Consumer Cyclical SML Dogs Start Summer Shopping Season
Yield (dividend / price) results from here verified by Yahoo Finance were calculated as of June 20, 2016 for Small, Mid, & Large cap stocks. Small cap firms were valued at $200M(illion) to $2B(illion); Mid cap firms were worth $2B to $10B; Large caps were valued above $10B. Those yield results led to the actionable conclusions discussed below.
Fifty ConCys For The Money
Since late 2011 this report series has applied dog dividend methodology to uncover possible buy opportunities in each of eight major market sectors listed by Yahoo Finance: basic materials (BasMats), consumer goods (ConGo), financials (Fins), healthcare (Heal), industrial goods (IndiGo), services (Svcs), technology (Tec), and utilities (Utes). In the past two years the series expanded to report (1) dividend yield; (2) price upside; (3) net gain results based on analyst 1 yr. target projections.
The series was recently revised to report on eleven sectors as defined by Morningstar and tracked here: Basic Materials; Communication Services; Consumer Cyclical; Consumer Defensive; Energy; Financial Services; Healthcare; Industrials; Real Estate; Technology; Utilities.
This article was dedicated to 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 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. Analyst price upside estimates expanded the stock universe to include popular growth equities, as desired.
Dog Metrics Classified Consumer Cyclical Stocks by Yield
Actionable Conclusion (1): Resorts, Apparel, Specialty retail, and Leisure Lead ConCyc Sector By Yield
Ten stocks showing the biggest ConCy dividend yields after May represented six industries: resorts & casinos; apparel stores; specialty retail; leisure; department stores; auto manufacturing-major.
Tops of four specialty retail firms placed fourth, GameStop (NYSE:GME) . The other three specialty retailers placed seventh, eighth, and tenth: Staples (NASDAQ:SPLS) , Barnes & Noble (NYSE:BKS) , and Pier 1 Imports (NYSE:PIR) .
A lone leisure entity placed fifth, SeaWorld Entertainment (NYSE:SEAS) . A single department store secured sixth, Kohl's (NYSE:KSS). Finally, the major auto manufacturer placed ninth, General Motors (NYSE:GM) , and completed the June consumer cyclical top ten dog list by yield.
[Note: the markedly lower ConCy dog yields and prices in June, compared to May, was caused by removing foreign exchange traded stocks from this list. The world market adds sizzle, so they'll be back next month.]
Consumer Cyclical Sector Dividend vs. Price Results Contrasted Those of The Dow
Relative strengths of the top ten consumer cyclical dogs (graphed below by yield as of 6/20/2016) were matched 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 prices of those ten stocks created the data points shown in green for price and blue for dividends.
Actionable Conclusions: (2) Consumer Dogs Mixed Down As (3) Dow Dogs Charged Bullishly
As of May 20, dividend from $10k invested as $1k in each of the top ten consumer cyclical stocks dropped as price also fell. Price descended 30% and dividend dropped 18% to make the mix down.
Dow dogs got back to their bullish ways after May. Projected annual dividend from $10k invested as $1K in each of the top ten Dow dogs dropped 2.37%. At the same time, aggregate single share price rose 5.2% to set the Dow charge.
The Dow dogs' overbought condition (in which aggregate single share price of the ten exceeded projected annual dividend from $1k invested in each of the ten) expanded to its widest of the year.
Actionable Conclusion (4): Dow Dogs Expand Their Overbought Status
In July, 2015, the overhang was $269 or 71%, but it inflated again as IBM (NYSE:IBM) replaced Pfizer (NYSE:PFE) to widen the gap to $331 or 85% in August. September brought some sanity back to the runaway Dow when the gap stood at $279 or 67%. October increases in price by Chevron (NYSE:CVX) and Exxon Mobil XOM) pushed the gap to $334 or 85%.
November changed out McDonald's (NYSE:MCD) for Wal-Mart (NYSE:WMT), and General Electric (NYSE:GE) for Coca-Cola (NYSE:KO). The resulting price over dividend gap went to $303 or 78%. As of December 4 the gap stood at $294 or 75%.
Come January 12, 2016, prices of the ten Dow top dogs fell, and dividends rose, as Boeing replaced General Electric to reduce the overbought gap to $215 or 53%. February moves put the gap at $230 or 55%. March extended the move as high price Procter & Gamble (NYSE:PG) replaced Intel (NASDAQ:INTC) in the ten slot moving the bar to $372 or 95%. April saw higher prices return to XOM and CVX and Boeing returned to the top ten so the price gap went to $392 or 102% before Procter & Gamble dropped out of the top ten in May, to help the gap recede 11% to $349, or 91%. Upward market pressure on the Dow moved June's numbers to $381 or 102%, again.
This gap between high share price and low dividend per $1k invested defines the Dow over-bought condition. Meaning these are low risk and low opportunity Dow dog stocks. The Dow top ten average price per dollar of annual dividend is now $26.63 in June, which is up 1.8% from $26.16 in May.
In contrast to the Dow, consumer cyclical dog charts show higher risk but also higher gain potential than the Dow. The consumer cyclical top ten dogs come in at 34% less than the Dow price per dividend dollar at $17.60.
Wall Street Wizard Wanting
One-year mean target price set by brokerage analysts multiplied by the number of shares in a $1k investment revealed ten stocks showing the highest upside price potential into 2017 out of 30 selected by yield. The number of analysts providing price estimates was noted after the name for each stock. Three to nine analysts have usually provided the most accurate mean target price estimates.
Actionable Conclusions: Analysts Estimate (5) 20.96% Average Price Upsides For Ten Top Consumer Cyclical Dogs Come June 2017; (6) Three Downside Dogs Averaged (7.9%)
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. Analysts Calculated (7) A 13.6% Average Upside; (8) A 15.95% Average 1 yr. Net Gain from Top 30 June Consumer Cyclical Dogs
ConCy sector dogs were graphed below to show relative strengths by dividend and price as of June 20, 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 shares number was then multiplied by projected annual per share dividend amounts to find the dividend return. Thereafter the analyst median target price was used to gauge the stock upside to 2017.
Historic prices and actual dividends paid from $1000 invested in each of the thirty 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 green for price and blue for dividends.
Analysts reported by Yahoo finance projected a 11.4% lower dividend from $10K invested in this group while aggregate single share price was projected to increase by 11.5% 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 have proven to be most accurate in projected estimates. Estimates provided by one analyst were not applied (n/a).
A beta (risk) ranking for each stock was shown 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 market direction.
Actionable Conclusion (9): Wall St. Analysts Predict 10 Consumer Cyclical Dogs To Net 24.1% to 68.86% Gains by June, 2017
Six of the ten top dividend yielding consumer cyclical dogs were verified as being among the ten top net gainers for the coming year based on analyst 1 year target prices. So this period the dog strategy for these consumer stocks as graded by Wall St. wizards was 60% accurate.
Ten probable profit generating trades were revealed by Thomson/First Call in Yahoo Finance for June 2017:
Barnes & Noble was projected to net $601.02 based on dividends plus the median target price estimate from two analysts less broker fees. The Beta number showed this estimate subject to volatility 181% more than the market as a whole.
ClubCorp Holdings (NYSE:MYCC) was projected to net $416.56 based on estimates from twelve analysts plus dividends less broker fees. A Beta number was not available for MYCC.
GameStop was projected to net $361.82, based on dividends plus a mean target price estimate from ten analysts less broker fees. The Beta number showed this estimate was subject to volatility 13% more than the market as a whole.
General Motors Company was projected to net $279.16 based on dividends plus the median of annual price estimates from seventeen analysts less broker fees. The Beta number showed this estimate subject to volatility 59% more than the market as a whole.
International Game Tech (NYSE:IGT) was projected to net $249.59 based on estimates from six analysts plus dividends less broker fees. The Beta number showed this estimate subject to volatility 35% less than the market as a whole.
H&R Block (NYSE:HRB) was projected to net $248.89 based on estimates from nine analysts plus dividends less broker fees. The Beta number showed this estimate subject to volatility 63% less than the market as a whole.
Abercrombie & Fitch (NYSE:ANF) was projected to net $243.60 based on the median target price estimate from twenty-six 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.
SeaWorld Entertainment was projected to net $242.81, based on dividends plus a median target price estimate from ten analysts less broker fees. The Beta number showed this estimate was subject to volatility 52% less than the market as a whole.
Las Vegas Sands was projected to net $241.11, based on dividends plus a median target price estimate from sixteen analysts less broker fees. The Beta number showed this estimate subject to volatility 78% more than the market as a whole.
Tailored Brands was projected to net $194.52 based on estimated dividends plus median target price estimate from five analysts less broker fees. The Beta number showed this estimate subject to volatility 52% more than the market as a whole.
Average net gain in dividend and price was 30.79% on $10k invested as $1k in each of these ten dogs. This gain estimate was subject to average volatility 23% more than the market as a whole.
Two ConCy Dividend Dog Price Histories Illustrate How Analyst Targets Matched June Price Momentum
Price histories repeat the news shown above in a year to date graph: the lowest ConCy "loser", Buckle (NYSE:BKE), showed a bearish negative year to date price trajectory, while the analysts upside star stock, BKS was bullishly positive. For a change, historic upside price momentum supports the Wall Street Wizard top dog target estimate.
This evidence contradicts Michael O'Higgins "media index" admonition. He advises investors to pay close attention to "magazine covers, news headlines, and ads placed by investment advisors, primarily in Barron's." He concludes that "you can make out like a bandit by acting the opposite way." However, analyst target price estimates may be correct this time.
Dog Metrics Found Some Bargains Among Five Lowest Priced Highest Yield Consumer Cyclical Stocks
Ten consumer cyclical sector equities were culled by yield from here. Yield (dividend / price) results verified by Yahoo Finance did the ranking.
As noted above, ten stocks that showed the biggest dividend yields after May, per YCharts data, represented six industries: resorts & casinos; apparel stores; specialty retail; leisure; department stores; auto manufacturing-major.
Actionable Conclusions: (9) Analysts Announce 5 Lowest Priced of Ten Highest Yield Consumer Goods Dividend Dogs Deliver 26.07% VS. (10) 24.52% Net Gains by All Ten as of June 20, 2017
$5000 invested as $1k in each of the five Lowest priced stocks in the top ten consumer cyclical dividend kennel by yield were predicted by analyst 1 year targets to deliver 6.34% more net gain than $5,000 invested as $.5k in each of all ten. The third lowest priced, Barnes & Noble , was projected to deliver the best net gain of 60.1%.
Lowest priced five consumer cyclical dividend dogs as of June 20 were: Pier 1 Imports; Staples; Barnes & Noble; Tailored Brands; SeaWorld Entertainment, with prices ranging from $5.53 to $15.32.
Higher priced five consumer goods dividend dogs for April 13 were: Guess?; GameStop; General Motors; Kohl's; Las Vegas Sands, whose prices ranged from $15.68 to $44.31.
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 same technique, you now see, can also be used to find the consumer cyclical sector.
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.
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.
See my instablog for specific instructions about how to best use the dividend dog data featured in this article. --Fredrik Arnold
Stocks listed above were suggested only as possible starting points for your consumer cyclical dog dividend stock purchase/sale research process. These were not recommendations.
None of these consumer cyclical sector dividend pups are part of the now 44 Dogs of the Week (DOTW) found on The Dividend Dog Catcher premium site. You are invited to join the growing throng of deputy dog catchers. Click here to learn more and subscribe.
A top performing DOTW dog for the first quarter has been named. A second quarterly winner was discovered May 13. For a free copy of both quarterly reports and analysis of the winning Arnold Q1 & Q2 picks, plus a surprise bonus bottom dog report, send your e-mail address, ticker symbol for your favorite dividend stock, and name of your favorite team of any type to: email@example.com. Remember: E-mail, ticker, team!
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 ycharts.com; dividend.com; finance.yahoo.com; analyst mean target price by Thomson/First Call in Yahoo Finance.
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.