Sector Leader Dogs Priced Over $10 Led By Calumet In April

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Includes: AHGP, ARLP, ARR, ASEI, CLMT, CTL, GLP, GM, GSK, MITT, NMFC, NRZ, OKE, PEGI, RRMS, RSO, SFL, SPH, STX, VGR
by: Fredrik Arnold

Summary

36 leading stocks from 9 business sectors with prices over $10 ranged in yield from 4.9% to 24.71% as of April 14.

9 sector leaders by yield showed annual yields averaging 12.19%. They were VGR, GSK, ASEI, STX, NMFC, SPH, GLP, RZ, and CLMT. Sector Leaders charged into Spring. Dow dogs did too.

Analyst one-year targets revealed 10 top business sector leading stocks with price upsides averaging 32.16% & net gains averaging 44.03%. Three showed downsides and losses.

Targets also revealed 30 sector leaders showing upsides averaging 10.34% and net gains averaging 20.10%. Gain leaders were GM, RSO, MITT, PEGI, STX, SFL, NRZ, GLP, ARLP, and CLMT.

10 Sector leading dividend dogs saw 54.10% more gains from 5 lowest priced. Also 10 top yield dividend dogs dug 38.57% more gain from five lowest priced as of April.

Finding Sector Leaders

Documented business sectors were basic materials, conglomerates, consumer goods, financial, healthcare, industrial goods, services, technology, and utilities. Yield (dividend/price) results from here verified by Yahoo Finance for sector leading stocks as of market closing prices April 14 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, NASDAQ 100, Champions, Contenders, Challengers, CCC Combined, and Global. Bonus reports cover Bad Boy AllStars, and Sector Leaders.

36 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's book "Beating The Dow" (HarperCollins, 1991), now named Dogs of the Dow. O'Higgins's 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 36 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.

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Nine equities showing top yields, represented the best in each of the nine Yahoo market sectors: basic materials, financials, services, utilities, conglomerates technology, healthcare, consumer goods, and industrial goods.

Top dog, Calumet Specialty Products L.P. (NASDAQ:CLMT) [1] represented basic materials. Eight remaining sector leaders were New Residential Investment Corp (NYSE:NRZ), [2] financials; Global Partners L.P. (NYSE:GLP), [3] services; Suburban Propane L.P. (NYSE:SPH), [4] utilities; New Mountain Finance Corp. (NYSE:NMFC), [5] conglomerates; Seagate Technology (NASDAQ:STX), [6] technology; GlaxoSmithKline PLC (NYSE:GSK), [7] healthcare; Vector Group (NYSE:VGR), [8] consumer goods; American Science & Engineering Inc. (NASDAQ:ASEI), [9], industrial goods to comprise the April 14 sector leader top dog team.

Sector Leader Dividend vs. Price Results Matched With Dow Dogs

Periodic strength of nine top business sector dogs by yield was graphed below as of market closing prices through 4/14/2016 and stacked against the 10 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.

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Actionable Conclusions: (1) Sector Leaders Charged, As (2) Dow Dogs Did Likewise

Nine sector leader dogs dropped in dividend as price increased after the previous February report. Eight of the nine sectors changed leaders in the two months past. Aggregate single share price of the nine increased nearly 10% while total dividend from $10k invested as $1.11k in each of those nine declined 18% for the period to signal the bullish charge.

Dow dogs charged too as price soared while dividend dropped. Aggregate single share price for the 10 jumped up 13.5% between February 5 and April 14, while annual dividend from $10k invested as $1K in each of the top 10 Dow dogs tumbled almost 7% 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 10) expanded to surpass its high November gap.

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Actionable Conclusion (3): Dow Dogs Persist Being Overbought

Historically, the overhang of price over dividend was a new 2014-15 record of $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%. April has sprung to widen the gap back to $368 or 96%.

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. The Dow top 10 average price per dollar of annual dividend was $26.12.

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Conversely, the Sector leader chart shows that list to be composed of volatile, high risk but high profit potential pups. In marked contrast to the Dow, Sector top nine average price per dollar of annual dividend was $9.38 as of April 14.

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Actionable Conclusion (4): 10 Sector Leader Dividend Dogs Seek 35.85% to 335.64% Price Upsides (5) 3 Found 8% to 14.9% Downsides

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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 10.34% and (7) net gains averaging 20.1% from 30 Top Yielding Sector Leaders by April 2017

Top 30 dogs on the sector leader stock list were graphed below as of April 14, 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.

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Analysts polled by Thomson/First Call and reported by Yahoo Finance projected a 10% lower dividend from $30K invested as $1k in each stock in this group while aggregate single share price was projected to increase almost 7% 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 one meant the stock's price would move with the market. Less than one showed lower than market movement. Higher than one 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 Advised Net Gains Of 26.65% to 98.5% for 10 Top Sector Dogs by April 2017

Seven of the 10 top dividend yielding sector leader dogs were verified as being among the 10 gainers out of 30 for the coming year based on analyst one-year target prices. So this time, the dog strategy for this collection as graded by Wall St. wizards was 70% accurate.

10 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 10 by upside and net gain. Basic materials had two, financials placed three, services contributed two, technology, utilities and consumer goods each had one representative on this top 10 list. However, conglomerates, industrial goods, and health placed no representatives in the net gain and upside top 10.

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Calumet Specialty Products L.P., the first representative from basic materials, was projected to net $985.41 based on the median target estimate from 10 analysts plus dividends less broker fees. The Beta number showed this estimate subject to volatility 10% more than the market as a whole.

Alliance Resource Partners L.P. (NASDAQ:ARLP), the second basic materials representative, was projected to net $578.46 based on dividends plus the median target price estimate from three analysts less broker fees. The Beta number showed this estimate subject to volatility 17% less than the market as a whole.

Global Partners L.P., the first of two representatives from the services sector, was projected to net $495.27 based on a mean target price estimate from four analysts combined with projected annual dividend less broker fees. The Beta number showed this estimate subject to volatility 14% less than the market as a whole.

New Residential Investment Corp., the first of three financial representatives, was projected to net $402.30 based on the median estimate from 11 analysts plus dividends less broker fees. The Beta number showed this estimate subject to volatility 26% less than the market as a whole.

Ship Finance International (NYSE:SFL), the second services representative, was projected to net $385.25 based on the median target price estimate from five analysts combined with projected annual dividend less broker fees. The Beta number showed this estimate subject to volatility 36% more than the market as a whole.

Seagate Technology, the lone technology representative in the top gainers was predicted to net $363.99 based on dividends plus a mean target price estimate from 24 analysts less broker fees. The Beta number showed this estimate subject to volatility 22% more than the market as a whole.

Pattern Energy Group (NASDAQ:PEGI), the lone utility, was projected to net $340.70 based on a mean target price estimate from 13 analysts combined with projected annual dividend less broker fees. The Beta number showed this estimate subject to volatility 22% more than the market as a whole.

AG Mortgage Investment Trust, Inc. (NYSE:MITT), the second financial representative, was projected to net $302.108, based on dividend plus median target price estimates from six analysts less broker fees. The Beta number showed this estimate subject to volatility 10% less than the market as a whole.

Resource Capital (NYSE:RSO), the third financial representative, was projected to net $283.00 based on estimates from four analysts plus dividends less broker fees. The Beta number showed this estimate subject to volatility 35% more than the market as a whole.

General Motors Company (NYSE:GM), the lone consumer goods maker on the sector leader top gains list, was projected to net $266.46 based on dividends plus a mean target price estimate from 17 analysts less broker fees. The Beta number showed this estimate subject to volatility 64% more than the market as a whole.

The average net gain projected was 44.03% on $10k invested as $1k in each of these 10 Sector Leader dogs. The average beta showed these estimates subject to volatility 16% more than the market as a whole.

Actionable Conclusion (9): (Bear Alerts) Analysts Projected Three Sector Leaders To Show Net Losses Averaging 3.3% By 2017

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

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American Science & Engineering Inc. was projected to lose $32.47 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 61% more than the market as a whole.

CenturyLink Inc. (NYSE:CTL) was projected to lose $48.98 based on dividend and a median target price estimate from 15 analysts including $20 of broker fees. The Beta number showed this estimate subject to volatility 1% less than the market as a whole.

ONEOK Inc. (NYSE:OKE) was projected to lose $91.54 based on dividend and a median target price estimate from 14 analysts including $20 of broker fees. The Beta number showed this estimate subject to volatility 38% more than the market as a whole.

The average net loss in price plus broker fees including annual dividends was predicted to be 3.25% on $3k invested as $1k in each of these three dogs. This loss estimate was subject to average volatility 61% more than the market as a whole.

Dog Measures Extracted More Bargains From Five Lowest Priced In The Top 10 Sector Leaders + 1 Runner-up

10 sector topping dividend stocks by yield April 14 per Yahoo Finance data represented all nine sectors plus the top runner-up: basic materials (2), financials (1), services (1), utilities (1), conglomerates (1), technology (1), health (1), consumer goods (1), and industrial goods (1). They ranked themselves by yield as follows:

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Actionable Conclusions: Analysts See 5 Lowest Priced of Top 10 Sector Leader Dogs Deliver (10) 45.24% Vs. (11) 29.36% Net Gains from All 10 by April 14, 2017

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$5k invested as $1k in each of the five lowest priced stocks in the top Sector Leaders kennel were asserted by analyst one-year targets to deliver 54.1% more net gain than $5k invested as $500 in each of all 10. The very lowest priced sector leading high yield dog, Calumet Specialty Products L.P., was projected to deliver the best net gain of 98.54%.

Five lowest priced Sector Leaders April 14 were Calumet Specialty Products L.P., New Residential Investment Corp., New Mountain Finance Corp., Global Partners L.P., and Alliance Holdings Group (NASDAQ:AHGP), with prices ranging from $11.09 to $15.94.

Higher priced five sector leading high yield dogs for April 14 were Vector Group, Seagate Technology, American Science & Engineering Inc., Suburban Propane L.P. (SPH), and GlaxoSmithKline PLC, whose prices ranged from $21.42 to $46.01.

Dog Methods Extracted Bargains From Five Lowest Priced In The Top 10 Sector Representatives by Yield, Too

10 sector topping dividend stocks by yield April 14 per Yahoo Finance data represented three sectors: basic materials (4), financials (4), services (2), utilities (0), conglomerates (0), industrial goods (0), technology (0), consumer goods (0), and health (0). They ranked themselves by yield as follows:

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Actionable Conclusions: Analysts See 5 Lowest Priced of Top 10 Highest Yield Sector Leader Dogs (12) Deliver 54.89% Vs. (13) 39.61% Net Gains from All 10 by April 14, 2017

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$5000 invested as $1k in each of the five lowest priced stocks in the top 10 highest yield Sector Leaders kennel was alleged by analyst one-year targets to deliver 38.57% more net gain than $5k invested as $500 in each of all 10. The very lowest priced Sector Leader high yield dog, Calumet Specialty Products L.P., was projected to deliver the best net gain of 98.54%.

Lowest priced five sector high yield dogs as of April 14 were Calumet Specialty Products L.P., Resource Capital, New Residential Investment Corp., Alliance Resource Partners L.P., and Global Partners L.P., with prices ranging from $11.09 to $13.10.

Higher priced five sector high yield dogs for April 14 were AG Mortgage Investment Trust, Inc., Ship Finance International, Rose Rock Midstream L.P. (NYSE:RRMS), Alliance Holdings Group, and ARMOUR Residential REIT Inc. (NYSE:ARR), whose prices ranged from $13.35 to $21.66.

This distinction between five low priced dividend dogs and the general field of 10 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. It's 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 mid-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.

Three of these sector leading dividend pups can be found on the now 34 Dogs of the Week listed in The Dividend Dog Catcher premium site. Click here to subscribe.

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

Disclosure: I am/we are long ARR, CSCO, PFE, VZ, GE.

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.