Industrial Sector Dividend Safety Check Favors 20 Of 50 In October

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Includes: DLNG, EURN, GMLP, KNOP, NAP, NNA, RRD, TNK, TNP
by: Fredrik Arnold

Summary

Twenty of 50 October industrial sector dogs dividends are safe because their reported free cash flow yield exceeds dividend yield. So, those 20 have sufficient margin to pay promised dividends.

Top 10 safe yields from DCI.TO; TNK; KNOT; AIM.TO; GMLP; DLNG; NNA; NAP; RRD; EURN ranged 7.57% to 16.91%. Cash flow yields ranged 11.02% to 55.34%.

Besides their safety margin, Industrial Sector dogs were also screened for low payout ratios, total annual returns and dividend growth as of the October 19 market close.

Broker targets revealed lowest priced five of ten top yield safe Industrial Sector dogs aiming at 15.34% more gains from $5k invested than from $5K invested in all ten.

The 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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What Industries In The Industrial Sector Show Up As "Safe"?

The eight industrial sector industries listing cash margins greater than their announced annual dividends are: integrated shipping; business services; shipping & ports; business equipment; engineering & construction; diversified industrials; railroads; staffing & outsourcing services.

Top ten Industrial sector dogs showing the biggest dividend yields by this screen as of October 19 represented four industries: (1) integrated shipping had one stock; (2) business services included two stocks; (3) shipping & ports had six stocks; (4) business equipment showed one stock.

20 Industrials Report Cash Margins to Cover Dividends

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Periodic Safety Inspection

A previous article discussed the attributes of 50 Industrial stocks from which these twenty were sorted. You see below the list that passed the dividend "stress" test. These twenty Industrial dogs report sufficient annual cash flow yield to cover their anticipated annual dividend yield. The margin of excess is shown in the bold face "Safety Margin" column.

Financial guarantees however are easily over-ruled by a cranky board of directors or company policy canceling or varying the payout of dividends to shareholders. For example, Teekay Tankers (NYSE:TNK) on the list below has paid a variable quarterly dividend that has ranged from $.03 to $.12 over the past year. Tsakos Energy Navigation (NYSE:TNP) cut its quarterly dividend from $0.15 to $0.05 as of January 2013, where it has remained.

Three additional columns of industrial data listed after the Safety Margin figures reveal payout ratios, total annual returns, and dividend growth levels for each stock. This data can be very useful for going beyond yield in picking reliable payout stocks.

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Dog Metrics Found Bargains In Industrial "Safe" Stocks

Ten "Safest" top industrial dividend equities that showed the biggest yields October 19 per YCharts data ranked themselves by yield as follows:

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Actionable Conclusions: (1) Analysts Expect 5 Lowest Priced of "Safe" Ten High Yield Industrial Dogs To Deliver 27.4% VS. (2) 23.76% Net Gains from All Ten by October, 2017

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$5000 invested as $1k in each of the five lowest priced stocks in the "safe" ten Industrial kennel by yield were determined by analyst 1 year targets to deliver 15.34% more net gain than $5,000 invested as $.5k in all ten. The very lowest priced safe Industrial dog, Navios Maritime (NYSE:NNA) showed the best net gain of 57.42% per analyst targets.

Lowest priced five "safe" Industrial Sector dogs as of October 19 were: Navios Maritime Acquisitions; Teekay Tankers; Aimia (AIM.TO); Euronav (NYSE:EURN); Navios Maritime Midstream (NYSE:NAP), with prices ranging from $1.38 to $11.53.

Higher priced five "safe" Industrial dogs for October 19 were: Dynagas LNG Partners (NYSE:DLNG); DirectCash Payments (DCI.TO); R.R.Donnelley & Sons (NASDAQ:RRD); KNOT Offshore Partners (NYSE:KNOP); Golar LNG Partners (NASDAQ:GMLP), whose prices ranged from $15.95 to $21.92.

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. It's 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 net gain estimates mentioned 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 apply the dividend dog data featured in this article.--Fredrik Arnold

Stocks listed above were suggested only as possible starting points for your safest Industrial dog dividend stock research process. These were not recommendations.

Four of these industrial sector dividend pups qualify as valuable catches! Find them as three of the now 52 Dogs of the Week 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. 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; finance.yahoo.com; analyst mean target price by Thomson/First Call in Yahoo Finance. Dog photo from: ickypeny.com.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

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.