7 Russell 1000 Dividend Dogs Nip 19% To 49% December Upsides

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Includes: AGNC, CIM, CLF, CLNS, FCX, GLPI, IQV, MFA, OUT, RRD, SDRL, SEAS, STWD, TWO, VER, WIN
by: Fredrik Arnold

Summary

10 Russell 1000 big-cap dividend dogs were pegged by 1-year analyst target price upsides to average 25.5% as of December 8.

Ranked by yield, top 10 Russell 1000 dogs dithered down as both price and dividend swooned. Meanwhile, 10 Dow dividend dogs dithered up after November.

Analysts projected average 30% 1-year net gains for FCX, CLF, NRF, RRD, SEAS, ARCP, OUT, GLPI, IMS, and WIN.

Consider these as starting points for your December Russell 1000 Index dividend dog equities purchase/sale research.

Basic Materials, Financials, Services, And Technology Issues Lead Russell Large-Cap Pack In NoDecember Upsides

Results from Yahoo Finance tallied for Russell 1000 Index members as of market closing prices December 8 compared to analyst mean target price projections one year hence.

In September, the resulting chart of that data showed three top stocks exhibiting 38% to 57% price upsides. November 12 upside potential in the wake of the late summer market pullback still was strong with three top stocks exhibiting 26% to 43% price upsides even as analysts lowered their targets. As of December 8, the Russell 1000 "three leaders of the pack" were pegged to deliver 31.5% to 49% upsides. The price fallout persists and leaders change when dividends are cut or canceled.

R.R. Donnelley & Sons (NASDAQ:RRD), the Chicago-based business service provider from the services sector, exhibited a 37.95% upside in September, which dropped to 25.8% in November, then recovered to 31.5% to keep RRD locked in third place of the top three in December.

September holder of the top spot, Cliffs Natural Resources (NYSE:CLF), was dismissed by November analysts whose mean target price was pegged below market. CLF now reappears on the list in second place for December with a 35.87% upside estimate from 14 analysts.

Seadrill (NYSE:SDRL), the offshore drilling contractor appropriately based in Hamilton, Bermuda, posted an upside number just under 48.5% in September. After analysts revised the SDRL mean target price down from $37.82 to $30.50, the gap was still sufficient to move SDRL to the top for November by upside at 43.39% to lead the Russell 1000 Index of large-cap stocks.

SDRL is now off the December charts having suspended its dividend, as of November 26.

The December leader of the Russell 1000 upside dog team is Freeport-McMoRan Copper & Gold (NYSE:FCX) sporting a 49.22% median 1 yr. target price gain estimate from 20 analysts.

This report presumed yield (dividend/price) dividend dog methodology applied to any index and compared that index side by side with the Dow. Below, Arnold active dog selections for NoDecember were disclosed step by step. Four actionable conclusions were drawn.

Actionable Conclusion (1): 10 Russell 1000 Dogs Sought 9.24% To 49.22% Upsides Per Analyst 1-Year NoDecember Targets

The chart above used one year mean target price set by brokerage analysts multiplied by the number of shares in a $1k investment to compare 10 Russell 1000 Index stocks showing the highest upside price potential into 2015 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 optimal for a valid mean target price estimate.

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; Russell 1000; Russell 2000; Russell Combined; NASDAQ 100; Champions; Contenders; Challengers; CCC Combined Global. Bonus reports covered, Bad Boy AllStars and Sector Leaders.

Fifty For The Money: Dog Metrics Screened Russell 1000 Index Stocks By Yield

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.

Russell Investments states:

"The Russell 1000 Index measures the performance of the large-cap segment of the U.S. equity universe. It is a subset of the Russell 3000® Index and includes approximately 1000 of the largest securities based on a combination of their market cap and current index membership. The Russell 1000 represents approximately 92% of the U.S. market.

The Russell 1000 Index is constructed to provide a comprehensive and unbiased barometer for the large-cap segment and is completely reconstituted annually (in June) to ensure new and growing equities are reflected."

Top ten stocks in this index promising the biggest yields in November represented three of nine sectors: financials, technology, and basic materials.

Seven financial firms placed first through fourth, and sixth to eighth: American Capital Agency (NASDAQ:AGNC) [1]; American Realty Capital (ARCP) [2]; Chimera Investment (NYSE:CIM) [3]; Annaly Capital Management (NYSE:NLY) [4]; Two Harbors Investment (NYSE:TWO) [6]; MFA Financial (NYSE:MFA) [7]; Northstar Realty Finance (NRF) [8].

The lone technology representative paced fifth, Windstream Holdings (NASDAQ:WIN) [5]. The single basic materials representative placed ninth, Cliffs Natural Resources (CLF) [9]. Finally, one remaining financial REIT took the tenth slot, Starwood Property Trust (NYSE:STWD) [10] to complete the Russell 1000 top 10 December dogs by yield.

Dividend Vs. Price Results Compared To Dow Dogs

Relative strengths of the top 10 Russell 1000 dogs by yield as of market close 12/8/2014 compared to those of the Dow were graphed below. Projected annual dividend history from $10,000 invested as $1k in each of the 10 highest yielding stocks and the total single share prices of those 10 stocks created the data points shown in green for price and blue for dividend.

Actionable Conclusion (2): Russell 1000 Dithers Down And Dow Dithers Up

The November Russell 1000 collection of dividend payers sank in both dividend and price. Top 10 dog annual dividend from $10k invested as $1k in each dog decreased xx% through November while aggregate single share price of the 10 dropped 2.7%. This mixed or dithering move was triggered by strong dividend payers, such as Seadrill, suddenly suspending dividends and exiting the list.

Meanwhile, Dow dogs mixed up showing 0.03% more annual dividend from $10k invested as $1K in each of the top 10 while aggregate single share price for the 10 soared 6% between November 5 and December 5.

As a result, the Dow dogs overbought condition (in which aggregate single share price of the 10 exceeded projected annual dividend from $10k invested as $1k each in those 10) returned to near its record September high.

The overhang was $145 or 38% for January; retreated to $125 or 33% in February; swelled to $149 or 40% in March; expanded to $173 or 47% in April; shrank to $170 or 46% come May; swelled to $215 or 59% for July; fell back to $197 or 53% in August; widened to $239 or 65% in September; fell to $199 or 53% through October; widened again to $230 or 62% through November.

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 Conclusion (3): Wall St. Wizards Wanted 15% Average Net Gain From Top 30 Russell 1000 Dogs By December 2015

Top 30 dogs from the Russell 1000 Index were graphed below to show relative strengths by dividend and price as of December 8, 2014 along with dividend and price projected by analyst mean price target estimates to the same date in 2015.

A hypothetical $1,000 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.

Historical prices and actual dividends paid from $30,000 invested as $1k in each of the highest-yielding stocks and the aggregate single share prices of those 30 stocks divided by 3 created data points for 2014. Projections based on estimated increases in dividend amounts from $1,000 invested in the 30 highest yielding stocks and aggregate one-year analyst target share prices from Yahoo Finance divided by 3 created the 2015 data points green for price and blue for dividend.

Yahoo projected 8% lower dividend from $10k invested in this group while aggregate single share price was projected to increase nearly 9% 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 estimate.

A beta (risk) ranking for each analyst rated stock was provided in the far right column on the above chart. A beta of one meant the stock's price would move with the market. Less than one showed lower than market movement. Higher than one showed greater than market movement. A negative beta numbers indicated the degree of a stock's movement opposed to market direction.

Actionable Conclusion (4): Analysts Forecast 10 Russell 1000 Dividend Dogs To Net 17.75% to 52.18% By December 2015

Four of the top-yielding dividend Russell 1000 dogs were found among the top 10 gainers for the coming year by analyst 1-year target prices. So this month, the dog strategy as graded by Wall St. wizards was 40% accurate.

10 probable profit-generating trades reported by Thomson/First Call in Yahoo Finance for 2015 were:

Freeport-McMoRan C&G was projected to net $521.98, based on a median target price estimate from 20 analysts, combined with projected annual dividend, less broker fees. The beta number showed this estimate, subject to volatility, 52% more than the market as a whole.

Cliffs Natural Resources was projected to net $420.22, based on dividends, plus median target price estimates from 14 analysts, less broker fees. The beta number showed this estimate, subject to volatility, 110% greater than the market as a whole.

Northstar Realty Finance was projected to net $361.96, based on dividends, plus median target price estimate from six analysts, less broker fees. The beta number showed this estimate, subject to volatility, 13% more than the market as a whole.

R.R. Donnelley & Sons was projected to net $358.59, based on dividends, plus the median of annual price estimates from two analysts, less broker fees. The beta number showed this estimate, subject to volatility, 96% greater than the market as a whole.

SeaWorld Entertainment (NYSE:SEAS) was projected to net $302.18, based on a median target price estimate from 10 analysts, combined with projected annual dividend, less broker fees. The beta number showed this estimate, subject to volatility, 105% greater than the market as a whole.

American Realty Capital was projected to net $285.77, based on dividends, plus median target price estimates from three analysts, less broker fees. The beta number showed this estimate, subject to volatility, 77% less than the market as a whole.

Outfront Media (NYSE:OUT) was projected to net $256.64, based on estimates from six analysts, plus dividends, less broker fees. A beta number was not available for OUT.

Gaming and Leisure Properties (NASDAQ:GLPI) was projected to net $117.23, based on dividends, plus the median of annual price estimates from nine analysts, less broker fees. A beta number was not available for GLPI.

IMS Health Holdings (IMS) was projected to net $178.80, based on dividends, plus a mean target price estimate by 13 analysts, less broker fees. The beta number showed this estimate, subject to volatility, 15% opposite the market as a whole.

Windstream Holdings was projected to net $177.48, based on dividends, plus mean target price estimate from 10 analysts, less broker fees. The beta number showed this estimate, subject to volatility, 30% more than the market as a whole.

The average net gain in dividend and price was over 30.9% on $10k invested as $1k in each of these 10 dogs. This gain estimate was subject to average volatility 1% more than to the market as a whole.

The net gain/loss 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/sale 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 www.russell.com/indexes; finance.yahoo.com; analyst mean target price by Thomson/First Call in Yahoo Finance.

Disclosure: The author is long CSCO, GE, PFE, 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.