Are These Industry Yield Leaders Really Bad?
These were not the worst of the worst. These were "Bad-As" stocks with high yields. The list of fifty bad dogs below was created by screening for industries populated by public companies that have allegedly committed acts, made substances, by-products, or devices that maim, kill, tempt, harm, addict, insult, and/or scam the public. These included corporate members of all nine business sectors: basic materials, consumer goods, financial, technology, conglomerates, health, services, utilities & industrial goods. Sorting and refining top stocks in each industry of interest by yield narrowed the field (by yield) to fifty from over 1000 candidates. They may be bad but they all pay strong dividends! Furthermore, late 2015 market price declines pushed those estimated annual dividends very high, reaching a peak as the first quarter of 2016 got going.
Fifty For the Money
Yield (dividend / price) results from here verified by Yahoo Finance for super-sinner "Bad Boy All-Star" ("Bad-As") stocks as of market closing prices 4/18/16 revealed the actionable conclusions discussed below. See Dow 30 article for an 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 expanded the stock universe to include popular growth equities, as desired.
Dog Metrics Arranged "Bad-As" Stocks by Yield
Fifty companies listed above were sorted by yield as of April 18 to reveal the top ten. Ten "bad-as" dogs that showed the biggest dividend yields included firms from just three of nine market sectors listed here:
Utilities ("Utes") meant regulated monopolies that regularly provide consumers blackouts, brown-outs, traffic delays, air pollution, toxic emissions, and insipid feel-good inflated billing notices.
Basic Materials ("BasMat") included all the exploitive mining companies, toxic, corrosive and genetically manipulative chemical firms, and explosives manufacturers, to name a few.
Financials ("Fins") included money manipulating, merger and acquisition managing, crisis creating, scamming and ill gotten gain laundering institutions and more.
Actionable Conclusions: (1): Top Green Utility Energy dog, GLBL, Led By Yield
Utility firms took first and tenth places, in April leaving middle ground for the basic material and financial sector representatives. TerraForm Global, Inc. (NASDAQ:GLBL)  was top dog while, Suburban Propane Partners, L.P. (NYSE:SPH)  was at the tail.
In between were six basic materials firms in second through seventh places and two financials, eighth, and ninth. The basic materials firms were: Midcoast Energy Partners LP (NYSE:MEP) ; American Midstream Partners, LP (NYSE:AMID) ; Alliance Holdings Group, L.P. (NASDAQ:AHGP) ; Rose Rock Midstream, L.P. (NYSE:RRMS) ; Tronox Limited (NYSE:TROX) ; CVR Partners, LP (NYSE:UAN) .
Finally, the balance of the top ten saw two financial firms: Prospect Capital Corporation (NASDAQ:PSEC) , and Medallion Financial Corp. (TAXI) , to complete the representation of market sectors in the bad boy all star April "Bad As" top ten by yield.
Not represented in the top ten "bad-as" dog list were six remaining sectors (in alphabetical order):
Conglomerates ("Gloms") were firms so diverse that there was no end to the mayhem and madness they could inflict.
Consumer goods ("ConGo") firms made all the processed foods, liquids, vehicles, devices and substances that made us fat, sick, addicted, hyper, stupid, mad, terminal, and dead.
Healthcare ("Heal") covered firms responsible for devising and preparing the prescription liquids, powders, gases, devices, and substances that make us fat, sick, addicted, hyper, stupid, mad, enraged, and terminal; all in the name of healing.
Industrial goods ("IndiGo"), included arms dealers, military contractors, equipment, hardware, nuts, bolts, and other factory produced items of mass destruction, mayhem, chaos, and confusion.
Services ("Svcs") covered all the delivery modes for those exploding, toxic, addictive, fattening, caustic, and insulting goods produced by the other sectors.
Technology (Tec) included wireless, cable, phone, and net service providers, addictive electronic gizmo creators and the like who enable the subversives to subliminally sway us and, as a further insult, provide abominable customer service.
Dividend vs. Price Results Compared to Dow Dogs
Periodic strength of ten top "bad-as" dogs by yield was graphed below as of market closing prices through 4/18/2016 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.
Actionable Conclusions: (2) "Bad-As" Dogs And (3) Dow Dogs Charged Bullishly After Winter
"Bad-As" top ten dividend payers plunged in dividend while their aggregate single share price increased after February. Annual dividend from $10k invested as $1k in each stock fell 26% while aggregate single share price of the ten rose 29.7%. The result was described as bullish as yields fell as price soared.
Dow dogs charged too as projected annual dividend from $10k invested as $1K in each of the top ten dropped 9.4% into April. At the same time, aggregate single share price rose at a 5.9% rate to confirm the bullish move for Dow dogs.
Actionable Conclusion (3): Dow Dogs Are Overbought And Remain There
The Dow dogs overbought condition (in which aggregate single share price of the ten exceeded projected annual dividend) recorded a record gap of $421, or 117% last May.
June shrank the gap down to $392 or 106%. Come July the gap narrowed to $237 or 63%. However IBM's high price and dividend pushed the gap to $343 or 89% for August.
Prices were down overall entering September as dividends increased to shrink the gap to $273 or 67%. October saw prices rise and dividend fall to move the price over dividend chasm to $305 or 76%. November commenced with the gap at $297 or 77%. December finished 2015 with a spread of $269 or 69%.
The first reading for 2016 showed the spread at $293 or 71% as of February 1. As of April 18 the chasm of $374 or 100% was again approaching last May's record.
This gap between high share price and low dividend per $1k invested showed an overbought condition. Meaning, no matter which chart you read, these are low risk and low opportunity Dow dogs. The Dow top ten average price per dollar of annual dividend was $26.18.
Conversely, the "Bad-As" chart shows those dogs to be made of volatile, high risk, and potentially highly profitable playful pups. Still, in marked contrast to the Dow, the "Bad As" Dog top ten average price per dollar of annual dividend was $5.75 as of April 18.
Actionable Conclusion (4) Ten "Bad-As" Dogs Averaged 17.85% April Upsides While (5) Two Averaged Near 20% Downsides
The charts above used one year mean target prices set by brokerage analysts matched against April 18 closing prices to compare ten "bad-as" stocks showing the highest upside price potential into 2016 out of 30 selected. The number of analysts providing price estimates was noted after the name for each stock. Three to nine analysts were considered optimal for a valid mean target price estimate.
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.
Actionable Conclusions: Wall St. Wizards Wanted A (6) 3.98% Average Upside and (7) 15.55% Net Gain for 30 "Bad-As" Dogs As Of April 18, 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 "bad as" 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.
Analysts quoted by Yahoo forecast a 2.9% lower dividend from $30K invested as $1k in each stock in this group while aggregate single share price was projected to increase 3.5% 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 were considered more accurate for valid mean target price 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): Analysts Allege "Bad-As" Top Ten Dogs Could Net 14.12% to 64.94% By April 2017
Six of the ten top dividend yielding "Bad Boy All-Star" dogs were verified as being among the ten net gainers for the coming year based on analyst 1 year target prices. So this period the dividend dog strategy as graded by Wall St. wizards was 60% accurate for the "bad-as" top ten.
Ten probable profit generating trades revealed by Yahoo Finance for 2017 were:
TerraForm Global, Inc. was projected to net $649.35 on dividends plus a median target price estimate from six analysts less broker fees. The Beta number showed this estimate subject to volatility 22% more than the market as a whole.
JMP Group LLC (NYSE:JMP) was projected to net $511.67 based on a median target price estimate from two 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.
Medallion Financial Corp (TAXI) was projected to net $401.05 based on dividends plus the lowest target price estimate from two analysts less broker fees. The Beta number showed this estimate subject to volatility 52% more than the market as a whole.
Vector Group (NYSE:VGR) was projected to net $310.23 based on dividends plus a median target price estimate from one analyst less broker fees. The Beta number showed this estimate subject to volatility 56% less than the market as a whole.
Midcoast Energy Partners was projected to net $267.09 based on dividends plus the lowest target price estimate from six analysts less broker fees. A Beta number was not available for MEP.
Tronox Limited (TROX) was projected to net $252.46 based on the median target price estimate from four analysts combined with projected annual dividend less broker fees. The Beta number showed this estimate subject to volatility 214% more than the market as a whole.
Rose Rock Midstream was projected to net $232.84 based on the median target price estimate from nine analysts combined with projected annual dividend less broker fees. The Beta number showed this estimate subject to volatility 159% more than the market as a whole.
Alliance Holdings Group, L.P. (AHGP) was projected to net $217.62 based on a mean target price estimate from two analysts combined with projected annual dividend less broker fees. The Beta number showed this estimate subject to volatility 34% less than the market as a whole.
Kronos Worldwide Inc (NYSE:KRO) was projected to net $147.43 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 118% more than the market as a whole.
Student Transportation Inc (NASDAQ:STB) was projected to net $141.22 based on the median target price estimate from three analysts combined with projected annual dividend less broker fees. The Beta number showed this estimate subject to volatility 13% less than the market as a whole.
The average net gain in dividend and price was calculated to be 3.13% on $10k invested as $1k in each of these ten dogs. This gain estimate was subject to average volatility 20% more than the market as a whole.
Actionable Conclusion (9): (Bear Alerts) Analysts Projected Two "Bad As" Dogs To Show Net Losses Averaging 13.75% By 2017
Probable losing trades revealed by Thomson/First Call in Yahoo Finance in 2017 were:
Bon-Ton Stores Inc. (NASDAQ:BONT) was projected to lose $129.59 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 220% more than the market as a whole.
Windstream Holdings, Inc. (NASDAQ:WIN) was projected to lose $145.43 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 23% opposite the market as a whole.
The average net loss in price plus broker fees including annual dividends was predicted to be 13.75% on $2k invested as $1k in each of these two dogs. This loss estimate was subject to average volatility 49% more than the market as a whole.
Dog Metrics Extract Best Bargains
As you now know, ten "Bad Boy All-Star" dogs showing the biggest dividend yields as of April 18 represented just three of nine market sectors: Utilities (1), basic materials (6), and financial (2). Listed as of market close, April 18, the "Bad Boy All-Star" dividend dogs arranged themselves by yield as follows:
Actionable Conclusions: Analysts Augur (9) 5 Lowest Priced of Top Ten Highest Bad Boys Deliver 27.91% VS. (10) 24.89% Net Gains from All Ten As Of April 18, 2017
$5K invested as $1k in each of the five Lowest priced stocks in the top ten "Bad Boy All-Star" kennel by yield was subject to 12.11% more net gain than $5K invested as $500 in each of all ten. The lowest priced "Bad Boy All-Star" dog, TerraForm Global, Inc., was projected to deliver the greatest net gain of 64.94%.
Lowest priced five "Bad Boy All-Star" dogs as of April 18 were: TerraForm Global, Inc.; Midcoast Energy Partners, L.P.; Tronox Limited; American Midstream Partners, LP; CVR Partners, LP, whose prices ranged from $2.48 to $7.42.
The higher priced five "Bad Boy All-Star" dogs as of April 18 were: Prospect Capital Corporation ; Medallion Financial Corp.; Rose Rock Midstream, L.P.; Alliance Holdings GP, L.P.; Cornerstone Progressive Return Fund (NYSEMKT:CFP), whose prices ranged from $7.76 to $29.92.
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. It also works well for teasing bargains out of this list of top yielding "Bad Boy All-Star" 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.
Author's note: See my instablog for specific instructions about how to best apply the dividend dog data featured in this article.
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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Sources: Graphs and charts were compiled by Rydlun & Co., LLC from data derived from dividend.com; Yahoo Finance; analyst mean target price by Thomson/First Call via Yahoo Finance.
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, INTC, 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.