Analysts Rate Only 8 Champion Dogs As Gainers July 8

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Includes: BWL.A, CTBI, CVX, ED, EMR, GE, HCP, HP, IBM, JPM, KO, MCD, MCY, MRK, NFG, NNN, ORI, SON, T, TGT, TROW, UHT, UVV, VVC, XOM
by: Fredrik Arnold

Summary

KO & TGT led the pack of eight Champions to price upsides averaging 6.45% and net gains averaging 7.3%. Six low downsides averaged 7.79% paced by ED per analyst targets.

Ten leading June/July Champion dogs - CTBI, UVV, ORI, CVX, HP, UHT, T, MCY, BWL.A, HCP - posted yields averaging 4.41%. They charged into July, as did Dow dogs.

50 Dividend Champions (sporting 25 or more years of annual dividend increases) ranged in yield from 0% to 6.5% as of July 8.

Analysts predicted a -038% upside and a +2.18% net gain for 30 Champions. Eight gainers, EMR, CVX, TROW, CTBI, MCD, NFG, TGT, & KO, ranged upward 2.92% to 10.18%.

Ten Top Champion dividend dogs ranked by yield projected 52.43% more gain from $5k invested in the lowest-priced five than from the same investment in all ten.

What is a dividend dog?

The "dog" moniker was earned by stocks exhibiting three traits: (1) paying reliable, repeating dividends, (2) their prices fell to where (3) yield (dividend/price) grew higher than their peers. Therefore, the highest yielding stocks in any collection became known as "dogs.

May Champion Dogs

Yield (dividend/price) results from David Fish's Dividend Champions Index members (as of July 8 market closing prices) were paired with annual dividends projected by dripinvesting.org as of June 30. Results from that data charted below showed five of nine business sectors represented by ten top yield Champions: five financials; one technology; one service; two basic materials; one consumer goods. In the Morningstar scheme of eleven sectors, the top ten champions covered six: two real estate; one communications services; one consumer cyclical; three financial services; two energy; one consumer defensive. Those ten stocks posted yields averaging 4.41%.

Actionable conclusions by yield, target price upsides, and net gains were drawn below as top Champion dog selections for June/July were examined, step by step.

Actionable Conclusion (1) Ten Dividend Champion Dogs Showed 3.6% to 6.4% Yields as of July 8

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; Russell 1000; Russell 2000; Champions; Contenders; Challengers; CCC Combined; and Global. Bonus reports cover Bad Boy AllStars, and Sector Leaders.

Fifty 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 Determined 50 Champion Stocks by Yield

David Fish's Champions list (from here) as of June 30 contained stocks distinguished as having paid increasing dividends for 25 years or longer. Champion stocks listed below were ranked by yields calculated as of July 8 prices to reveal the top ten. Price data was sourced from Yahoo.com.

As mentioned previously, five of nine Yahoo Finance market sectors [and six of eleven Morningstar sector] were represented in the top ten champions dog list selected by yield below: financials; technology; services; basic materials; utilities; consumer goods; [or/also real estate; communications services; consumer cyclical; financial services; energy; consumer defensive].

Top dog HCP Inc. (NYSE:HCP) [1] was tops of the five financial [or two real estate] firms. Other financials placed third, fifth, eighth, and tenth: Mercury General Corp. (NYSE:MCY) [3]; Universal Health Realty Trust (NYSE:UHT) [5] [real estate]; Old Republic International (NYSE:ORI) [8]; Community Trust Banc. (NASDAQ:CTBI) [10].

Second place was held by the steadfast services [consumer cyclical] stock, Bowl America Class A (NYSEMKT:BWL.A) [2]. Fourth place was secured by a lone technology, [communication service] sector representative, AT&T Inc. (NYSE:T) [4]. Sixth and seventh positions were taken by two basic materials [energy] firms, Helmerich & Payne Inc. (NYSE:HP) [6], and Chevron Corp. (NYSE:CVX) [7].

The last of the top ten champions in consumer goods [consumer defensive] occupied the ninth place, Universal Corp. (NYSE:UVV) [9], and completed ten champion dogs by yield for June/July.

Champion Dividend vs. Price Results Matched Dow Dogs

Periodic strength of ten top Champions by yield was graphed below as of market closing prices on 7/5/2016 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.

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Actionable Conclusions: (2) Champions Charged Bullishly As (3) Dow Dogs Did Too

Champions dividend (from $10k invested as $1k in each dog) declined as aggregate single share price for the ten increased after May to create their bullish status. Champions top ten dog dividend fell 6.7% while price went 4.4% higher. The Champions went $47 beyond parity or 11% into the overbought zone.

Dow dogs, also charged into July, as they expanded their overbought condition by 47%. Aggregate single share price for the ten soared 16.1% between May 23 and July 8, while annual dividend from $10k invested as $1K in each of the top ten dropped 6.4% according to IndexArb.

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As mentioned, the Dow dogs' overbought condition (where aggregate single share price of the ten exceeded projected annual dividend from $10k invested as $1k each in those ten) expanded nearly 1/2 after May. Say "goodbye" to any long overdue retreat!

Actionable Conclusion (4): Dow Dogs Become More Overbought

Historically, to begin August, 2105, IBM's (NYSE:IBM) high price and dividend entrance pushed the Dow overbought gap to $343 or 89%. As September dawned, nearly all ten dogs dropped in price to temporarily shrink the gap to $273 or 67%. October saw prices rise and dividend fall to move the price over the dividend chasm to $305 or 76%. November 6 price action and top dog shuffle put the gap at $305 or 79%. As of December 4 the gap stood at $302 or 78%.

Come January 8, 2016, prices of the ten Dow top dogs fell, and dividends rose, to push the overbought gap down to $224 or 56%. In February the gap grew to $246 or 59%. The March charge put the gap up to $293 or 73%. April set a 2016 record expanding to $400 or 104%, May's price retreat brought the price over dividend gap down to $350 or 91% and June put the gap down to $342 or 90%. The July surge was led first, by heavyweight ExxonMobil (NYSE:XOM) muscling little General Electric (NYSE:GE) out on the tenth slot by yield then by JPMorgan Chase (NYSE:JPM) pushing Merck (NYSE:MRK) out of the ninth slot. The resulting gap between aggregate single share price of ten dogs above dividends projected from $10K invested as $1K per each of the ten was $414 or 114%.

The Dow Dogs remain overbought and overpriced. Meaning, these are low risk and low opportunity Dow dogs. The Dow top ten average price per dollar of annual dividend was $27.30

Compared to the DOW, the Champion ten have sporadically retreated in a pattern where aggregate dividend value of $1k investments in each remained above the aggregate single share price. Now the Champions have joined the Dow in the overbought zone. In little contrast to the Dow, Champion Dog top ten average price per dollar of annual dividend was $23.04 as of July 8.

Should Dow prices somehow move to a level 30-35% lower, they could again become attractive dividend buys! As it stands, the Dow has become an index of growth stocks as their dividends stay overpriced by their market price.

Actionable Conclusions: (5) Analysts Anticipated Eight Champion Dogs Hitting 6.45% Average Upside into July 2017 While (6) Ten Sagging Champs Showed -6.13% Average Downside.

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The O'Higgins dividend/price metrics 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, if desired. This picture of stronger downsides overpowering or equaling upsides is rare and was first spotted in March. This bearish condition is apparently strengthening in July.

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 Estimated (7) -0.38% Average Upside & (8) 2.17% Average Net Gain from Top 30 Dividend Champions By July 2017

Top thirty dogs from David Fish's Dividend Champions index were graphed below as of July 8, 2016 compared to analyst mean price target estimates for 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 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 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.

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Analyst data reported by Yahoo finance projected a 0.67% higher dividend from $30K invested as $1k in each stock in this group while aggregate single share price was projected to decrease 0.24% in the coming year.

Notice that the chart showed price exceeded dividend. So, analysts predicted the overbought Champions index returning. 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 shown the best track record for 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. A negative beta number indicated the degree of a stock price movement opposite of market direction.

Actionable Conclusion (9): Analysts Projected Ten Dividend Champion Dogs Showing 4.48% to 11.27% Gains By July 2017

Only two of the ten top dividend yielding Champion dogs were among the ten gainers for the coming year based on analyst 1 year target prices. So this month the dog strategy as graded by Wall St. wizards was just 20% accurate.

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

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Coca-Cola Company (NYSE:KO) was projected to net $112.66 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 18% less than the market as a whole.

Target Corp. (NYSE:TGT) was projected to net $93.45 based on dividends plus median target price estimate from twenty-two analysts less broker fees. The Beta number showed this estimate subject to volatility 48% less than the market as a whole.

National Fuel Gas (NYSE:NFG) was projected to net $81.73 based on dividends plus a median target price estimate from four analysts less broker fees. The Beta number showed this estimate subject to volatility 18% less than the market as a whole.

Community Trust Banc was projected to net $81.07 based on dividends plus a median target price estimate from three analysts less broker fees. The Beta number showed this estimate subject to volatility 35% less than the market as a whole.

McDonald's Corp. (NYSE:MCD) was projected to net $80.98 based 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 64% less than the market as a whole.

T. Rowe Price Group (NASDAQ:TROW) was projected to net $74.76 based on dividends plus a median target price estimate from thirteen analysts less broker fees. The Beta number showed volatility 18% more than the market as a whole.

Chevron Corp. was projected to net $51.68 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 27% more than the market as a whole.

Emerson Electric (NYSE:EMR) was projected to net $44.75 based on dividends plus a median target price estimate from nineteen analysts less broker fees. The Beta number showed this estimate subject to volatility 13% more than the market as a whole.

HCP, Inc. was projected to net $44 based on dividends alone less broker fees. The Beta number showed this estimate subject to volatility 81% less than the market as a whole.

Bowl America Class A was projected to net $26.58 based on dividends only less broker fees. The Beta number showed this estimate subject to volatility 65% less than the market as a whole.

The average net gain in dividend and price was predicted to be 8.2% on $10k invested as $1k in each of these ten dogs. This gain estimate was subject to average volatility 27% less than the market as a whole.

Actionable Conclusion (10): (Bear Alerts) Analysts Estimated Six Champion Dogs To Show Net Losses Averaging 8.8% By 2017

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

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ExxonMobil Corp. was projected to lose $47.15 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 10% less than the market as a whole.

National Retail Properties (NYSE:NNN) was projected to lose $59.40 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 68% less than the market as a whole.

Helmerich & Payne Inc. was projected to lose $59.88 based on dividend and a median target price estimate from twenty-nine analysts including $20 of broker fees. The Beta number showed this estimate subject to volatility 152% opposite the market as a whole.

Vectren Corp. (NYSE:VVC) was projected to lose $83.76 based on dividend and a median target price estimate from three analysts including $20 of broker fees. The Beta number showed this estimate subject to volatility 10% less than the market as a whole.

Sonoco Products Co. (NYSE:SON) was projected to lose $85.91 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 19% more than the market as a whole.

Consolidated Edison (NYSE:ED) was projected to lose $103.35 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 89% less than the market as a whole.

The average net loss in price plus broker fees including annual dividends was predicted to be 7.32% on $6k invested as $1k in each of these six dogs. This loss estimate was subject to average volatility 68% less than the market as a whole.

Actionable Conclusion (11): Choose KO vs. ED Based On Analyst Upside Projections?

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Past month price performance of Consolidated Edison, the Champion portfolio "loser" red-lined by analysts, showed a better year-to-date upside of 25% in contrast to the barely positive 5.6% price performance by analyst tagged upside leader, Coca-Cola Co.

Again, historic market price momentum contradicted the analyst estimates.

Dog Metrics Extracted Bargains

As noted above, ten Champion dividend dogs showing the biggest dividend yields as of July 8 covered five of nine business sectors represented by ten top yield Champions: five financials; one technology; one service; two basic materials; one consumer goods. In the Morningstar scheme of eleven sectors, the top ten champions covered six: two real estate; one communications services; one consumer cyclical; three financial services; two energy; one consumer defensive. Listed as of market close, July 8, Champion dividend dogs ranged in yield thus:

Actionable Conclusions: Analysts Allege (12) 5 Lowest Priced of Top Ten Highest Yield Champions Deliver 3.91% VS. (13) 2.56% Net Gains from All Ten As Of July 8, 2017

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$5000 invested as $1k in each of the five lowest priced stocks in the top ten Champion kennel by yield promised 52.43% more net gain than $5,000 invested as $500 in each of all ten. The third lowest priced Champion dog, Community Trust Banc., was projected to deliver the best net gain of 8.11%.

Lowest priced five Champion dogs as of July 8 were: Bowl America Class A; Old Republic International; Community Trust Banc.; HCP Inc.; AT&T Inc.; whose prices ranged from $14.60 to $42.61.

Higher priced five Champion dogs as of July 8 were: Mercury General Corp.; Universal Health Realty Trust; Universal Corp.; Helmerich & Payne Inc.; Chevron Corp., whose prices ranged from $53.48 to $104.77.

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 testing bargain Champion 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.

Annual Analyst Accuracy

You see below the one year result of ten analyst target estimates for Dow stocks per Yahoo from this article in Early July in 2015. These were applied to the "basic method" Michael B. O'Higgins employed for beating the Dow. The key shows: losses in a reddish tint; poor results tinted yellow; gains tinted green; no tint means no difference.

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The "basic method" top ten annual analyst accuracy score for The Top Ten Champions by yield between early-July 2015-16 was two losses, one poor performance, and seven gains.

See my instablog for specific instructions about how to best apply the dividend dog data featured in this article.--Fredrik Arnold

The 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.

Five of these Champion pups qualify as valuable catches! They are listed with the now 46 Dogs Of The Week (DOTW) found on The Dividend Dog Catcher premium site. Click here to subscribe or get more information.

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 & Q3 August picks, send your e-mail address, ticker symbol for your favorite dividend stock, and name of your favorite team of any sport or activity to: fredrika120@gmail.com. Remember: E-mail, ticker, team!

Stocks listed above were suggested only as possible starting points for your index dog dividend stock purchase or sale research process. These were not recommendations.

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; indexarb.com; dripinvesting.org/Tools/Tools.asp; finance.yahoo.com; analyst mean target prices by Thomson/First Call in Yahoo Finance.

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

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.