S&P Aristocrats Analysts Cite AbbVie As Lone March Stalwart Dog

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Includes: ABBV, ABT, ADM, CLX, CVX, DOV, ED, EMR, GPC, HCP, KO, MCD, NUE, PEP, PG, SYY, T, TGT, VFC, WMT, XOM
by: Fredrik Arnold

Summary

Among 10 Aristocrat leaders — NUE, PG, ADM, XOM, EMR, ED, ABBV, CVX, T, and HCP — yields ranged from 3.1% to 7.09% as of March 30.

52 S&P 500 Aristocrat dogs ranged in yield from 0.47% to 7.09%. Ten Aristocrat top dogs charged bullishly in the past month, as did the Dow dogs, to greet April.

Upsides averaged 5.6% and gains 6.6% for AFL, ADM, PEP, CVX, KO, APD, MCD, NUE, ABT, and ABBV. Losers off 19% were DOV, SYY, CLX, WMT, GPC, CINF, & ED.

Top 10 S&P Aristocrats by yield showed 193.88% less gain from $5K invested in the lowest-priced five than from $5K invested in all 10, per 1-year analyst targets.

Consider these stocks as reference points for an S&P 500 April Aristocrat investment investigation.

S&P Aristocrats In March

S&P 500 Aristocrats prices were surveyed as of market close March 30. Yield (dividend / price) results from yahoo.com/finance for 30 top yielding S&P 500 Aristocrats were stacked against analyst 1-yr target projections and produced the actionable conclusions detailed below.

Actionable Conclusion (1) 52 S&P 500 Aristocrats Dogs Promised 0.47% to 7.09% Yields

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-Two Ready And Set

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 Ranked 52 S&P Aristocrats by Yield

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McGraw Hill, publisher of this index, states:

The S&P 500® Dividend Aristocrats index measures the performance of large cap, blue chip companies within the S&P 500 that have followed a policy of increasing dividends every year for at least 25 consecutive years.

Ten leading Aristocrats by yield for March included firms representing seven of nine business sectors: financial; technology; basic materials; healthcare; utilities; industrial goods; consumer goods. Unrepresented at the top were services and conglomerates.

A lone financial firm led the ten, HCP, Inc. (NYSE:HCP) [1]. The lone technology dog placed second, AT&T (NYSE:T) [2].

Basic materials representatives placed third, seventh, and tenth: Chevron Corp. (NYSE:CVX) [3], Nucor Corp (NYSE:NUE) [7], and Exxon Mobil Corp. (NYSE:XOM) [10].

The lone healthcare representative placed fourth, AbbVie Inc. (NYSE:ABBV) [4]. A single utility was fifth, Consolidated Edison Inc. (NYSE:ED) [5]. A single industrial goods firm placed sixth, Emerson Electric Co (NYSE:EMR) [6].

Two consumer goods representatives took the remaining bottom slots, eighth was Archer-Daniels-Midland Co (NYSE:ADM) [8]. Finally, in ninth, Procter & Gamble (NYSE:PG) [9], completed this March top ten S&P 500 Aristocrats dog list by yield.

Dividend vs. Price Results Beside Dow Dogs

Strengths of ten top Aristocrat dogs by yield were graphed below over a year of market closing prices up to 3/30/2016. These were stood up against 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 of those ten stocks created the data points shown in green for price and blue for dividend.

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Actionable Conclusions: (2) S&P Aristocrats Charged Bullishly As (3) Dow Dogs Did Too Through March

S&P Aristocrat dividend (from $10k invested as $1k in each of the top ten) fell 5.27% after February. Aggregate single share price of those ten however rose 5.5%, producing the charging bull event. Note how, gradually over the nine months to January, the aristocrats top ten moved to close the overbought gap of price over dividend. That trend has now reversed.

While the overbought condition mostly shrank over the year for Aristocrats, the Dow held a steady gap. Since January, however, Dow dogs charged too with aggregate single share price for the ten rising 6.8% between March 2 and 30. Meanwhile, annual dividend from $10k invested as $1K in each of the top ten fell 5,6% according to IndexArb.

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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) increased. The price rise and dividend fall for the top ten in March was entirely due to market price action.

Actionable Conclusion (4): Dow Dogs Continue Overbought; (5) Aristocrats (Also Overbought) Shy From Confluence

The Dow dog overbought overhang was $270 or 81% for a record in April; then broke the new annual record again in May at $421 or 117%.

June saw the gap narrow to $286 or 77%. Then the August market set a new gap high at $328 but merely 84%. A September retreat narrowed the chasm to $261 or 62%.

October action, however, put the gap at $299, or 77%. December brought a reduction to $266, or 68%. January went slightly wider at $295, or 72%. February widened the gap to $327 or 81%. March showed $399 or 104% to approach the May 2015 record.

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 $26.30.

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Compared to the DOW, the Aristocrat ten, while volatile and also overbought, are closer to a "normal" dividend over price pattern. The Dow looks set to widen the gap, while the Aristocrats look more likely to reach parity of price to dividends from $1k invested before 2017. In marked similarity to the Dow, Aristocrat Dog top ten average price per dollar of annual dividend was $25.70 as of March 30, just pennies away from the price of Dow dividends.

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Actionable Conclusions: (6) 10 Leading Aristocrat Dogs Showed 5.61% Average Upsides Through March, 2017; (7) 7 Were 8.1% Downcast On Average

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The number of analysts providing price estimates was noted after the name for each stock. Three to nine analysts have proven most accurate in target price estimating.

Actionable Conclusions : Wall St. Wizards Projected (8) A negative 0.9% Average 1 yr. Upside & (9) A 1.28% Average Net Gain for Top 30 S&P Aristocrats Dogs by March 30, 2017

Top 30 dogs on the S&P Aristocrats index stock list graphed below show relative strengths by dividend and price as of March 30, 2016 and those projected by analyst mean 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 projected annual dividend amounts to find the dividend return. Thereafter the analyst mean target price was used to gauge each stock's upside to 2017.

Historic prices and actual dividends paid from $1000 invested in each of the 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 2017 data points on the chart below: green for price and blue for dividend.

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Yahoo reported analyst survey numbers that predicted a 1.6% higher dividend from $10K invested as $1k in the average ten of this group, while aggregate single share price of those ten was predicted to decrease 1.1% in the coming year.

Notice that price still exceeded dividend signaling an S&P Aristocrats index remaining overbought into 2017 per analyst predictions. The number of analysts contributing to the mean target price estimate for each stock was noted in the next to the last column of the chart. Three to nine analysts have historically provided more accurate estimates.

A beta (risk) ranking for each 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. Negative beta numbers indicated the degree of a stocks movement opposed to market direction.

Actionable Conclusion (10): Analysts Asserted 10 Aristocrat Dogs Would Net 2.9% to 28.3% Gains By March 30, 2017

Four of the top yielding dividend S&P 500 Aristocrat dogs were verified as being among the top ten gainers for the coming year per analyst 1 year target prices. So this period the dog strategy as graded by Wall St. wizards was 40% accurate.

Ten probable profit generating trades reported by Yahoo Finance into 2017 were:

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AbbVie Inc. was projected to net $283.16 based on dividends plus a median target price estimate from seventeen analysts less broker fees. The Beta number showed this estimate subject to volatility 60% greater than the market as a whole.

Abbott Laboratories (NYSE:ABT) was projected to net $85.40 based on target price estimates from fifteen analysts plus dividends less broker fees. The Beta number showed this estimate subject to volatility 50% more than the market as a whole.

VF Corp (NYSE:VFC) was projected to net $44.99 based on target price estimates from twenty-six analysts plus dividends less broker fees. The Beta number showed this estimate subject to volatility 30% more than the market as a whole.

McDonald's Corp (NYSE:MCD) was projected to net $41.43 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 42% less than the market as a whole.

Coca-Cola Co (NYSE:KO) was projected to net $40.54 based on target price estimates from twenty-two analysts plus dividends less broker fees. The Beta number showed this estimate subject to volatility 24% less than the market as a whole.

Archer-Daniels-Midland Co was projected to net $36.80 based on a median target price estimate from ten analysts combined with projected annual dividend less broker fees. The Beta number showed this estimate subject to volatility 23% more than the market as a whole.

Target Corp (NYSE:TGT) was projected to net $35.50 based on dividends plus a median target price estimate from twenty analysts less broker fees. The Beta number showed this estimate subject to volatility 42% less than the market as a whole.

Procter & Gamble was projected to net $34.09 based on dividends plus a median target price estimate from twenty analysts less broker fees. The Beta number showed this estimate subject to volatility 34% less than the market as a whole.

Chevron Corporation was projected to net $32.81 based on dividends plus a median target price estimate from twenty-two analysts less broker fees. The Beta number showed this estimate subject to volatility 17% more than the market as a whole.

PepsiCo Inc. (NYSE:PEP) was projected to net $29.86 based on dividend plus median target price estimates from twenty-two analysts less broker fees. The Beta number showed this estimate subject to volatility 30% less than the market as a whole.

The average net gain in dividend and price was 6.65% on $10k invested as $1k in each of these ten dogs. This gain estimate was subject to average volatility 1% more than the market as a whole.

Actionable Conclusion (11): (Bear Alert) Analysts Predicted Seven Aristocrat Dogs Would Average A Net Loss of 7.25% By April 2017

Seven probable losing trades revealed by Yahoo Finance in 2017 were:

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Dover Corp (NYSE:DOV) was projected to lose $30.10 based on dividend and a median target price estimate from seventeen analysts including $20 of broker fees (covered by the dividend). The Beta number showed this estimate subject to volatility 25% more than the market as a whole.

Sysco Corp (NYSE:SYY) was projected to lose $49.81 based on dividend and a median target price estimate from four analysts including $20 of broker fees (covered by the dividend). The Beta number showed this estimate subject to volatility equal to the market as a whole.

Clorox Co (NYSE:CLX) was projected to lose $54.30 based on dividend and a median target price estimate from twelve analysts including $20 of broker fees (which the dividend more than covered). The Beta number showed this estimate subject to volatility 60% less than the market as a whole.

Wal-Mart Stores (NYSE:WMT) was projected to lose $60.70 based on dividend and a median target price estimate from twenty-five analysts including $20 of broker fees (covered by the dividend). The Beta number showed this estimate subject to volatility 81% less than the market as a whole.

Genuine Parts Co (NYSE:GPC) was projected to lose $85.48 based on dividend and a median target price estimate from seven analysts including $20 of broker fees (covered by the dividend). The Beta number showed this estimate subject to volatility 4% more than the market as a whole.

Emerson Electric Co was projected to lose $105.41 based on dividend and a median target price estimate from twenty-one analysts including $20 of broker fees. The Beta number showed this estimate subject to volatility 5% more than the market as a whole.

Consolidated Edison was projected to lose $121.99 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.

The average net loss in dividend and price with broker fees included was 7.25% on $7k invested as $1k in each of these seven dogs. The beta number showed this estimate subject to volatility 30% less than the market as a whole.

Dog Metrics Extracted Losses From Five Lowest Priced Aristocrats

Yield (dividend / price) results from Yahoo.com for S&P 500 Aristocrat index March 30 did the ranking.

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Actionable Conclusions: (1) 5 Lowest Priced of Top Ten Highest Yield Aristocrats Promised Negative 1.38% VS. (2) Positive 1.47% Net Gains by All Ten by March 30, 2017

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$5000 invested as $1k in each of the five Lowest priced stocks in the top ten Aristocrat dividend kennel by yield were alleged by analyst 1 year targets to deliver 193.88% LESS net gain than the same amount invested in all ten. The sixth lowest priced Aristocrat dividend dog, AbbVie Inc. , was projected to deliver the best net gain of 28.32%.

Lowest priced five Aristocrat dogs for March 30 were: HCP Inc.; Archer-Daniels-Midland Co; AT&T Inc.; Nucor Corp; Emerson Electric Co, with prices ranging from $32.44 to $54.56.

Higher priced five Aristocrat dogs for March 30 were: AbbVie Inc.; Consolidated Edison, Inc.; Procter & Gamble; Exxon Mobil Corp; Chevron Corporation, whose prices ranged from $57.00 to $95.25.

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 an S&P 500 Dividend April, 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.

Graphs and charts were compiled by Rydlun & Co., LLC from data derived from dividend.com and Yahoo Finance, Analyst mean target prices by Thomson/First Call via Yahoo Finance.

Disclosure: I am/we are long CSCO, INTC, PFE, VZ, T.

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.