10 Contender Dividend Dogs Uncover 18% To 45% December Upsides

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Includes: APU, ARLP, BBL, BHP, BPL, EPD, GEL, HEP, OKE, PAA, STON, TCP, TGP, TLP, VGR, WMB, WPZ
by: Fredrik Arnold

Summary

10 Contender divi-dogs (with 10 to 24 years of regular dividend raises) uncovered 1-year analyst target price upsides averaging 30.77% as of December 18. One downsider lagged 8.48%.

Contender and Dow dogs both retreated from bears into December.

Analysts projected average 34.5% 1-year net gains for WMB, WPZ, OKE, BHP, GEL, ARLP, EPD, BBL, PAA, and HEP. They predicted TCP to lose 8.5%.

Consider these stocks as likely starting points for your dividend Contender stock investment research.

Yield (dividend/price) results from David Fish's Dividend Contenders Index members (as of the December 18 market close) tallied from Yahoo Finance were compared with analyst mean target gain results one year out. The chart below showed nine basic materials, and one utility stock posted 18.36% to 45.09% price upsides. However, one basic materials representative was expected to lose 8.48% for investors in the coming year.

Below, six actionable conclusions were drawn as Arnold top dog selections for December by price upside, yield, and net gain were disclosed step by step.

Actionable Conclusion (1) Analysts Expect Ten Contender Dogs To Average 34.49% Upsides; (2) One To Post An 8.5% Loss Come December 2015

Forty-five For the Money

This article was written to reveal bargain stocks to buy and hold from December to June or perhaps 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, if desired.

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.

Dog Metrics Measured Contender Dog Stocks by Yield

David Fish's November 28 Contenders list (from here) contained stocks distinguished as having paid increasing dividends for 10 to 24 years. Contenders stocks listed below were ranked by yields calculated as of December 18 to reveal the top ten. Price data was sourced from Yahoo.com. Annual dividend calculations as of 11/28 came from dripinvesting.org.

Four of nine Yahoo Finance market sectors were represented in the top ten contenders dog list selected by yield below: services; basic materials; utilities; and consumer goods. Top dog StoneMor Partners LP (NYSE:STON) [1] was one of two services firms. The other services firm, placed seventh, was Teekay LNG Partners LP. (NYSE:TGP) [7].

In second and third place were two of six basic materials firms listed, Williams Partners LP (NYSE:WPZ) [2]; and Transmontaigne Partners LP (NYSE:TLP) [3]. A lone utility took fourth place, AmeriGas Partners LP (NYSE:APU) [4]. A lone consumer goods stock earned fifth place, Vector Group Ltd. (NYSE:VGR) [5]. The balance of the top ten contenders were the other four basic materials firms placing sixth, and eighth through tenth: Holly Energy Partners LP (NYSE:HEP) [6]; Alliance Resource Partners LP (NASDAQ:ARLP) [8]; Buckeye Partners LP (NYSE:BPL) [9]; and BHP Billiton plc (NYSE:BBL) [10]. These completed the top ten contenders dog yield show for December.

Dividend vs. Price Results Compared to Dow Dogs

Relative strengths of the top ten Dividend Contender dogs by yield as of market close 12/18/2014 compared to those of the Dow were graphed as shown below. Historical projected annual dividend history from $1000 invested in each of the ten highest-yielding stocks and the total single share prices of those ten stocks created the data points as shown in green for price and blue for dividend.

Actionable Conclusion (3): Contenders & Dow Dogs Were Both Bearish

Contenders top December dividend payers reversed a brief bullish course after November to retreat on the bear path. In the past month, the Contenders top ten dog dividend rose 4.6%, while price dropped 12% to get bearish.

Dow dogs got bearish, showing 8% more annual dividend from $10k invested as $1K in each of the top ten, while the aggregate single share price dropped 4.5% after November 17.

As a result, the Dow dogs' overbought condition (in which aggregate single share price of the ten exceeded the projected annual dividend from $10k invested as $1k each in those ten) shrank from its record November 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; widened again to $257 or 70% into November; but narrowed to $198 or 50% December 15.

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, the analyst mean price target is another tool used to dig out bargains.

Actionable Conclusion (4): Wall St. Wizards Willed A 14.82% Average Net Gain from Top 30 Dividend Contenders December Dogs Come 2015

The top thirty dogs from David Fish's Dividend Contenders collection were graphed below to show relative strengths by dividend and price as of December 18, 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.

Historical 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 data points for 2014. 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 2015 data points as shown in green for price and blue for dividend.

Yahoo projected a 9% lower dividend from $30K invested as $1k in each member of this group, while the average aggregate single share price was projected to increase 12% 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 have demonstrated the best history for valid estimates.

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 stock's movement opposite of market direction.

Actionable Conclusion (5) : Analysts Forecast 10 Dividend Contender Dogs to Net 23.3% to 48.2% By December 2015

Four of the ten top dividend-yielding Contender 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 as graded by Wall St. wizards was 40% accurate.

Probable profit generating trades were revealed by Thomson/First Call in Yahoo Finance into 2015:

Williams Companies (NYSE:WMB) was projected to net $481.79, based on dividends plus the mean of annual price estimates from fourteen analysts less broker fees. The Beta number showed this estimate subject to volatility 27% less than the market as a whole.

Williams Partners LP was projected to net $427.95, based on a median target price estimate from fourteen analysts, combined with projected annual dividend less broker fees. The Beta number showed this estimate subject to volatility 52% less than the market as a whole.

ONEOK Inc. (NYSE:OKE) was projected to net $379.02, based on dividends plus median target price estimate from twelve analysts less broker fees. The Beta number showed this estimate subject to volatility 6% less than the market as a whole.

BHP Billiton Ltd. (NYSE:BHP) was projected to net $360.73, based on dividends plus median target price estimate from four analysts less broker fees. The Beta number showed this estimate subject to volatility 15% more than the market as a whole.

Genesis Energy LP (NYSE:GEL) was projected to net $357.48, based on dividends plus median target price estimate from nine analysts less broker fees. The Beta number showed this estimate subject to volatility 37% less than the market as a whole.

Alliance Resource Partners was projected to net $334.82, based on a median target price estimate from six analysts, combined with projected annual dividend less broker fees. The Beta number showed this estimate subject to volatility 59% less than the market as a whole.

Enterprise Products (NYSE:EPD) was projected to net $295.77, based on dividends plus the median of annual price estimates from twenty analysts less broker fees. The Beta number showed this estimate subject to volatility 16% less than the market as a whole.

BHP Billiton plc was projected to net $291.89, based on dividends plus the median of annual price estimates from three analysts less broker fees. The Beta number showed this estimate subject to volatility 15% more than the market as a whole.

Plains All American Pipeline LP (NYSE:PAA) was projected to net $287.18, based on dividends plus median target price estimate from twenty-three analysts less broker fees. The Beta number showed this estimate subject to volatility 33% less than the market as a whole.

Holly Energy Partners was projected to net $233.30, based on dividends plus median target price estimate from five analysts less broker fees. The Beta number showed this estimate subject to volatility 46% less than the market as a whole.

The average net gain in dividend and price was nearly 34.5% on $1k invested in each of these ten dogs. This gain estimate was subject to average volatility 25% less than the market as a whole.

Actionable Conclusion (6): (Bear Alert) Analysts Forecast 1 Contender Dog to Post A Net Loss of 8.5% By 2015

The probable losing trade revealed by Thomson/First Call in Yahoo Finance into 2015:

TC Pipelines LP (NYSE:TCP) lost $56.93, based on dividend and a median target price estimate from ten analysts, including $20 in broker fees. The Beta number showed this estimate subject to volatility 49% less than the market as a whole.

The net gain and 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.

The stocks listed above were suggested only as possible starting points for your index dog dividend stock purchase or 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.indexarb.com; http://dripinvesting.org/Tools/Tools.asp; finance.yahoo.com; analyst mean target prices by Thomson/First Call in Yahoo Finance.

Disclosure: The author is long 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.