Eleven Morningstar Sector Dogs Led By Financial Yields In August

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Includes: ABY, AMID, APU, ARCC, ARLP, CALM, CG, ETP, GES, GMLP, GSK, KND, NRF, NRZ, PMT, SFL, SNY, STX, TEF, TRTN, VGR, VOD, WDC
by: Fredrik Arnold

Summary

55 leading stocks from 11 business sectors with prices over $9.90 ranged in yield from 2.35% to 15.01% as of August 9.

11 sector leaders, GSK; GES; VGR; STX; ABY; TEF; ARLP; NRZ; GMLP; AMID; CG, showed annual yields averaging 9.7%. They retreated Bearishly after July. Dow dogs mixed up.

11 top business sector leaders price upsides averaged 18.17% with net gains 21.48%. Eleven to the downside averaged a 2.74% loss per analyst 1yr. targets.

Analysts revealed thirty-three sector leader upsides averaging 6.66% and net gains averaging 10.69%. Gain leaders were ARCC, CG; GES; ABY; NRF; TRTN; KND; AMID; VOD; SNY, with WDC tops.

10 Sector leading dividend dogs saw 33.39% more gains from 5 lowest priced. AND 10 top YIELD all-sector dividend dogs showed ONLY 15.78% gain from 5 lowest priced for August.

Dividend Dogs Rule

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. Thus, the highest yielding stocks in any collection became known as "dogs."

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Finding Sector Leaders

Eleven Morningstar business sectors (in alphabetical order) were: basic materials, communication services, consumer cyclicals, consumer defensive, energy, financial services, healthcare, industrials, real estate, technology, and utilities. Yield (dividend / price) results from here verified by Yahoo Finance for sector leading stocks as of market closing prices August 9 revealed the actionable conclusions discussed below.

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 Five For the Show

This article was intended to reveal 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. Utilizing analyst price upside estimates has expanded the stock universe to include popular growth equities, as necessary.

Dog Metrics Revealed Bargains

Top five sector leading stocks were culled by yield in each of eleven sectors to create the list of fifty-five for this article. Only common shares and ADRs with share prices above $9.90, $200 million market capitalization, and 30 day average trading volume over $300,000 were included. This step was taken to validate financial strengths of the sector leading stocks.

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Eleven equities showing top yields, represented the best in each of the eleven Morningstar market sectors mentioned above.

Top dog, The Carlyle Group (NASDAQ:CG) [1] represented financial services. Ten remaining sector leaders were: American Midstream Partners, LP (NYSE:AMID) [2] energy; Golar LNG Partners (NASDAQ:GMLP) [3] industrials; New Residential Investment (NYSE:NRZ) [4] real estate; Alliance Resource Partners (NASDAQ:ARLP) [5] basic materials; Telefonica, S.A. (NYSE:TEF) [6] communication services; Atlantica Yield (NYSE:APU) [7] utilities; Seagate Technology (NASDAQ:STX) [8] technology; Vector Group (NYSE:VGR) [9] consumer defensive; Guess? (NYSE:GES) [10] consumer cyclical; GlaxoSmithKline PLC (NYSE:GSK) [11] healthcare, to complete the August 9 Morningstar sector top leader dog team.

Sector Leader Dividend vs. Price Results Contrasted With Dow Dogs

Periodic strength of eleven top business sector dogs by yield was graphed below as of market closing prices through 8/9/2016 and stacked against the ten of the Dow. Projected 2017 dividend history from $10,000 invested as $909.09 in each of the eleven high yielding stocks and the total single share price of those stocks created the data points shown in green for price and blue for dividend.

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Actionable Conclusions: (2) Sector Leaders Retreated Bearishy, As (3) Dow Dogs Mixed Up

Eleven sector leader dogs upped their dividend as their prices fell after the previous July report. Aggregate single share price of the eleven fell 18.5% while total dividend from $10k invested as $909.09k in each of those eleven ramped up 2.2% for the period to signal the retreat.

Dow dogs got more of a surge as price surged and dividend increased, too. Aggregate single share price for the ten rose 2.6% between July 13 and August 9, while annual dividend from $10k invested as $1K in each of the top ten Dow dogs stepped up 1.4% for the period according to IndexArb.

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) expanded again to it its widest ever.

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Actionable Conclusion (4): Dow Dogs Go Further Overbought

Historically, the overhang in September 2015 put the gap between high price and low dividend at $264 or 63%. The October-November gap of $320 or 84% flirted with new record territory. A December bearish move put the spread at $294 or 75%.

More bear action through January 2016 put the gap down to $250 or 61%. April sprung to widen the gap to $368 or 96%. A May mix down constricted the price above dividend fissure to $341 or 90% but June/July moves made a great gap gulf at $437 or 122%. Then August brought a gust of heat to open the window to $452 or 124%.

The gap between high share price and low dividend per $1k invested shows 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 $27.50.

Conversely, the Sector leader chart shows that list composed of volatile, high risk but high profit potential pups. In marked contrast to the Dow, Sector top eleven average price per dollar of annual dividend was $11.26 as of August 9.

Actionable Conclusion (5): 11 Sector Leader Dividend Dogs Made 10.95% to 32.51% Price Upsides (6) 1 Dropped To A 8.42% Downside Per Analyst Targets

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To quantify top dog rankings, analyst mean price target estimates provided 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 Wrangle (7) Upsides at 6.66% Average and (8) net gains Of 11.69% from 33 Top Yielding Sector Leaders by August 2017

Top 30 dogs on the sector leader stock list were graphed below as of August 9, 2016 compared to analyst mean price target estimates for the same date in 2017.

A hypothetical $1K investment in each equity was divided by the current share price to find the number of shares purchased. The number of shares were then multiplied by projected annual dividend amounts to find the dividend return. Thereafter, analyst mean target price was used to gauge the stock upsides to 2017.

Historic prices and actual dividends paid from $1K invested in each of 30 highest yielding stocks and the aggregate single share prices of those 30 stocks divided by 3 created the data points for 2016. Projections based on estimated increases in dividend amounts from $1K invested in the 30 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.

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Analysts polled by Thomson/First Call and reported by Yahoo Finance projected a 10% lower dividend from $30K invested as $1k in each stock in this group while aggregate single share price was projected to increase nearly 7% 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 historically provided more accurate 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 (9): Wall St. Analysts Alleged Net Gains Of 16.63% to 31.57% for 11 Top Sector Dogs by August, 2017

Four of the eleven top dividend yielding sector leader dogs were verified as being among the eleven gainers out of 33 for the coming year based on analyst 1-year target prices. So this time the dog strategy for this collection as graded by Wall St. wizards was 36.4% accurate.

Eleven probable profit generating trades were revealed by Thomson/First Call in Yahoo Finance into 2017. Note that nine of eleven sectors placed representatives in the top eleven by upside and net gain. Financial services and healthcare had two each. Others had one each: energy, industrials, real estate, communication services, and utilities. However, basic materials, and consumer defensive placed no representatives in the net gain and upside top eleven.

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Western Digital (NYSE:WDC), the lone representative from technology, was projected to net $315.69 based on the median target estimate from twenty-six analysts plus dividends less broker fees. The Beta number showed this estimate subject to volatility 20% more than the market as a whole.

Sanofi (NYSE:SNY), the first healthcare firm on the sector leader top gains list, was projected to net $297.62 based on dividends plus a mean target price estimate from three analysts less broker fees. The Beta number showed this estimate subject to volatility 9% less than the market as a whole.

Vodafone Group plc (NASDAQ:VOD) the communications services representative, was projected to net $239.74, based on dividend plus median target price estimates from two analysts less broker fees. The Beta number showed this estimate subject to volatility 34% less than the market as a whole.

American Midstream , the energy dog, was projected to net $209.15 based on the median estimate from five analysts plus dividends less broker fees. The Beta number showed this estimate subject to volatility 10% less than the market as a whole.

Kindred Healthcare (NYSE:KND), the second healthcare facility, was projected to net $199.87 based on a mean target price estimate from seven analysts combined with projected annual dividend less broker fees. The Beta number showed this estimate subject to volatility 12% more than the market as a whole.

Triton International (NYSE:TRTN), the lone industrial representative, was projected to net $199.77 based on dividends plus the median target price estimate from six analysts less broker fees. The Beta number showed this estimate subject to volatility 162% more than the market as a whole.

NorthStar Realty Finance (NYSE:NRF), the representative of the real estate sector, was projected to net $187.10 based on a mean target price estimate from three analysts combined with projected annual dividend less broker fees. The Beta number showed this estimate subject to volatility 60% more than the market as a whole.

Atlantica Yield (NASDAQ:ABY), the utilities representative, was projected to net $182.87 based on the median target price estimate from five analysts combined with projected annual dividend less broker fees. A Beta number was not available for ABY.

Guess?, the lone consumer cyclical representative in the top gainers was predicted to net $160.51 based on dividends plus a mean target price estimate from four analysts less broker fees. The Beta number showed this estimate subject to volatility 59% more than the market as a whole.

The Carlyle Group, the first financial representative in the top gainers was predicted to net $181.96 based on dividends plus a mean target price estimate from twelve analysts less broker fees. The Beta number showed this estimate subject to volatility 88% more than the market as a whole.

Ares Capital Corporation (NASDAQ:ARCC), the second financial representative in the top gainers was predicted to net $168.31 based on dividends plus a mean target price estimate from fourteen analysts less broker fees. The Beta number showed this estimate subject to volatility 35% less than the market as a whole.

The average net gain projected was 21.48% on $11k invested as $1k in each of these eleven Sector Leader dogs. The average beta showed these estimates subject to volatility 18% more than the market as a whole.

Actionable Conclusion (10): (Bear Alert) Analysts Expected One Sector Topper To Show A Net Loss

Probable losing trade revealed by Thomson/First Call in Yahoo Finance in 2017 was:

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Cal-Maine Foods (NASDAQ:CALM), a consumer defensive representative was projected to lose $59.33 based on dividend and a median four analysts including $20 of broker fees. The Beta number showed this estimate subject to volatility 27% less than the market as a whole.

Sector "Loser" CALM Showed A Negative Past Quarter Price History Unlike Analyst Top Dog WDC

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Price performance of Western Digital & Cal-Maine Foods, the two extreme ends of analyst sector leader projections, amazingly, coincide with the analysts. WDC price is indeed up, and CALM down in the past quarter.

Momentum agrees with these forecaster predictions. (Incredible!)

Dog Measures Predicted Bargains From Top Ten Sector Leaders By Both Legacy and Yield

Ten sector topping dividend stocks by yield August 9 per Yahoo Finance data represented all eleven sectors by combining the real-estate and financial services representatives. Sector Leaders ranked themselves by yield as follows:

Actionable Conclusions: Analysts See 5 Lowest Priced of Top Ten Sector Leader Legacy Dogs Deliver (11) 15.71% VS. (12) 11.78% Net Gains from All Ten by August 9, 2017

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$5000 invested as $1k in each of the five Lowest priced stocks in the top Sector Leaders kennel were alleged by analyst 1 year targets to deliver 33.39% more net gain than $5,000 invested as $5k in each of all ten. The second lowest priced sector leading high yield dog, American Midstream , was projected to deliver the best net gain of 20.92%.

Five lowest priced Sector Leaders August 9 were: Telefonica; American Midstream; Guess?; The Carlyle Group; Golar LNG Partners, with prices ranging from $9.90 to $18.39.

Higher priced five sector leading high yield dogs for August 9 were: Alliance Resource; Atlantica Yield; Vector Group; Seagate Technology; GlaxoSmithKline PLC, whose prices ranged from $19.24 to $44.40.

Dog Methods Also Extracted Bargains From Five Lowest Priced Of The Top Ten Sector Representatives by Yield

Ten sector topping dividend stocks by yield August 9 per Yahoo Finance data represented just four of eleven sectors: financial services (1); energy (3); industrials (3); real estate (3); basic materials (0); technology (0); utilities (0); consumer cyclical (0); consumer defensive (0); communication services (0); health (0). They ranked themselves by yield as follows:

Actionable Conclusions: Analysts Forecast 5 Lowest Priced of Top Ten Highest Yield Sector Leader Dogs (13) To Deliver 17.38% VS. (14) 15.01% Net Gains from All Ten by August 9, 2017

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$5000 invested as $1k in each of the five Lowest priced stocks in the top ten highest yield Sector Leaders kennel was judged by analyst 1 year targets to deliver 15.78% more net gain than $5,000 invested as $500 in each of all ten. The very lowest priced Sector Leader high yield dog, American Midstream , was projected to deliver the best net gain of 20.92%.

Lowest priced five sector high yield dogs as of August 9 were: American Midstream; NorthStar Realty Finance; New Residential Investment Corp; Triton International; Ship Finance International (NYSE:SFL), with prices ranging from $12.10 to $15.42.

Higher priced five sector high yield dogs for August 9 were: PennyMac Mortgage Investment (NYSE:PMT); The Carlyle Group; Golar LNG Partners; Crestwood Equity Partners CEQP); Energy Transfer Partners. (NYSE:ETP), whose prices ranged from $15.55 to $42.59.

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.

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.

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

The stocks listed above were suggested only as reference points for your top yield sector leader dog stock research in mid-August, 2016. These were not recommendations.

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.

Three of these sector leading dividend pups qualify as valuable catches! They are listed with the now 51 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. The third quarterly top gain dog will be announced August 22.

For a free copy of both quarterly reports and analysis of the winning Arnold Q1, Q2, & coming Q3 August 22 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!

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 www.dividend.com; finance.yahoo.com; analyst mean target price by Thomson/First Call in Yahoo Finance.

Disclosure: I am/we are long ARR, 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.