S&P 500 Dogs Show 10 Up And 6 Down, Still Big Gains Possible For April

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Includes: CTL, ESV, F, FTR, GM, GME, HCP, HP, IRM, KSS, MUR, NAVI, OKE, PBCT, SE, STX, WMB
by: Fredrik Arnold

Summary

S&P 500 index annual yield estimates for top ten (NAVI, SE, IRM, ESV, HCP, CTL, FTR, OKE, STX, WMB) ranged from 5.04% to 14.59% as of April 15 close.

Yields of 50 top S&P 500 stocks ranged from 3.51%. Top ten S&P dividend dogs mixed down as Dow dogs did likewise for April.

Upsides averaged 17.17% with net gains 27.4% for KSS, GME, SE, FTR, F, IRM, GM, NAVI, WMB, and STX. Downsides by HP, CTL, PBCT, HCP, OKE and MUR, averaged 12.28%.

Ten top S&P 500 stocks by yield showed 73.83% more gain from $5k invested in the lowest priced five than from $5k invested in all ten per analyst 1-year targets.

Consider these stocks reference points for your late-April 2016 S&P 500 dividend investment investigations.

April S&P 500 Dogs

S&P 500 Index prices were tallied as of market close April 15. Yield (dividend/price) results from yahoo.com/finance for 30 top yielding S&P 500 stocks stacked against analyst 1-year targets led to the actionable conclusions elaborated below.

Actionable Conclusion (1) 50 S&P 500 Dogs Showed 3.51% to 14.59% 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; NASDAQ 100; Champions; Contenders; Challengers; CCC Combined; and Global. Bonus reports cover Bad Boy AllStars, and Sector Leaders.

50 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 Set S&P 500 Stocks by Yield

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McGraw Hill Finance, publisher of the Dow Jones S&P 500 Index states:

The S&P 500® is widely regarded as the best single gauge of large cap U.S. equities. There is over USD 5.58 trillion benchmarked to the index, with index assets comprising approximately USD 1.3 trillion of this total. The index includes 500 leading companies and captures approximately 80% coverage of available market capitalization."

Four of nine sectors placed dogs in the top ten by yield for April: basic materials, technology, utilities, and financial. Top dog, Williams Companies Inc (NYSE:WMB) [1] was the tops of three basic materials firms. The other two basic materials firms placed seventh, and ninth: Ensco PLC (NYSE:ESV) [7]; and Spectra Energy Corp. (NYSE:SE) [9].

Four technology firms moved higher on the top ten list. They captured slots two, four, five, and nine, on the S&P 500 list by yield: Seagate Technology (NASDAQ:STX) [2], Frontier Communications Corp. (NASDAQ:FTR) [4], and CenturyLink Inc, (NYSE:CTL) [5], were followed by Iron Mountain Inc. (NYSE:IRM) [8].

In the third slot, Oneok Inc. (NYSE:OKE) [3] was the lone utility sector representative. Finally, two financial firms claimed slots seven, and ten, HCP Inc. (NYSE:HCP) [7], and Navient Corp (NASDAQ:NAVI) [10], to complete these S&P 500 April top ten dogs by yield.

S&P 500 Dividend vs. Price Results Matched With The Dow Dogs

Relative strengths of the top ten S&P 500 dogs by yield as of market close 4/16/2016 differed from those of the Dow as shown in the graphs and charts below. Projected annual dividend history from $10,000 invested as $1k in each of the ten highest yielding stocks and the total single share prices 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 500 Dogs Mixed Down And (3) Dow Dogs Did Likewise

The S&P 500 collection mixed down with dividends joining single share price of the ten dropping after March. Dividends from $1k invested in each of the top ten S&P 500 stocks fell 1.56% for the period as their aggregate single share price declined 6% to create the mix down.

The Dow dog dither down was shown as aggregate single share price for those ten fell 4.2% between March 30 and April 16, while annual dividends from $10k invested as $1K in each of the top ten dropped about 2%, 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) shrank slightly. The price and dividend fall for the top ten in was largely due to Intel (NASDAQ:INTL) suddenly replacing Procter & Gamble (NYSE:PG) in the top ten.

Actionable Conclusion (4): Dow Dogs Continue Ever Overbought; (5) S&P 500 Dogs Show Desirable Dividend Above Price Performance

The Dow dog overbought overhang broke the annual record in May at $421 or 117%. June saw the gap between high price and low dividend narrow to $286 or 77%. Then the July/August market gap hit $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. In April, Intel's price swoon narrowed the mighty Dow overbought chasm to $374 or 100%.

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 $26.75.

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Compared to the Dow dogs, the S&P 500 ten, while volatile, are not overbought, expanding slightly their "normal" pattern of dividends above price.

In contrast to the Dow, S&P 500 top ten average price per dollar of annual dividend came in at a low $13.53 as of April 16. That's barely over half the price of an annual dollar of Dow dividend.

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S&P Upside/Downside April Dogs

S&P 500 Index prices were collected as of market close April 15. Yield (dividend/price) results from yahoo.com/finance for 30 top yielding S&P 500 stocks, weighed against analyst 1-year target projections, led to the additional actionable conclusions described below.

Actionable Conclusions (5) 10 Top S&P 500 Dogs Showed 8.37% to 25.89% Upsides, While (6) 6 Bottom S&P 500 Dogs Dropped 7.15% To 19.27%) Per Analyst Price Targets For April 2017

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 Estimated (7) A 3.48% Average 1 year Upside & (8) A 7.63% Average Net Gain In the 30 List of S&P Dogs By April 2017

Top 30 dogs on the S&P 500 index stock list graphed below show relative strengths by dividend and price as of April 16, 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.

Yahoo reported analyst survey numbers predicting a 3.5% lower dividend from $10K invested as $1k in the average ten of this group, while aggregate single share price of those ten was predicted to increase a little over 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 was considered optimal for a valid estimate.

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 stocks movement opposed to market direction.

Actionable Conclusion (9): Analysts Assert Top 10 S&P 500 Dogs Poised To Net 10.98% to 32.89% By April 2017

Six of ten top yielding S&P 500 dogs were tagged as top gainers for the coming year by analyst 1-year target prices. So, by that reckoning, this month the dog strategy as graded by Wall St. wizards was 60% accurate.

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

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Seagate Technology (NASDAQ:STX) was projected to net $328.96 based on a median target price estimate from twenty-four 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.

Williams Cos, Inc. (The) (NYSE:WMB) was projected to net $322.45 based on a median target price estimate from seven analysts combined with projected annual dividend less broker fees. The Beta number showed this estimate subject to volatility 45% more than the market as a whole.

Navient Corporation was projected to net $289.21 based on a median target price estimate from seven analysts combined with projected annual dividend less broker fees. The Beta number showed this estimate subject to volatility 24% greater than the market as a whole.

General Motors (NYSE:GM) was projected to net $273.19 based on estimates from seventeen analysts plus dividends less broker fees. The Beta number showed this estimate subject to volatility 64% more than the market as a whole.

Iron Mountain Inc. (NYSE:IRM) was projected to net $214.44 based on estimates from six analysts plus dividends less broker fees. The Beta number showed this estimate subject to volatility 6% less than the market as a whole.

Ford Motor Co. (NYSE:F) was projected to net $185.56 based on a median target price estimate from seventeen analysts combined with projected annual dividend less broker fees. The Beta number showed this estimate subject to volatility 32% more than the market as a whole.

Frontier Communications was projected to net $166.69 based on a median target price estimate from fourteen analysts combined with projected annual dividend less broker fees. The Beta number showed this estimate subject to volatility 32% less than the market as a whole.

Spectra Energy Corp. was projected to net $157.55 based on a median target price estimate from thirteen analysts combined with projected annual dividend less broker fees. The Beta number showed this estimate subject to volatility 36% less than the market as a whole.

GameStop Corp. (NYSE:GME) was projected to net 143.26 based on estimates from ten analysts plus dividends less broker fees. The Beta number showed this estimate subject to volatility 20% more than the market as a whole.

Kohl's Corp. (NYSE:KSS) was projected to net $109.81 based on a median target price estimate from twenty-one analysts combined with projected annual dividend less broker fees. The Beta number showed this estimate subject to volatility 10% more than the market as a whole.

The average net gain in dividend and price was 27.39% on $10k invested as $1k in each of these ten dogs. This gain estimate was subject to average volatility 14% more than the market as a whole.

Actionable Conclusion (10): (Bear Alert) Analysts Predicted Six S&P 500 Dogs Would Average A Net Loss of 8.47% By 2017

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

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Helmerich & Payne Inc. (NYSE:HP) was projected to lose $44.24 based on dividend and a median target price estimate from twenty-seven analysts including $20 of broker fees (which the dividend more than covered). The Beta number showed this estimate subject to volatility 31% more than the market as a whole.

CenturyLink Inc. (NYSE:CTL) was projected to lose $54.10 based on dividend and a median target price estimate from fifteen 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 $73.99 based on dividend and a median target price estimate from fourteen analysts including $20 of broker fees (which the dividend more than covered). The Beta number showed this estimate subject to volatility 38% more than the market as a whole.

HCP Inc. was projected to lose $80.98 based on dividend and a median target price estimate from fourteen analysts including $20 of broker fees (which the dividend more than covered). The Beta number showed this estimate subject to volatility 78% less than the market as a whole.

People's United Financial (NASDAQ:PBCT) was projected to lose $91.56 based on dividend and a median target price estimate from ten analysts including $20 of broker fees (which the dividend more than covered). The Beta number showed this estimate subject to volatility 21% less than the market as a whole.

Murphy Oil Corp. (NYSE:MUR) was projected to lose $163.56 based on dividend and a median target price estimate from seventeen analysts including $20 of broker fees. The Beta number showed this estimate subject to volatility 54% less than the market as a whole.

The average net loss in dividend and price with broker fees included was 8.34% on $5k invested as $1k in each of these five dogs. The beta number showed this estimate subject to volatility 13% less than the market as a whole.

Dog Metrics Extracted Big Gains From Five Lowest Priced S&P 500 Top Yielders

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Remember, four of nine sectors placed dogs in the top ten by yield for April: basic materials, technology, utilities, and financial.

Actionable Conclusions: (11) 5 Lowest Priced of Top Ten Highest Yield S&P 500 Dogs Projected 21.65% Vs. (12) 12.45% Net Gains for All Ten by April 2017

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$5000 invested as $1k in each of the five Lowest priced stocks in the top ten S&P 500® dividend kennel by yield were asserted by analyst 1 year targets to deliver 73.837% more net gain than the same amount invested in all ten. The fifth lowest priced Seagate Technology, was projected to deliver the best net gain of 32.9%.

Lowest priced five S&P 500® dogs for April 16 were: Frontier Communications Corp; Ensco PLC; Navient Corp; Williams Companies Inc; and Seagate Technology, with prices ranging from $5.41 to $25.59.

Higher priced five S&P 500® dogs for April 16 were: Spectra Energy Corp; ONEOK Inc; CenturyLink Inc; and Iron Mountain Inc; HCP Inc., whose prices ranged from $29.40 to $34.93.

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. It's 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 investment research process in late-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.

At least three of these S&P 500 dividend pups are part of the now 36 Dogs of the Week (AKA "valuable catches") found on The Dividend Dog Catcher premium site. Click here to learn more or 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 dividend.com; finance.yahoo.com; analyst mean target price by Thomson/First Call in Yahoo Finance.

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