MCY Leads Champion Dogs Down As Financials Dominate March List

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Includes: BWL.A, CTBI, CVX, ED, EMR, EV, HCP, HP, KO, MCY, MDU, MO, NFG, NNN, NUE, NWN, ORI, PG, STR, T, UBSI, UHT, VVC
by: Fredrik Arnold

Summary

Ten leading March Champion dogs NNN; MDU; ORI; MCY; BWL.A; UHT; CVX; HP; T; HCP, posted yields averaging 4.75%. They charged as Dow dogs charged, too.

50 Dividend Dog Champions (sporting 25 or more years of regular dividend increases) ranged in yield from 2.68% to 7.15% as of March 22.

National Fuel Gas led the pack of ten Champion dividend dogs who showed upsides averaging 3.73% with net gains averaging 5.36%. Seven downsides averaged 9.62% per March analyst 1yr. targets.

Analysts forecast average -2% downside leading to+0.042% gain for 30 Champions. Top ten gainers, MDU, T, PG, STR, NNN, NUE, KO, MO, CTBI, & NFG, ranged upward 0.8% to 9.67%.

Ten Top Champion dividend dogs ranked by yield projected 632.53% more gain from $5k invested in the lowest priced five than from the same investment in all ten.

The March Champion Dogs

Yield (dividend/price) results from David Fish's Dividend Champions Index members (as of March 22 market closing prices) were paired with annual dividends projected by dripinvesting.org as of February 29. Results from that data charted below showed five of nine business sectors represented by top yield Champions: five financials; one technology; two basic materials; one services; one utility. Those ten stocks posted yields averaging 4.75%.

Actionable conclusions by yield, target price upsides, and net gains were drawn below as top Champion dog selections for March were investigated, step by step.

Actionable Conclusion (1) Ten Dividend Champion Dogs Displayed 3.91% to 7.75% Yields as of March 22

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; Consumer Goods; NASDAQ 100; Champions; Contenders; Challengers; CCC Combined; and Global. Bonus reports cover Bad Boy AllStars, and Sector Leaders.

Fifty For the Money

This article was written to reveal bargain stocks to buy and hold up to one full 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 expanded the stock universe to include popular growth equities, as desired.

Dog Metrics Charted 50 Champion Stocks by Yield

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David Fish's Champions list (from here) as of February 29 contained stocks distinguished as having paid increasing dividends for 25 years or longer. Champion stocks listed below were ranked by yields calculated as of March 22 prices to reveal the top ten. Price data was sourced from Yahoo.com. Annual dividend calculations as of 2/29 came from dripinvesting.org.

As mentioned previously, five of nine Yahoo Finance market sectors were represented in the top ten champions dog list selected by yield below: financials; technology; basic materials; services; utilities.

Top dog HCP Inc. (NYSE:HCP) [1] was tops of the five financial firms. Other financials placed fifth, seventh, eighth, and tenth: Universal Health Realty Trust [5]; Mercury General Corp. (NYSE:MCY) [7]; Old Republic International [8]; National Retail Properties (NYSE:NNN) [10].

Second place was secured by a lone technology representative, AT&T Inc. (NYSE:T) [2].

Third and fourth positions were taken by two basic materials firms, Helmerich & Payne Inc. (NYSE:HP) [3], and Chevron Corp. (NYSE:CVX) [4].

The balance of the top ten champions in services, and utilities occupied sixth, and ninth places.

Sixth place was held by one steadfast services stock, Bowl America Class A (NYSEMKT:BWL.A) [6]. The lone utility took the ninth place, MDU Resources (NYSE:MDU) [9], and completed the top ten champion dogs by yield for March.

Champion Dividend vs. Price Results Matched Dow Dogs

Periodic strength of ten top Champions by yield was graphed below as of market closing prices on 3/22/2016 and compared to those of the Dow. Projected annual dividend history from $10,000 invested as $1k in each of the ten highest yielding stocks and the total single share price history of those ten stocks created the data points shown in green for price and blue for dividend.

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Actionable Conclusions: (2) Champions Charged Bullishly As (3) Dow Dogs Did Too

Champions dividend from $10k invested as $1k in each dog dropped as aggregate single share price for the ten popped up after February to maintain the charge. Champions top ten dog dividend fell 4.7% while price pushed 4.9% higher. The Champions narrowed the gap to move closer to becoming overbought as aggregate single share price of the ten top dogs rose to a level just 11% removed from the total annual dividend amount estimated as derived from $10k invested as $1k in each of those ten dogs for February

Dow dogs, however, charged too, as aggregate single share price for those ten rose 17% between February 25 and March 22, while annual dividend from $10k invested as $1K in each of the top ten fell 7% according to IndexArb.

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As a result, the Dow dogs overbought condition (where aggregate single share price of the ten exceeded projected annual dividend from $10k invested as $1k each in those ten) expanded again after February.

Actionable Conclusion (4): Dow Dogs Are Overbought

The overhang gapped to $295 or 81% record in April; then broke the new annual record again in May at $311 or 87%. June saw the gap narrow to $286 or 77%. The July/August market set a new high for the gap at $329 or 85%. September shrank the gap to $279 or 67%. October expanded the chasm again to $323 or 82%. November-December constricted the gap somewhat to $271 or 70%. January narrowed the gap slightly to $246 or 57%. In February when $30 Intel with its dividend dollar replaced Procter & Gamble's $75 price and $2.80 dividend, the gap of Dow price over dividend grew to $265 or 65%. But P&G reclaimed slot ten in March to join big dogs IBM and Boeing to put the gap to a record of $406 or 106%.

This gap between high share price and low dividend per $1k invested shows an overbought condition. Meaning, these are low risk and low opportunity Dow dogs. The Dow top ten average price per dollar of annual dividend was $26.45.

Compared to the DOW, the Champion ten have sporadically retreated in a pattern where aggregate dividend value of $1k investments in each remained above the aggregate single share price. In slight contrast to the Dow, Champion Dog top ten average price per dollar of annual dividend was $21.19 as of March 22.

[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 have, in 2015, returned to a normal balance where dividends from 10 $1k investments could have exceeded the aggregate single share price of those top ten stocks.]

Should Dow prices somehow move to a level 30-35% lower, they could again become attractive dividend buys! As it stands, the Dow has become an index of growth stocks as their dividends have been progressively devalued by their market price.

Actionable Conclusions: (5) Ten Champion Dogs Pursued 3.73% Average Upsides into March 2017; (6) Seven Champs Tumbled To An 9.62% Average Downside

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The O'Higgins dividend/price metrics 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, if desired. This picture of downsides exceeding upsides is one not seen before by this dividend dog reporter.

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 Estimated (7) -2% Average Downside & (8) +4.16% Average Net Gain from Top 30 Dividend Champions By March 2017

Top thirty dogs from David Fish's Dividend Champions index were graphed below as of March 22, 2016 as compared to analyst mean price target estimates for 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 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 thirty stocks divided by 3 created 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 2017 data points green for price and blue for dividend.

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Analyst data reported by Yahoo finance projected a 5.3% higher dividend from $30K invested as $1k in each stock in this group while aggregate single share price was projected to decrease 3.8% in the coming year.

Notice that the chart showed price exceeded dividend. So, analysts predicted the an overbought Champions index returning by 2017. 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 had a better track record of 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 (9): Analysts Pictured Ten Dividend Champion Dogs Would Net 2.7% to 10.77% By March 2017

Only three of the ten top dividend yielding Champion dogs were among the ten gainers for the coming year based on analyst 1 year target prices. So this month the dog strategy as graded by Wall St. wizards was all of 30% accurate.

Ten probable profit generating trades were revealed by Thomson/First Call in Yahoo Finance into 2017:

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National Fuel Gas (NYSE:NFG) was projected to net $107.69 based on dividends plus a median target price estimate from five analysts less broker fees. The Beta number showed this estimate subject to volatility 20% less than the market as a whole.

Community Trust Banc (NASDAQ:CTBI) was projected to net $7507 based on dividends plus a median target price estimate from three analysts less broker fees. The Beta number showed this estimate subject to volatility 41% less than the market as a whole.

Altria Group Inc. (NYSE:MO) was projected to net $74.43 based on dividends plus median target price estimate from eight analysts less broker fees. The Beta number showed this estimate subject to volatility 26% less than the market as a whole.

Coca-Cola Company (NYSE:KO) was projected to net $65.71 based on a median target price estimate from twenty-two analysts combined with projected annual dividend less broker fees. The Beta number showed this estimate subject to volatility 23% less than the market as a whole.

Nucor Corp. (NYSE:NUE) was projected to net $42.46 based on dividends plus a median target price estimate from seventeen analysts less broker fees. The Beta number showed this estimate subject to volatility 27% more than the market as a whole.

National Retail Properties was projected to net $40.69 based on dividends plus a median target price estimate from sixteen analysts less broker fees. The Beta number showed this estimate subject to volatility 65% less than the market as a whole.

AT&T Inc. was projected to net $39.28 based on dividends plus a median target price estimate from twenty-seven analysts less broker fees. The Beta number showed volatility 72% less than the market as a whole.

Questar Corp. (NYSE:STR) was projected to net $35.90 based a median target price estimate from six analysts combined with projected annual dividend less broker fees. The Beta number showed this estimate subject to volatility 50% less than the market as a whole.

MDU Resources was projected to net $27.75 based on a median target price estimate from five analysts combined with projected annual dividend less broker fees. The Beta number showed this estimate subject to volatility 4% less than the market as a whole.

Procter & Gamble Co. (NYSE:PG) was projected to net $27.26 based on dividends plus a median target price estimate from twenty-one analysts less broker fees. The Beta number showed this estimate subject to volatility 34% less than the market as a whole.

The average net gain in dividend and price was predicted to be 5.36% on $10k invested as $1k in each of these 31% less than the market as a whole.

Actionable Conclusion (10): (Bear Alerts) Analysts Augured Seven Champion Dogs To Show Net Losses Averaging 9.62% By 2017

Probable losing trades revealed by Thomson/First Call in Yahoo Finance in 2017 were:

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Vectren Corp. (NYSE:VVC) was projected to lose $49.07 based on dividend and a median target price estimate from four analysts including $20 of broker fees. The Beta number showed this estimate subject to volatility 16% less than the market as a whole.

United Bankshares Inc (NASDAQ:UBSI) was projected to lose $57.08 based on dividend and a median target price estimate from two analysts including $20 of broker fees. The Beta number showed this estimate subject to volatility 70% less than the market as a whole.

Eaton Vance Corp. (NYSE:EV) was projected to lose $89.10 based on dividend and a median target price estimate from ten analysts including $20 of broker fees. The Beta number showed this estimate subject to volatility 55% more than the market as a whole.

Consolidated Edison (NYSE:ED) was projected to lose $112.27 based on dividend and a median target price estimate from thirteen analysts including $20 of broker fees. The Beta number showed this estimate subject to volatility 2% opposite the market as a whole.

Northwest Natural Gas (NYSE:NWN) was projected to lose $117.09 based on dividend and a median target price estimate from two analysts including $20 of broker fees. The Beta number showed this estimate subject to volatility 68% less than the market as a whole.

Emerson Electric (NYSE:EMR) was projected to lose $117.98 based on dividend and a median target price estimate from twenty-two analysts including $20 of broker fees. The Beta number showed this estimate subject to volatility 5% more than the market as a whole.

Mercury General Corp. was projected to lose $130.48 based on dividend and a median target price estimate from two analysts including $20 of broker fees. The Beta number showed this estimate subject to volatility 45% less than the market as a whole.

The average net loss in price plus broker fees including annual dividends was predicted to be 9.62% on $7k invested as $1k in each of these seven dogs. This loss estimate was subject to average volatility 34% less than the market as a whole.

Dog Metrics Extracted Bargains

As noted above, ten Champion dividend dogs showing the biggest dividend yields as of March 22 represented five of nine business sectors: five financials; one technology; two basic materials; one services; one utility. Listed as of market close, March 22, Champion dividend dogs ranged in yield as follows:

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Actionable Conclusions: Analysts Assert (8) 5 Lowest Priced of Top Ten Highest Yield Champions Deliver 2.32% VS. (9) 0.32% Net Gains from All Ten As Of March 22, 2017

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$5000 invested as $1k in each of the five Lowest priced stocks in the top ten Champion kennel by yield promised 632.53% more net gain than $5,000 invested as $500 in each of all ten. The sixth highest priced Champion dog, National Retail Properties , was projected to deliver the best net gain of 4.07%.

Lowest priced five Champion dogs as of March 22 were: Bowl America Class A; Old Republic International (NYSE:ORI); MDU Resources ; HCP Inc.; AT&T Inc., whose prices ranged from $14.10 to $38.63.

The higher priced five Champion dogs as of February 25 were: National Retail Properties; Universal Health Realty Trust (NYSE:UHT); Mercury General Corp.; Helmerich & Payne Inc.; Chevron Corp. , whose prices ranged from $45.48 to $95.50.

This distinction between five low priced dividend dogs and the general field of ten reflects the "basic method" Michael B. Chignons employed for beating the Dow. It also works well for testing bargain Champion dogs, as you see.

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.

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

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.

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Stocks listed above were suggested only as possible starting points for your index dog dividend stock purchase or 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.

Graphs and charts were compiled by Rydlun & Co., LLC from data derived from www.indexarb.com; http://dripinvesting.org/Tools/Tools.asp; finance.yahoo.com; analyst mean target prices by Thomson/First Call in Yahoo Finance.

Disclosure: I am/we are long T, 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.