Finding Sector Leaders
Documented business sectors were: basic materials, conglomerates, consumer goods, health, industrial goods, services, technology, utilities. Yield (dividend / price) results from here verified by Yahoo Finance for sector leading stocks as of market closing prices February 5 revealed the actionable conclusions enumerated below.
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.
Thirty Six For the Show
This article was intended to reveal bargain stocks to buy and hold up to one year. See 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 has expanded the stock universe to include popular growth equities, as necessary.
Dog Metrics Revealed Bargains
Top four sector leading stocks were culled by yield in each of nine sectors to create the list of thirty-six for this article. Only common shares and ADRs with share prices above $10 were included. This step was taken to side step debate about whether projected sector leader dividends might be sustained.
Nine equities showing top yields, represented the best in each of the nine Yahoo market sectors: financials; basic materials; services; utilities; conglomerates; consumer goods; industrial goods; technology; healthcare.
Top dog, Northstar Realty Financial Corp (NYSE:NRF)  represented the financials. Eight remaining sector leaders were: NGL Energy Partners L.P. (NYSE:NGL),  basic materials; Golar LNG Partners LP (NASDAQ:GMLP),  services; Suburban Propane L.P. (NYSE:SPH),  utilities; Icahn Enterprises LP (NYSE:IEP),  conglomerates; Fibria Celulose S.A. (NYSE:FBR)  consumer goods; Enviva Partners, LP (NYSE:EVA),  industrial goods; NVE Corp. (NASDAQ:NVEC),  technology; Psychemedics Corp. (NASDAQ:PMD)  healthcare, to comprise the February 5 sector leader top dog team.
Sector Leader Dividend vs. Price Results Compared To Dow Dogs
Periodic strength of nine top business sector dogs by yield was graphed below as of market closing prices through 2/5/2016 and matched against the ten of the Dow. Projected 2017 dividend history from $10,000 invested as $1.11k in each of the nine high yielding stocks and the total single share price of those stocks created the data points shown in green for price and blue for dividend.
Actionable Conclusions: (2) Sector Toppers Mixed Up, As (3) Dow Dogs Retreated
Nine sector leader dogs jumped up in both dividend and price after December 31 as five of the nine top dogs changed leaders in the month past. Aggregate single share price of the nine soared 33.4% while, total dividend from $10k invested as $1.11k in each of those nine rose 2.9% for the period to signal the mix up.
Dow dogs retreated bearishly again as price dropped while dividend popped. Aggregate single share price for the ten fell 3.7% between December 30 and February 5, while annual dividend from $10k invested as $1K in each of the top ten Dow dogs hopped up 4.8% for the period according to IndexArb.
As a result, the Dow dogs overbought condition (in which aggregate single share price of the ten exceeded projected annual dividend from $10k invested as $1k each in those ten) narrowed again from its from its high November span.
Actionable Conclusion (4): Dow Dogs Remain Overbought
Historically, the overhang of price over dividend was $299 and a record 82% in March, 2015; extended the gap to $312 or 87% for April; then widened the gap further to a new 2014-15 record $318 or 89% in May. July 22 saw the gap fall to $220 or 59%. August 24 changed the spread to its narrowest $217 or 51%. September saw the gap widen to $264 or 63%. The October-November gap of $320 or 84% was flirting with new record territory. The December bearish move put the spread at $294 or 75%. More bear action through January set the gap down to $250 or 61%.
The gap between high share price and low dividend per $1k invested shows an overbought condition. Meaning, no matter which chart you read, these are low risk and low opportunity Dow dogs.
Conversely, the Sector leader chart shows that list to be composed of volatile, high risk but high profit potential pups.
Actionable Conclusion (5): 10 Sector Leader Dividend Dogs Seek 35.85% to 335.64% Price Upsides
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" metrics, analyst mean price target estimates provided another tool to dig out bargains.
Actionable Conclusions: Wall St. Wizards Forecast (6) Upsides averaging 43.8% and (7) net gains averaging 46.95% from 30 Top Yielding Sector Leaders by February 2017
Top 30 dogs on the sector leader stock list were graphed below as of February 5, 2016 compared to analyst mean price target estimates for the same date in 2017.
A hypothetical $1K investment in each equity was divided by the current share price to find the number of shares purchased. The number of shares were then multiplied by projected annual dividend amounts to find the dividend return. Thereafter the analyst mean target price was used to gauge the stock upsides to 2017.
Historic prices and actual dividends paid from $1K invested in each of 30 highest yielding stocks and the aggregate single share prices of those 30 stocks divided by 3 created the data points for 2016. Projections based on estimated increases in dividend amounts from $1K invested in the 30 highest yielding 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 dividends.
Analysts polled by Thomson/First Call and reported by Yahoo Finance projected a 25.8% lower dividend from $30K invested as $1k in each stock in this group while aggregate single share price was projected to increase over 31.5% 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 have historically contributed more accurate 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 (8): Wall St. Analysts Augured Net Gains Of 44% to 344% for 10 Top Sector Dogs by February, 2017
Five of the ten top dividend yielding sector lead dogs were verified as being among the ten gainers out of 30 for the coming year based on analyst 1-year target prices. So this time the dog strategy for this collection as graded by Wall St. wizards was 50% accurate.
Ten probable profit generating trades were revealed by Thomson/First Call in Yahoo Finance into 2017. Note that six of nine sectors placed representatives in the top ten by upside and net gain. Financials placed two; basic materials had one; services contributed two; utilities had three; industrial goods, and consumer goods, both had one representative on this top ten list. However, conglomerates, technology, and health did not place any representatives in the net gain and upside top ten.
Fibria Celulose S.A. , the lone representative from consumer goods, was projected to net $3,440.40 based on the lowest target estimates from eleven analysts plus dividends less broker fees. The Beta number showed this estimate subject to volatility 93% less than the market as a whole.
Northstar Realty Financial , the first of two financial representatives, was projected to net $1,989.88 based on dividends plus the median target price estimate from six analysts less broker fees. The Beta number showed this estimate subject to volatility 22% less than the market as a whole.
Golar LNG Partners LP , the first of two representatives from the services sector, was projected to net $845.89 based on a mean target price estimate from ten analysts combined with projected annual dividend less broker fees. The Beta number showed this more than the market as a whole.
NGL Energy Partners L.P. , the lone basic materials representative, was projected to net $766.33 based on the median estimate from seven analysts plus dividends less broker fees. The Beta number showed this estimate subject to volatility 25% less than the market as a whole.
TAL International Group (NYSE:TAL), the second services representative, was projected to net $760.30 based on the median target price estimate from eight analysts combined with projected annual dividend less broker fees. The Beta number showed this estimate subject to volatility 110% more than the market as a whole.
Ladder Capital Corp. (NYSE:LADR), the second financial representative, was projected to net $662.83 based on dividends plus a mean target price estimate from seven analysts less broker fees. A Beta number was not available for LADR.
Suburban Propane L.P. (SPH), the first of three utilities, was projected to net $614.74 based on a mean 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.
General Cable Corp (NYSE:BGC), the lone representative from industrial goods, was projected to net $546.38, based on dividend plus median target price estimates from two analysts less broker fees. The Beta number showed this estimate subject to volatility 136% more than the market as a whole.
Pattern Energy Group (NASDAQ:PEGI), the second utility representative, was projected to net $546.38 based on estimates from thirteen analysts plus dividends less broker fees. The Beta number showed this estimate subject to volatility 22% more than the market as a whole.
Abengoa Yield PLC (NASDAQ:ABY), the third utility on the sector top gains list, was projected to net $440.14 based on dividends plus a mean target price estimate from seven analysts less broker fees. A Beta number was not available for ABY.
The average net gain projected was 106.68% on $10k invested as $1k in each of these ten Sector Leader dogs. The average beta showed these estimates subject to volatility 1% more than the market as a whole.
Dog Metrics Extracted More Bargains From Five Lowest Priced In The Top Ten Sector Leaders + 1 Runner-up
Ten sector topping dividend stocks by yield February 5 per Yahoo Finance data represented all nine sectors plus the top runner-up: financials (1); basic materials (2); services (1); utilities (1); conglomerates (1); consumer goods (1); industrial goods (1); technology (1); health (1). They ranked themselves by yield as follows:
Actionable Conclusions: Analysts See 5 Lowest Priced of Top Ten Sector Leader Dogs Deliver (9) 141.59% VS. (10) 87.17% Net Gains from All Ten by February 5, 2017
$5000 invested as $1k in each of the five Lowest priced stocks in the top Sector Leaders kennel were asserted by analyst 1 year targets to deliver 62.43% more net gain than $5,000 invested as $5k in each of all ten. The very lowest priced sector leading high yield dog, Fibria Celulose S.A. , was projected to deliver the best net gain of 344.04%.
Five lowest priced Sector Leaders February 5 were: Fibria Celulose S.A. ; NGL Energy Partners L.P. ; Psychemedics Corp. ; Northstar Realty Financial Corp ; Golar LNG Partners LP , with prices ranging from $10.10 to $13.03.
Higher priced five sector leading high yield dogs for February 5 were: Targa Resources Partners L.P. ; Enviva Partners, LP ; Suburban Propane L.P. ; NVE Corp. (NYSE:NVE); Icahn Enterprises LP , whose prices ranged from $13.99 to $51.06.
Dog Metrics Extracted More Bargains From Five Lowest Priced In The Top Ten Sector Representatives by Yield, Too
Ten sector topping dividend stocks by yield February 5 per Yahoo Finance data represented three sectors: financials (4); basic materials (4); services (2); utilities (0); conglomerates (0); industrial goods (0); technology (0); consumer goods (0); health (0). They ranked themselves by yield as follows:
Actionable Conclusions: Analysts See 5 Lowest Priced of Top Ten Highest Yield Sector Leader Dogs (11) Deliver 89.83% VS. (12) 69.65% Net Gains from All Ten by February 5, 2017
$5000 invested as $1k in each of the five Lowest priced stocks in the top ten highest yield Sector Leaders kennel was alleged by analyst 1 year targets to deliver 28.96% more net gain than $5,000 invested as $500 in each of all ten. The fifth lowest priced Sector Leader high yield dog, Northstar Realty Financial Corp , was projected to deliver the best net gain of 198.99%.
Lowest priced five sector high yield dogs as of February 5 were: Western Asset Mortgage Capital Corp (NYSE:WMC); NGL Energy Partners L.P. ; TAL International Group ; Ladder Capital Corp ; Northstar Realty Financial Corp , with prices ranging from $10.00 to $11.13.
Higher priced five sector high yield dogs for February 5 were: Golar LNG Partners L.P. ; Targa Resources Partners L.P. ; Alon USA Partners LP (NYSE:ALDW); Alliance Holdings Group (NASDAQ:AHGP); ARMOUR Residential REIT Inc. (NYSE:ARR), whose prices ranged from $13.03 to $19.27.
This distinction between 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 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. Its 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 stocks listed above were suggested only as reference points for your top yield sector leader dog stock research in February, 2016. 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.
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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 ARR, 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.
Editor's Note: This article covers one or more stocks trading at less than $1 per share and/or with less than a $100 million market cap. Please be aware of the risks associated with these stocks.