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." More specifically, these are, in fact, "underdogs".
One Communication Service Industry Showed More Cash Margin For Dividends
Just two industries compose the sector, telecom services, and pay TV. No pay TV firms made the list of 14. Thus, the top ten communication services sector dogs showing the biggest dividend yields by this screen as of November 25 were all from telecom services.
14 Telecom Services Firms Were Backed By Cash Flow Margins to Cover Dividends
Periodic Safety Check
Another article will discuss the attributes of these 50 communication services stocks from which these fourteen were sorted. You see below the list that passed the dividend "stress" test. These 14 Comm Services 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, Mobile Telesystems (NYSE:MBT) on the list below now issues variable semi-annual dividends. Also CenturyLink (NYSE:CTL) cut its quarterly dividend paid at $0.725 since March, 2010, to $0.54 as of March, 2013 where it has remained. In another case, Telstra (OTCPK:TLSYY) pays a variable semi-annual dividend since 1998.
Three additional columns of industrial data listed after the Safety Margin figures reveal payout ratios (lower is better), total annual returns, and dividend growth levels for each stock. This data is provided to reach beyond yield to select reliable payout stocks.
Dog Metrics Revealed Bargains In "Safe" Dividend Communication Services Stocks
Ten "Safest" top Comm Services firms that showed the biggest yields November 25 per YCharts data ranked themselves by yield as follows:
Actionable Conclusions: (1) Analysts Predict 5 Lowest Priced of Ten "Safe" Dividend High Yield Communication Services Sector Dogs To Deliver 9.38% VS. (2) 6.96% Net Gains from All Ten by December, 2017
$5000 invested as $1k in each of the five lowest priced stocks in the "safe" ten Comm Services kennel by yield were determined by analyst 1 year targets to deliver 34.84% more net gain than $5,000 invested as $.5k in all ten. The second lowest priced safe dividend Comm Services Sector dog, Mobile Telesystems showed the best net gain of 25.3% per analyst targets.
Lowest priced five "safe" Communication Services dogs as of November 25 were: PCCW Limited (OTCPK:PCCWY); Mobile Telesystems; Inmarsat (OTCPK:IMASF); Telenor ASA (OTCPK:TELNY); Telstra Corporation Limited, with prices ranging from $5.55 to $18.66.
Higher priced five Safe Dividend Communication Services dogs as of November 25 were: CenturyLink; Consolidated Communications Holdings (NASDAQ:CNSL); AT&T Inc. (NYSE:T); BCE Inc. (NYSE:BCE); BCE Inc. (BCE.TO), with prices ranging from $24.66 to $58.16.
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 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.
Stocks listed above were suggested only as possible starting points for your safest Industrial dog dividend stock research process. These were not recommendations.
Two of these communication services sector dividend pups qualify as valuable catches! Find them as five of the now 52 Dogs of the Week found on The Dividend Dog Catcher premium site. Click here to subscribe or get more information.
It's about time to make investing fun again. For a free copy of the monthly top dogs, the quarterly reports, and the dog of the year winner from the 52 Dogs of the Week, send your e-mail address, ticker symbol for your favorite dividend stock, and name of your favorite team of any sport or activity to: firstname.lastname@example.org. Remember: E-mail, ticker, team!
Root for the Underdog.
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: teletextholidays.co.uk.
Disclosure: I am/we are long T, 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.