basic materials firms were: Crestwood Equity Partners LP (NYSE:CEQP) [1]; Chesapeake Granite Wash Trust (NYSE:CHKR) [2]; SunCoke Energy Partners, L.P. (NYSE:SXCP) [3]; Rose Rock Midstream, L.P. (NYSE:RRMS) [4]; CVR Refining, LP (NYSE:CVRR) [5]; CVR Partners, LP (NYSE:UAN) [6]; Tronox Limited (NYSE:TROX) [7].

The balance of the top 10 saw two financial firms positioned eighth and ninth: Cornerstone Progressive Return Fund (NYSEMKT:CFP) [8], and KCAP Financial, Inc. (NASDAQ:KCAP) [9]. Finally, one utility firm took 10th place, TerraForm Global, Inc. (NASDAQ:GLBL) [10] completed the representation of market sectors in the bad boy all star January "Bad As" top 10 by yield.

Not represented in the top 10 "bad-as" dog list were six remaining sectors (in alphabetical order):

Conglomerates ("Gloms") were firms so diverse that there was no end to the mayhem and madness they could inflict.

Consumer goods ("ConGo") firms made all the processed foods, liquids, vehicles, devices and substances that made us fat, sick, addicted, hyper, stupid, mad, terminal, and dead.

Healthcare ("Heal") covered firms responsible for devising and preparing the prescription liquids, powders, gases, devices, and substances that make us fat, sick, addicted, hyper, stupid, mad, enraged, and terminal; all in the name of healing.

Industrial goods ("IndiGo"), included arms dealers, military contractors, equipment, hardware, nuts, bolts, and other factory produced items of mass destruction, mayhem, chaos, and confusion.

Services ("Svcs") covered all the delivery modes for those exploding, toxic, addictive, fattening, caustic, and insulting goods produced by the other sectors.

Technology (Tec) included wireless, cable, phone, and net service providers, addictive electronic gizmo creators and the like who enable the subversives to subliminally sway us and, as a further insult, provide abominable customer service.

Dividend vs. Price Results Compared to Dow Dogs

Periodic strength of 10 top "bad-as" dogs by yield was graphed below as of market closing prices through 2/4/2016 and compared to those of the Dow. Projected annual dividend history from $10,000 invested as $1k in each of the 10 highest yielding stocks and the total single share price history of those 10 stocks created the data points shown in green for price and blue for dividend.

Click to enlarge

Actionable Conclusions: (2) "Bad-As" Dogs Retreated Bearishly, While (3) Dow Dogs Mixed UP After December

"Bad-As" top 10 dividend payers soared in dividend while their aggregate single share price tumbled after December. Annual dividend from $10k invested as $1k in each stock increased 3% while aggregate single share price of the 10 soared 17.4%. The result was described as bearish as yields soared as price fell.

Dow dogs mixed up as projected annual dividend from $10k invested as $1K in each of the top ten rose 5.9% into early February. At the same time, aggregate single share price also rose at a 7% rate to confirm the mixed up move for Dow dogs.

Actionable Conclusion (3): Dow Dogs Are Overbought And Stuck There

[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 10 stocks.]

Click to enlarge

The Dow dogs' overbought condition (in which aggregate single share price of the 10 exceeded projected annual dividend) recorded a gap of $250 or 65% in February 2015. March saw the gap widen again to $278 or 73%. April's gap was $269 or 73%. May set the new price/dividend record of $421, or 117%.

June shrank the gap down to $392 or 106%. Come July the gap narrowed to $237 or 63%. However, IBM's high price and dividend pushed the gap to $343 or 89% for August. Prices were down overall entering September as dividends increased to shrink the gap to $273 or 67%. October saw prices rise and dividend fall to move the price over dividend chasm to $305 or 76%. November commenced with the gap at $297 or 77%. December finished 2015 with a spread of $269 or 69%.

The first reading for 2016 shows the spread at $293 or 71% as of February 1. This gap between high share price and low dividend per $1k invested showed an overbought condition. Meaning no matter which chart you read, these are low risk and low opportunity Dow dogs.

Conversely, the "Bad-As" chart shows those dogs to be made of volatile, high risk, and potentially highly profitable playful pups.

Actionable Conclusion (4) 10 "Bad-As" Dogs Averaged 72.23% January Upsides

Click to enlarge

The charts above used one-year mean target prices set by brokerage analysts matched against February 4 closing prices to compare 10 "bad-as" stocks showing the highest upside price potential into 2016 out of 30 selected. 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; S&P Aristocrats; Russell 2000; NASDAQ 100; Champions; Contenders; Challengers; CCC Combined; and Global. Bonus reports cover Bad Boy AllStars, and Sector Leaders.

Actionable Conclusions: Wall St. Wizards Wished A (5) 28.21% Average Upside and (6) 38.467% Net Gain for 30 "Bad-As" Dogs As Of February 4, 207

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 2017.

Historic prices and actual dividends paid from $30,000 invested as $1k in each of the highest yielding stocks and the aggregate single share prices of those 30 stocks divided by 3 created data points for 2016. Projections based on estimated increases in dividend amounts from $1000 invested in the 30 highest yielding "bad as" stocks and aggregate one-year analyst target share prices from Yahoo Finance divided by 3 created the 2017 data points green for price and blue for dividend.

Click to enlarge

Analysts quoted by Yahoo forecast a 23% lower dividend from $30K invested as $1k in each stock in this group while aggregate single share price was projected to increase 25% 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 were considered more accurate for valid mean target price estimates.

A beta (risk) ranking for each analyst rated 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 of market direction.

Actionable Conclusion (7): Analysts Allege "Bad-As" Top 10 Dogs Could Net 67.34% to 136.82% By February 2017

Seven of the 10 top dividend yielding "Bad Boy All-Star" dogs were verified as being among the 10 net gainers for the coming year based on analyst 1-year target prices. So this period the dividend dog strategy as graded by Wall St. wizards was 70% accurate for the "bad-as" top 10.

Ten probable profit generating trades revealed by Yahoo Finance for 20176 were:

Click to enlarge

Rose Rock Midstream was projected to net $1,368.19 based on the median target price estimate from nine analysts combined with projected annual dividend less broker fees. The Beta number showed this estimate subject to volatility 157% more than the market as a whole.

Crestwood Equity Partners LP was projected to net $1,193.26 based on dividends plus the lowest target price estimate from five analysts less broker fees. The Beta number showed this estimate subject to volatility 89% more than the market as a whole.

Tronox Limited was projected to net $1,006.29 based on the median target price estimate from four analysts combined with projected annual dividend less broker fees. The Beta number showed this estimate subject to volatility 220% more than the market as a whole.

KCAP Financial, Inc. was projected to net $1,010.77 based on a median target price estimate from three analysts combined with projected annual dividend less broker fees. The Beta number showed this estimate subject to volatility 51% more than the market as a whole.

PDL BioPharma, Inc. (NASDAQ:PDLI) was projected to net $919.50 based on a mean target price estimate from two analysts combined with projected annual dividend less broker fees. The Beta number showed this estimate subject to volatility 34% less than the market as a whole.

SunCoke Energy Partners, L.P. was projected to net $857.28 based on a median target price estimate from seven analysts combined with projected annual dividend less broker fees. The Beta number showed this estimate subject to volatility 37% more than the market as a whole.

Medallion Financial Corp (TAXI) was projected to net $834.71 based on dividends plus the lowest target price estimate from two analysts less broker fees. The Beta number showed this estimate subject to volatility 46% more than the market as a whole.

CVR Partners, LP was projected to net $798.33 based on dividends plus a median target price estimate from two analysts less broker fees. The Beta number showed this estimate subject to volatility 21% more than the market as a whole.

Suburban Propane Partners (NYSE:SPH) was projected to net $692.82 based on the median target price estimate from seven analysts combined with projected annual dividend less broker fees. The Beta number showed this estimate subject to volatility 32% less than the market as a whole.

TerraForm Global, Inc. was projected to net $673.40 on dividends plus a median target price estimate from eight analysts less broker fees. The Beta number showed this estimate subject to volatility 22% more than the market as a whole.

The average net gain in dividend and price was calculated to be 93.81% on $10k invested as $1k in each of these ten dogs. This gain estimate was subject to average volatility 58% more than the market as a whole.

The stocks listed above were suggested only as decent starting points for a "Bad-As" dog dividend stock purchase/sale research process in December, 2015. These were not recommendations.

See Fredrik Arnold's instablog for specific instructions about how to best apply the dividend dog data featured in this article.

Gains/declines as reported do not factor-in any tax problems resulting from dividend, profit, or return of capital distributions. Consult your tax advisor regarding the source and consequences of "dividends" from any investment.

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.dividend.com; finance.yahoo.com; analyst mean target price by Thomson/First Call in Yahoo Finance.

Disclosure: I am/we are long CSCO, 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.