The Dividend Dogs Rule
Stocks earned the "dog" moniker by exhibiting three traits: (1) paying reliable, repeating dividends, (2) their prices fell to where (3) yield (dividend/price) grew higher than their peers. Thus, the highest yielding stocks in any collection became known as "dogs."
NASDAQ August Tech Savvy Dividend Dogs
NASDAQ 100 Index members paying dividends were scored as of market closing prices August 2. Yield (dividend / price) results for 48 dividend paying NASDAQ stocks were combined with analyst 1-yr target projections to form the actionable conclusions below.
Actionable Conclusion (1) 10 Top NASDAQ Dogs Sported 3.04% to 8.22% Yields as of August 2
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.
Forty-Eight Show 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 Sought NASDAQ Stocks by Yield
"The NASDAQ-100 Index includes 100 of the largest domestic and international non-financial securities listed on The Nasdaq Stock Market based on market capitalization. The Index reflects companies across major industry groups including computer hardware and software, telecommunications, retail/wholesale trade and biotechnology. It does not contain securities of financial companies including investment companies."
Four of eleven Morningstar business sectors were represented in the top ten NASDAQ dogs by yield as of August 2, 2016 per YCharts data: technology; communication services; consumer cyclical; industrial.
The technology sector put six firms in the top ten by yield. Tops for tech and overall was Seagate Technology (NASDAQ:STX) . The remaining five tech firms placed fourth, sixth through eighth, and tenth: Western Digital (NASDAQ:WDC) ; QUALCOMM (NASDAQ:QCOM) ; Cisco Systems (NASDAQ:CSCO) ; Maxim Integrated Products (NASDAQ:MXIM); CA, Inc. (NASDAQ:CA) .
A communication service dog placed second, Vodafone Group (NASDAQ:VOD) . Two consumer cyclical sector dogs placed third, and fifth, Mattel (NASDAQ:MAT) , and Viacom (NASDAQ:VIAB) . Finally, a lone industrial sector firm landed in the ninth NASDAQ slot, Paychex (NASDAQ:PAYX) , and completed the top ten NASDAQ 100 dogs by yield for August.
NASDAQ Results Compared With Dow Dogs By Dividend vs. Price
Top ten NASDAQ 100 dogs were matched against to those of the Dow Industrials Index by yield 8/2/2016. Annual dividend projected from $10,000 invested as $1K in each of the ten highest yielding stocks and total single share price of those ten stocks created the data points shown in green for price and blue for dividend.
Actionable Conclusions: (2) NASDAQ 100 Dogs Charged Bullishly, As (3) Dow Dogs Did Too Through July
NASDAQ 100 top ten dividend payers flirted again with the overbought zone as they rose in price and fell in dividend after July. Aggregate single share price increased 2%, while aggregate dividend from $10k invested, dropped 2.4% to set the charge.
Dow dogs, also, charged bullishly and expanded their overbought condition by 8.4%. Aggregate single share price for the ten rose 3.4% between July 1, and August 2, while annual dividend from $10k invested as $1K in each of the top ten dropped 2% according to IndexArb.
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 8% after July. The long overdue Dow retreat is still delayed.
Actionable Conclusion (4): Dow Dogs Are Increasingly Overbought
In September, 2015 the gap was $273 or 67%. October saw prices rise and dividend fall to move the price over 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%. A July surge put it at $401 or 109%. Now August widened the chasm between aggregate single share price of ten dogs above their projected dividends from $10K invested as $1K in each to $434 or 121%.
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 u to $27.72.
Unlike the DOW the NASDAQ ten, moved further away from overbought territory. The value of dividends from $1k investments in each fell less than share prices and so increased the distance above the track of aggregate single share price of those stocks. The NASDAQ dog chart showed how normal could be achieved. (Notice the double crossing points in July, March and April where dividends moved above price in July, below again in March, and back above in April.) The NASDAQ top ten average price per dollar of annual dividend has now gone to $24.55 as of August 2.
NASDAQ Dog Upsides
Results from IndexArb.com tallied for 48 NASDAQ 100 Index members paying dividends as of market closing prices August 2, 2016 were stacked against analyst mean target price projections one year out. The results led to the actionable conclusions continuing below.
Actionable Conclusions: (5) 10 Top NASDAQ 100 Dogs Displayed 23.45% Average Upside August 2017 While (6) Two NASDAQ Dogs Pushed 10 & 11% Downsides
Actionable Conclusion (7): Wall St. Wizards Imagined A 9.63% Average 1 yr. Upside & (8) A 9.2% Average Net Gain for Top 30 NASDAQ 100 Dogs To August, 2017
Top 30 dogs on the NASDAQ 100 index stock list graphed below showed relative strengths by dividend and price as of August 2, 2016 and those projected by analyst median 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 Thomson/First Call analyst survey numbers predicted a 7.3% 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 10% in the coming year. Notice that the 2016-17 graph shows price above dividend. Analysts assert a Dow-like overbought condition will overtake the NASDAQ 100 come 2017.
Actionable Conclusion (8): Analysts Alleged 10 NASDAQ Dogs Would Net 143% to 35.63% By August 2017
Three of the top ten dividend yielding NASDAQ 100 dogs were among the top ten gainers for the coming year based on analyst 1 year target prices. Therefore, the past month dog strategy (as graded by Wall St. wizards) was 30% accurate.
Western Digital was projected to net $356.25 based on dividends plus a median target price estimate from twenty-six analysts less broker fees. The Beta number showed this estimate subject to volatility 20% more than the market as a whole.
Gilead Sciences (NASDAQ:GILD) was projected to net $335.79 based on a mean target price estimate from seventeen analysts combined with projected annual dividend less broker fees. The Beta number showed this estimate subject to volatility 21% greater than the market as a whole.
21st Century Fox (NASDAQ:FOX) was projected to net $333.55 based on dividends plus median target price estimates from two analysts less broker fees. The Beta number showed this estimate subject to volatility 49% more than the market as a whole.
Vodafone Group plc was projected to net $269.15 based on dividends plus the mean of annual price estimates from two analysts less broker fees. The Beta number showed this estimate subject to volatility 22% less than the market as a whole.
Skyworks Solutions (NASDAQ:SWKS) was projected to net $257.98 based on dividends plus a mean target price estimate from twenty-three analysts less broker fees. The Beta number showed this estimate subject to volatility 24% less than the market as a whole.
21st Century Fox A (NASDAQ:FOXA) was projected to net $238.55 based on dividends plus median target price estimates from twenty-nine analysts less broker fees. The Beta number showed this estimate subject to volatility 57% more than the market as a whole.
Walgreens Boots Alliance (NASDAQ:WBA) was projected to net $189.63 based on a mean target price estimate from nineteen analysts combined with projected annual dividend less broker fees. The Beta number showed this estimate subject to volatility 28% more than the market as a whole.
Mondelez International (NASDAQ:MDLZ) was projected to net $159.84 based on a median target price estimate from fifteen analysts combined with projected annual dividend less broker fees. The Beta number showed this estimate subject to volatility 7% more than the market as a whole.
Apple, Inc. (NASDAQ:AAPL) was projected to net $150.37 based on dividends plus median target price estimate from forty analysts less broker fees. The Beta number showed this estimate subject to volatility 43% greater than the market as a whole.
Mattel was projected to net $131.63 based on a mean target price estimate from nine analysts combined with projected annual dividend less broker fees. The Beta number showed this estimate subject to volatility 6% less than the market as a whole.
The average net gain in dividend and price was 24.23% on $10k invested as $1k in each of these dogs. This gain estimate was subject to average volatility 17% more than the market as a whole.
Actionable Conclusion (9): (Bear Alert) Analysts Predicted Two NASDAQ Dogs With Net Losses Averaging 9.3% By August, 2017
Two probable losing trades revealed by Thomson/First Call in Yahoo Finance in 2017 were:
NetApp (NASDAQ:NTAP) was projected to lose $88.71 based on dividend and a median target price estimate from twenty-four analysts including $20 of broker fees. The Beta number showed this estimate subject to volatility 9% more than the market as a whole.
Paychex, Inc. was projected to lose $97.11 based on dividend and a median target price estimate from twelve analysts including $20 of broker fees. The Beta number showed this estimate subject to volatility 8% less than the market as a whole.
"If Everyone Told The Truth, The Market Would Not Move": GILD vs. PAYX Price History
One year price performance of Paychex, Inc., the NASDAQ 100 Index "loser" red-lined by analysts, showed nice upside in contrast to the ragged downside annual price history for analyst tagged upside leader, Western Digital.
Momentum did not favor these analyst forecasts.
Dog Metrics Projected More Gains From Five Lowest Priced NASDAQ Highest Yielding Dogs
Yield (dividend / price) results from YCharts.com for NASDAQ 100 index August 2 did the ranking.
Actionable Conclusions: (1) 5 Lowest Priced of Top Ten Highest Yield NASDAQ Dogs Promised 9.87% VS. (2) 8.81% Net Gains by All Ten by August 2, 2017
$5000 invested as $1k in each of the five Lowest priced stocks in the top ten NASDAQ dividend kennel by yield were alleged by analyst 1 year targets to deliver 11.97% more net gain than the same amount invested in all ten. The eighth lowest priced NASDAQ dividend dog, Western Digital , was projected to deliver the best net gain of 35.62%.
Lowest priced five NASDAQ dogs for August 2 were: Cisco Systems ; Seagate Technology; Vodafone Group plc; Mattel ; CA, Inc., whose prices ranged from $30.62 to $33.60.
Higher priced five Aristocrat dogs for August 2 were: Maxim Integrated Products; Viacom ; Western Digital ; Paychex ; QUALCOMM Incorporated, whose prices ranged from $40.17 to $60.60.
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. Its 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 a NASDAQ dividend dog investigation in early-August, 2016. These were not recommendations.
See my instablog for specific instructions about how to best apply the dividend dog data featured in this article.--Fredrik Arnold
Four of these NASDAQ pups qualify as valuable catches! They are listed with the now 50 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 Q1, and Q2 quarterly reports and analysis of the soon to be named winning Arnold Q3 August pick, send your e-mail address, ticker symbol for your favorite dividend stock, and name of your favorite team of any sport or activity to: email@example.com. Remember: E-mail, ticker, team!
The net gain 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.
Stocks listed above were suggested only as possible starting points for your index dog dividend stock purchase/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.
Disclosure: I am/we are long CSCO, 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.