Ships And Ports Still Atop Industrial Sector In October

|
Includes: ABB, ASC, CPLP, DHT, FLY, FTAI, GE, HEES, IEP, KO, MCD, NAP, NNA, RRD, SFL, SSW, STNG, TRTN
by: Fredrik Arnold

Summary

Annual yields from ten Industrial Sector leaders averaged 14.73% and they mixed up big time after September. Dow dogs mixed up too showing 3.77% average yield.

Industrial leaders, SSW, IEP, SFL, ABB, TRTN, NNA, NAP, RRD, EURN, & DHT yield ranged 11.72% to 20.81% as of October 19.

Analyst 1yr. target top ten industrial sector upsides averaged 37.74% with net gains averaging 48.07% for FTAI; TRTN; HEES; CPLP; FLY; DHT; STNG; NNA;RRD; ASC.

Thirty Industrial firms averaged 15.25% upsides and 26.17% net gains. Top ten analyst predicted gains ranged 35.03% to 67.85%.

Analysts projected ten top yield industrials to make 8.82% more net gain from $5k invested in the lowest priced five than from the same investment in all ten.

October SML Industrial Dogs

Yield (dividend / price) results from here verified by Yahoo Finance were calculated as of October 19, 2016 for Small, Mid, & Large cap Industrials sector 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.

The Dividend Dogs Rule

The "dog" moniker was earned in three steps: (1) any stock paying a reliable, repeating dividend (2) whose price fell to a point where its yield (dividend/price) (3) grew higher than its peers (such as this Industrials collection), is so tagged. Thus, the highest yielding stocks in any collection became known as "dogs."

Click to enlarge

Fifty For Show

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, and (3) net gain results based on analyst one-year target projections.

The series was recently revised to report on 11 sectors as defined by Morningstar and tracked here: Basic Materials, Communication Services, Consumer Cyclical, Consumer Defensive, Energy, Financial Services, Healthcare,Industrials, Real Estate, Technology, and Utilities.

This article 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 expanded the stock universe to include popular growth equities, as desired.

Dog Metrics Ranked Industrial Stocks by Yield

Click to enlarge

Actionable Conclusion (1): Ships & Ports Float Top Yields Again

The shipping and ports firms sourced five of the top ten industrial stocks showing the biggest yields, placing first, fourth, fifth, eighth, and tenth.

Top yield dog was, DHT Holdings (NYSE:DHT) [1]. The remaining four shipping and ports outfits were: Navios Maritime Midstream (NYSE:NAP) [4]; Navios Maritime (NYSE:NNA) [5]; Ship Finance International (NYSE:SFL) [8]; Seaspan (NYSE:SSW) [10].

The rest were from five distinct industries: Integrated shipping placed second, Euronav (EURB) [2]; business services was third, R.R.Donnelley & Sons (NASDAQ:RRD) [3]; rental and leasing services, sixth, Triton International (NYSE:TRTN) [6]; diversified industrial, seventh, ABB Ltd. (NYSE:ABB) [7]. Finally, in ninth, was a conglomerate, Icahn Enterprises (NYSE:IEP) [9], completed the YChart calculated top ten Industrials sector dogs by yield as of October 19.

Industrial Top Ten And Dogs of The Dow

Relative strengths of the top ten Industrials sector dogs graphed below by yield were plotted as of market close 10/19/2016 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 prices of those ten stocks created the data points shown in green for price and blue for dividend.

Click to enlarge

Actionable Conclusions: (2) Top Ten Industrials Mixed Up

Dividend from $10k invested as $1k in each of the industrial top ten dogs soared after September, while the aggregate single share price of the top ten increased, too. Dividend erupted 23% while total single share price popped up 91.5%.

Click to enlarge

Dow dogs mixed up, also, as aggregate single share price for those ten rose 11.44% between September 22 and October19. Meanwhile, annual dividend from $10k invested as $1K in each of the top ten rose 1.23%, according to IndexArb.

The Dow dogs overbought condition (in which aggregate single share price of the ten exceeded projected annual dividend from $1k invested in each) widened toward its recent August record.

Actionable Conclusion (4): Dow Dogs Retained Their Overbought Status

The overhang was $215 or 53% in January 2016. February pushed the gap higher to $246 or 59%. March saw the chasm at $293 or 73%. April widened the gap to $394 or 102%. A May retreat shrank the gap to $357 or 93%. In June the score settled to $344 or 89% but July broke out with a bang and soared to $486 or 136%. August saw McDonald's (NYSE:MCD) and Coke (NYSE:KO) replace Intel and Merck to make the gap to $487 or 134%. In September General Electric (NYSE:GE) pushed McDonald's out of tenth to lower the gap to $374 or 100%. October found MCD back in and the gap widened to $455 or 121%.

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 September average price per dollar of annual dividend was $26.85.

Compared to the Dow dogs, the industrial top ten, while volatile, are far from overbought, maintaining their "normal" pattern of dividends above price.

In marked contrast to the Dow, Industrials Dog top ten average price per dollar of annual dividend came in at $7.21 as of October 19, which was more than 3.7 times less than the price of an annual dollar of Dow dividends.

Wall Street Wizards Cast Upside & Downside October Industrial Dogs

One-year median target price set by brokerage analysts multiplied by the number of shares in a $1k investment were used to compare 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 were considered best for the most accurate mean target price estimate.

Actionable Conclusions: (4) Ten Industrial Sector Dividend Dogs Showed Upsides of 24.81% to 59.09% per Analyst 1 yr. Targets & (5) One Showed A -3.34% Downside

Click to enlarge

Dog Metrics Tracked September Industrial 30 By Yield

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. Brokers Estimated (6) Average 16.51% Upsides; (7) & 26.17% Net Gains from Top 30 Industrials Dogs By October, 2017

Top thirty sector dogs were graphed below as of October 19, 2016 closing prices as compared to prices projected by analyst mean price target estimates for the same date in 2017.

Click to enlarge

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 upsides 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 13% lower dividend from $10K invested in this group while aggregate single share price was projected to increase by 12% in the coming year (October to October).

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 projection estimate. Estimates provided by one analyst were not applied (n/a).

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 opposite of market direction.

Actionable Conclusion (8): Analysts Argued 10 Industrial Sector Dogs Would Net 35.03% to 67.85% By October, 2017

Four of ten top yielding Industrial sector dogs were verified as being among the top gainers for the coming year based on analyst 1 year target prices. So this month analysts graded the dog strategy as 40% accurate.

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

Click to enlarge

Ardmore Shipping (NYSE:ASC) was projected to net $678.48 based on dividends plus the median of annual price estimates from eleven analysts less broker fees. The Beta number showed this estimate subject to volatility 41% more than the market as a whole.

R.R.Donnelley & Sons was projected to net $610.74 based on estimated dividends plus mean target price estimate from two analysts less broker fees. The Beta number showed this estimate subject to volatility 72% more than the market as a whole.

Navios Maritime Acquisition Corporation was projected to net $574.20, based on dividend plus median target price estimates from seven analysts less broker fees. The Beta number showed this estimate was subject to volatility 28% more than the market as a whole.

Scorpio Tankers Inc. (NYSE:STNG) was projected to net $553.03 based on the median of estimates from seventeen analysts plus dividends less broker fees. The Beta number showed this estimate subject to volatility 47% more than the market as a whole.

DHT Holdings, Inc. was projected to net $545.61 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 27% less than the market as a whole.

Fly Leasing (NYSE:FLY) was projected to net $379.18 based on the median target price estimate from six analysts plus dividends less broker fees. The Beta number showed this estimate subject to volatility 115% more than the market as a whole.

Capital Product Partners (NASDAQ:CPLP) was projected to net $376.10 based on dividends plus the median target price estimate from seven analysts less broker fees. The Beta number showed this estimate subject to volatility 60% more than the market as a whole.

H&E Equipment Services (NASDAQ:HEES) was projected to net $375.50 based on the low target price estimate from five analysts combined with projected annual dividend less broker fees. The Beta number showed this estimate subject to volatility 155% more than the market as a whole.

Triton International was projected to net $364.27, based on dividends plus a median target price estimate from six analysts less broker fees. The Beta number showed this estimate subject to volatility 184% more than the market as a whole.

Fortress Transportation (NYSE:FTAI) was projected to net $350.28 based on estimates from nine analysts plus dividends less broker fees. A Beta number was not available for FTAI.

Average net gain in dividend and price was 48.07%. The average Beta number showed these estimates subject to volatility 48% more than the market as a whole.

Top vs Bottom Three Month Price Histories Contradict Broker Upside Predictions

Click to enlarge

Price performance of Ardmore Shipping & Icahn Enterprises , the two extreme ends of analyst Industrial sector projections, show parallel sinking paths year to date.

However, in contrast to the broker stated expectation, the favored Ardmore price has dropped lower while the Icahn history has stayed higher, yet declining, too.

Momentum favors neither forecaster prediction. What market or operating conditions will conspire to lift future prices for the shipper as the conglomerate continues to slide?

Analysts Predict An 8.82% Advantage For Five Lowest Priced Highest Yield October Industrial Sector Dogs

Ten small, mid, and large cap industrial equities were culled by yield from 50 industrial sector equity choices from here. Yield (dividend / price) results verified by Yahoo Finance did the ranking.

Click to enlarge

Actionable Conclusions: (10) Analysts Projected 5 Lowest Priced of Ten Highest Yield Making 34.28% VS. (11) 31.5% Net Gains From All Ten Industrial Dogs as of October 19, 2017

Click to enlarge

$5000 invested as $1k in each of the five Lowest priced stocks in the top ten basic materials dividend kennel by yield were predicted by analyst 1 year targets to deliver 8.82% more net gain than $5,000 invested as $500 in each of the top ten. The eighth lowest priced industrial dividend dog, R.R.Donnelley & Sons , was projected to

Lowest priced five industrials dividend dogs for October 19 were: Navios Maritime Acquisition Corporation; DHT Holdings Inc.; Euronav; Navios Maritime Midstream; Seaspan, whose prices ranged from $1.38 to $12.80.

Higher priced five industrials dividend dogs for August 22 were: Triton International ; Ship Finance International; R.R.Donnelley & Sons; ABB Ltd.; Icahn Enterprises, whose prices ranged from $13.22 to $47.07.

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 mostly works here too.

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.

Stocks listed above were suggested only as decent starting points for a small, mid, and large cap Industrials sector dog dividend stock investment research process in late-September, 2016. These were not recommendations.

See my instablog for specific instructions about how to best use the dividend dog data featured in this article.

Gains/declines as reported did 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.

Nine of these industrials sector dividend pups qualify as valuable catches! They are listed with the 52 Dogs Of The Week (DOTW) found on The Dividend Dog Catcher premium site. Click here to subscribe or get more information.

Root for the Underdog and celebrate the top dividend net gainers for the past year at the free for all first annual dividend dog of the year award webinar on shindig. Wednesday, November 16 at 11AM to Noon EST. Go here to reserve your seat: http://events.shindig.com/event/dogofyearaward.

For a free copy of the 12 monthly top dogs list, including updates on the Q1, Q2, and the Q3 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 ycharts.com/screener; dividend.com; finance.yahoo.com; analyst mean target price by Thomson/First Call in Yahoo Finance. Dog Photo: samcom.ro

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