Yield (dividend/price) results from here verified by Yahoo Finance for small, mid, and large cap Healthcare stocks as of market closing prices as of June 12 compared with analyst 1-yr target projections led to four actionable conclusions discussed below. Small cap firms were valued at $200M to $2B; mid cap firms were worth $2B to $10B; large caps were valued north of $10B.
Wall Street Wizard Weights
One-year mean 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 2015 out of 20 selected by yield. The number of analysts providing price estimates was noted after the name for each stock. Three to nine analysts were optimal for a valid mean target price estimate.
Actionable Conclusion (1) Ten June Healthcare Dividend Dogs Formulated 7.4% to 44.3% Upsides
Thirty For the Money
Since the fall of 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 year the series expanded to report (1) dividend yield; (2) price upside; (3) net gain results based on analyst 1 yr. target projections.
Dog dividend methodology is based on Michael B. O'Higgins book "Beating The Dow" (HarperCollins, 1991), which revealed how high yielding stocks whose prices increased (and whose dividend yields therefore decreased) could be sold off once a year to sweep gains and reinvest the seed money into higher yielding stocks in the same index. Now named Dogs of the Dow, O'Higgins system also works to find bargains in any collection of dividend paying stocks. Utilizing analyst price upside estimates has expanded the stock lists to include popular growth equities, if desired.
Dog Metrics Gauged Health Stocks by Yield
Top ten healthcare sector dogs showing the biggest dividend yields by this screen as of June 12 represented just two industries: (1) drug manufacturers - major; (2) diagnostic substances. Top healthcare sector stocks was one of eight drug manufacturers - major on this list, GlaxoSmithKline (NYSE:GSK) was top dog by yield.
Diagnostic substances firms were represented in second, and third places by Trinity Biotech plc (NASDAQ:TRIB) and Meridian Bioscience, Inc. (NASDAQ:VIVO). In fourth through tenth places were the remaining drug manufacturers - major: AstraZeneca (NYSE:AZN),; Sanofi SA (NYSE:SNY); Pfizer (NYSE:PFE); Eli Lilly and Company (NYSE:LLY); AbbVie Inc. (NYSE:ABBV); Bristol-Myers Squibb (NYSE:BMY); Novartis (NYSE:NVS) to complete the top ten healthcare dogs.
Sector Leader Dividend vs. Price Results Compared to Dow Index Dogs
Graphs below compared relative strengths of the top ten healthcare sector dogs by yield as of market close 6/12/2014 with those of the Dow industrials index. Annual dividend history from $10,000 invested as $1k in each of the ten highest yielding stocks along with the total single share price of those ten stocks made the data points shown in green for price and blue for dividends.
Actionable Conclusion (2): Healthcare Pups Were Mauled in May as Dow Dogs Stayed Bullish
The Healthcare collection of dividend payers reversed its bullish course after May as total single share price dropped 6.7% and aggregate dividend from $10k invested as $1k in each of the top ten healthcare dogs inclined at a rate of 2.7%. The healthcare pack remained in overbought territory as aggregate single share price stayed higher than dividend derived from $10K invested as $1k in each. December/January healthcare top ten price exceeded dividend by $76 or 20%; in February the overhang jumped to $133 or 37%; March saw the gap widen to $141 or 40%; April expanded to $178 or 50%; May's overbought exuberance grew to $190 or 54%; the June overhang moderated to $144 or 40%.
Dow dogs frolicked as projected annual dividend from $10k invested as $1K in each of the top ten declined 0.9% since May. At the same time aggregate single share price moved up 0.48% to confirm the bullish turn. The Dow dogs overbought condition in which aggregate single share price of the ten exceeded projected annual dividend from $1k invested in each of the ten increased. The overhang of $111 or 29% in December/January, grew to $132 or 35% in February, expanded to $136 or 36% in March, widened again to $180 or 49% for April, retreated to $167 or 43% in May, then expanded to $193 or 53% for June.
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" metric, analyst mean price target estimates is another tool used to dig out bargains.
Actionable Conclusion (3): Wall Street Wizards Wrought A 9.44% Net Gain from Top 20 Healthcare Dogs Come June 2015
Top twenty dogs from the Healthcare sector were graphed below to show relative strengths by dividend and price as of June 12, 2014 and those projected by analyst mean price target estimates to the same date in 2015.
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 price upsides and net gains including dividends less broker fees as of 2015.
Historic prices and actual dividends paid from $20,000 invested as $1k in each of the highest yielding stocks and the aggregate single share prices of those twenty stocks divided by 2 created data points for 2014. Projections based on estimated dividend amounts from $1000 invested in the twenty highest yielding stocks and aggregate one year analyst target share prices from Yahoo Finance divided by 2 created the 2015 data points green for price and blue for dividend.
Yahoo projected a 8% lower dividend from $10K invested as $1k in ten dogs in this group while aggregate single share price for those ten was projected to increase by 7.4% 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 was considered optimal for a valid projection estimate. Estimates provided by one analyst were not applied (n/a).
A beta (risk) ranking for each stock was provided in the far right column of 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 (4): Analysts Allege Ten Healthcare DiviDog Net Gains of 7.4% to 44.3% by June 2015
Five of the ten top dividend yielding healthcare dogs were verified as being among the ten gainers for the coming year based on analyst 1 year target prices. So this month the dog strategy for the financial sector as graded by Wall St. wizards was 50% accurate.
Ten probable profit generating trades were revealed by Thomson/First Call in Yahoo Finance for 2015:
Trinity Biotech plc netted $461.34 based on estimates from four analysts plus dividends less broker fees. The Beta number showed this estimate subject to volatility 9% less than the market as a whole.
Pfizer netted $188.49 based on dividends plus mean target price estimate from fifteen analysts less broker fees. The Beta number showed this estimate subject to volatility 22% less than the market as a whole.
Bristol-Myers Squibb netted $175.18 based on dividends plus the mean of annual price estimates from seventeen analysts less broker fees. The Beta number showed this estimate subject to volatility 65% less than the market as a whole.
Amgen (NASDAQ:AMGN) netted $143.68 based on dividends plus the mean of annual price estimates from twenty analysts less broker fees. The Beta number showed this estimate subject to volatility 592% less than the market as a whole.
GlaxoSmithKline PLC netted $136.05 based on dividends plus a mean target price estimate from three analysts less broker fees. The Beta number showed this estimate subject to volatility 35% less than the market as a whole.
Teva Pharmaceutical (NYSE:TEVA) netted $104.47 based on mean target price estimates from twenty-two analysts plus dividends less broker fees. The Beta number showed this estimate subject to volatility 5% more than the market as a whole.
Baxter International, Inc. (NYSE:BAX) netted $104.38 based on estimates from twelve analysts plus dividends less broker fees. The Beta number showed this estimate subject to volatility 44% less than the market as a whole.
Select Medical Holdings (NYSE:SEM) netted $94.06 based on dividend plus a mean target price estimate from six analysts less broker fees. The Beta number showed this estimate subject to volatility 28% greater than the market as a whole.
MSA Safety (NYSE:MSA) netted $91.37 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 50% greater than the market as a whole.
Sanofi SA netted $89.50, based on dividends plus mean target price estimate from three analysts less broker fees. The Beta number showed this estimate subject to volatility 14% more than the market as a whole.
Average net gain in dividend and price was 15.89% on $10k invested as $1k in each of these ten dogs. This gain estimate was subject to average volatility 14% less than the market as a whole.
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 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.
Graphs and charts were compiled by Rydlun & Co., LLC from data derived from Yahoo Finance; analyst mean target price by Thomson/First Call in Yahoo! Finance.
Disclosure: The author is long PFE, CSCO, CVX, GE, INTC, MCD, MSFT, T, VZ. The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.