Contender Dividend Dogs March On
Yield (dividend/price) results from David Fish's Dividend Contenders Index members market closing prices of March 22 were paired with annual dividends projected by dripinvesting.org as of February 29. That data (charted below) showed three of nine business sectors represented by the with top yield ten Contenders, basic materials, services, and utilities. Those ten stocks posted yields from 8.5% to 28.51%.
Actionable conclusions by yield, target price upsides and net gains were drawn below as top Contender dog selections for March were uncovered, step by step.
Actionable Conclusion (1) 10 Dividend Contender Dogs Yield Averaged 14.47% 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 covered Bad Boy AllStars, and Sector Leaders.
Fifty Charge After The Money
This article was written to reveal bargain dividend 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 has expanded the stock universe to include popular growth equities, as desired.
Dog Metrics Set 50 Contender Stocks by Yield
David Fish's Contenders list (from here) as of March 22 paid increasing dividends for 10 to 24 years. Contender stocks listed below were rated by yield 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 above, just three of nine Yahoo Finance market sectors were represented on the top ten contenders dog list selected by yield, basic materials, and utilities.
Basic Materials captured all but the eighth and tenth slots: Alliance Holdings GP LP (NASDAQ:AHGP) ; Alliance Resource Partners LP (NASDAQ:ARLP) ; Energy Transfer Equity LP (NYSE:ETE) ; Williams Companies (NYSE:WMB) ; Genesis Energy LP (NYSE:GEL) ; Plains All American Pipeline LP (NYSE:PAA) ; DCP Midstream Partners LP (NYSE:DPM) ; ONEOK Partners LP (NYSE:OKS) .
Finally, two non-basic sector firms placed eighth and tenth. StoneMor Partners LP (NASDAQ:STON)  from services, and the lone utility, AmeriGas Partners LP (NYSE:APU)  completed the top ten contender dogs by yield for March.
Contenders Dividend vs. Price Results Matched With Dow Dogs
Periodic strength of ten top Contenders by yield, graphed below as of 3/22/2016 was compared to that 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.
Actionable Conclusions: (2) Contenders Charged Bullishly, As (3) Dow Dogs Also Charged Into March
Contender top ten dividend from $10k invested as $1k in each dog fell 13.5% as aggregate single share price inclined 27.5% after February. The Contenders shrank the distance to an overbought condition and moved the gap from 8.53 down to 5.46 times more than the aggregated single share price of those stocks between February 25 and March 22.
Dow dogs, also charged into March, as aggregate single share price for those ten jumped 16.6% between February 25 and March 2, while annual dividend from $10k invested as $1K in each of the top ten declined 6.7% according to IndexArb.
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) grew 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 Contender ten for the year has progressively retreated in a pattern where aggregate dividend value of $1k investments in each steadily rose above the aggregate single share price. March brought the two data points closer together. And, in great contrast to the Dow, Contender Dog top ten average price per dollar of annual dividend was $7.87 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 returned to a normal balance where dividends from 10 $1k investments could have again exceeded the aggregate single share price of those top ten stocks.]
If Dow prices can decline about 30-35% they would 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 the marketplace. Should Dow prices plunge, resulting dividends would become more valuable.
Actionable Conclusions: (5) Ten Contender Dogs Quested A 49.82% Average Upside, While (6) Two Tumbled To Average 9.56% Loss For March 2017
To quantify top dog rankings, analyst mean price target estimates provided a "market sentiment" gauge of upside potential. Added to the simple high yield "dog" metrics, analyst mean price target estimates were another tool used to dig out bargains.
Actionable Conclusions: Wall St. Analysts Cast (7) 16.98% Average Upside & (8) 24.08% Average Net Gain from Top 30 Dividend Contenders By March, 2017
Top thirty dogs from David Fish's Dividend Contenders list 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.
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.
Analyst data reported by Yahoo finance projected a 12.45% lower dividend from $30K invested as $1k in each stock in this group while aggregate single share price was projected to increase 7.2% 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 had a better history 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 Asserted Ten Dividend Contender Dogs Would Net 13.69% to 238.8% By Late-March 2017
Five of ten top dividend yielding Contender 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 50% accurate.
Ten probable profit generating trades were revealed by Thomson/First Call in Yahoo Finance into 2017:
Energy Transfer Equity LP was projected to net $2,388.08 based on dividends plus the lowest of annual price estimates from eight analysts less broker fees. The Beta number showed this estimate subject to volatility 108% more than the market as a whole.
Williams Companies was projected to net $826.85 based on dividends plus the lowest target price estimate from seven analysts less broker fees. The Beta number showed this estimate subject to volatility 55% more than the market as a whole.
Genesis Energy LP was projected to net $771.34 based on dividends plus the median of annual price estimates from twelve analysts less broker fees. The Beta number showed this estimate subject to volatility 6% less than the market as a whole.
Alliance Resource Partners was projected to net $642.65 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 29% less than the market as a whole.
StoneMor Partners LP was projected to net $394.65 based on dividends plus median target price estimate from four analysts less broker fees. The Beta number showed this estimate subject to volatility 34% less than the market as a whole.
Sunoco Logistics Partners LP (NYSE:SXL) was projected to net $303.15 based on dividends plus median target price estimate from fifteen analysts less broker fees. The Beta number showed this estimate subject to volatility 2% less than the market as a whole.
Enterprise Products Partners (NYSE:EPD) was projected to net $275.66 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 17% less than the market as a whole.
Urstadt Biddle Properties (NYSE:ENB) was projected to net $175.43 based on dividends plus the median of annual price estimates from three analysts less broker fees. The Beta number showed this estimate subject to volatility 59% less than the market as a whole.
Daktronics Inc. (NASDAQ:DAKT) was projected to net $168.37 based on dividends plus the median rates of three analysts less broker fees. The Beta number showed this estimate subject to volatility 18% more than the market as a whole.
Spectra Energy Partners LP (NYSE:SEP) was projected to net $136.88 based on dividends plus median target price estimate from fifteen analysts less broker fees. The Beta number showed this estimate subject to volatility 32% less than the market as a whole.
The average net gain in dividend and price was 60.83% on $10k invested as $1k in each of these ten dogs. This gain estimate was subject to average volatility equal to the market as a whole.
Actionable Conclusion (10): (Bear Alerts) Analysts Psyched Two Contender Dogs To Show Net Losses Averaging 9.56% By 2017
Probable losing trades revealed by Thomson/First Call in Yahoo Finance in 2017 were:
ONEOK Inc. (NYSE:OKE) was projected to lose $65.20 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 11% more than the market as a whole.
Murphy Oil Corp. (NYSE:MUR) was projected to lose $48.62 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 181% opposite the market as a whole.
The average net loss in price plus broker fees including annual dividends was predicted to be 5.69% on $2k invested as $1k in each of these two dogs. This loss estimate was subject to average volatility 35% opposite the market as a whole.
Dog Metrics Extracted Bargains
Yield (dividend / price) results from Yahoo.com and dripinvesting.org for Contender dividend stocks as of market closing prices March 22 did the ranking.
As noted above, just three of nine Yahoo Finance market sectors were represented in the top ten contenders dog list selected by yield below: basic materials, services, and utilities.
Actionable Conclusions: (11) 5 Lowest Priced of Top Ten Highest Yield Contender Dogs Promised 97.88% VS. (12) 54.91% Net Gains by All Ten by March 22, 2017
$5000 invested as $1k in each of the five Lowest priced stocks in the top ten contenders dividend kennel by yield were alleged by analyst 1 year targets to deliver 78.25% more net gain than the same amount invested in all ten. The very lowest priced contender dividend dog, Energy Transfer Equity LP, was projected to deliver the best net gain of 238.81%.
Lowest priced five contenders dogs for March 22 were: Energy Transfer Equity LP; Alliance Resource Partners LP; Alliance Holdings GP LP; Williams Companies ; Genesis Energy LP, with prices ranging from $7.67 to $21.95.
Higher priced five contenders dogs for March 22 were: Plains All American Pipeline LP ; StoneMor Partners LP; DCP Midstream Partners LP; ONEOK Partners LP; AmeriGas Partners LP, whose prices ranged from $24.11 to $43.30.
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.
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 a Contender dog stock investigation in late March, 2016. These were not recommendations.
See my instablog for specific instructions about how to best use the dividend dog data featured in this article.--Fredrik Arnold
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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The net gain 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.
Stocks listed above were suggested only as possible starting points for your index 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 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.