6 Champion Dividend Dogs Chase 10.7% To 42% December Upsides

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Includes: BKH, BWL.A, CVX, ED, EMR, HCP, HP, MCY, MO, MSEX, NNN, NUE, NWN, ORI, SYY, T, THFF, UCC, UHT, XOM
by: Fredrik Arnold

Summary

10 Champion dogs (noted for 25 or more years of regular dividend increases) showed hearty 1-year analyst targets averaging 15.85% as of December 17. Five downward Champs averaged (11.09%).

All year, Champion dogs alternated bull and bear months. Dow dogs, however, have tended to a bull run all year. Champs were mixed for December, while Dow dogs retreated.

Analysts projected average 17.7% December 1-year net gains for THFF, HP, NUE, ORI, CVX, BKH, EMR, T, MSEX, and XOM.

On the downside, analysts projected an average 9.4% November 1-year net loss for ED, MCY, SYY, NWN, and WGL.

Consider these stocks as possible starting points for your Champion dividend dog stocks long or short investment research.

Even Champions Have Downsides

Yield (dividend/price) results from David Fish's Dividend Champions Index members (as of the December 17 market close) tallied from Yahoo Finance were compared with analyst mean or median target price estimates one year out. A chart of that data displayed below showed one technology, two financials, four basic materials, two utilities, plus one industrial goods firm comprised the ten stocks posting 4.2% to 42.01% price upsides. Below that upside chart, one financial, three utilities, plus one service firm were predicted to drop 8.48% to 14.02%, as displayed on the second chart.

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

Actionable Conclusions: (1) Ten Champion Dogs Hounded 15.85% Average Upsides Come December 2015; (2) Five Down Dogs Fell An Average of 11.08%

Forty-Five For the Money

This article was written to reveal bargain stocks to buy and hold from December to June or at 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 Sorted Champion Dog Stocks by Yield

David Fish's November Champions (from here) listed November 28 contained stocks distinguished as having paid increasing dividends for 25 years or longer. Champion stocks listed below were ranked by yields calculated based on December 17 prices and November 28 dividends to reveal the top ten. Price data was sourced from Yahoo.com. Annual dividend calculations came from dripinvesting.org.

Five of nine Yahoo Finance market sectors were represented in the top ten champion dogs list selected by yield below: Technology, Financials, Consumer Goods, Services, and Basic Materials. Top dog was the lone technology representative, AT&T Inc. (NYSE:T) [1].

In second place, Universal Health Realty Trust (NYSE:UHT) [2], was top of five financial firms. The other financials placed third, fifth, seventh, and eighth were: Old Republic International (NYSE:ORI) [3], HCP Inc. (NYSE:HCP) [5], Mercury General Corp. (NYSE:MCY) [7], and National Retail Properties (NYSE:NNN) [8].

In fourth place was the top of two consumer goods firms on the list, Universal Corp. (NYSE:UVV) [4]. Tenth place went to the other consumer goods firm, Altria Group Inc. (NYSE:MO) [10].

The balance of the top ten contenders occupied sixth and ninth places. Sixth was one little services stock, Bowl America Inc. Class A (NYSEMKT:BWL.A) [6]. Last, but not least was the basic materials representative in ninth place, Helmerich & Payne Inc. (NYSE:HP) [9] which completed the top ten champion dogs for December.

Dividend vs. Price Results Compared to Dow Dogs

Periodic strength of ten top Champions by yield was graphed below as of market closing prices through 12/17/2014 and compared to those of the Dow. Projected annual dividend history from $10,000 invested as $1k in each of the ten highest yielding stocks and the total single share price history of those ten stocks created the data points shown in green for price and blue for dividend.

Actionable Conclusion (3): Champions Were Mixed Up As Dow Dogs Retreated Into December

Champions top ten dividend dogs sent mixed signals as dividend rose while price did too after November. Champions top ten dogs' dividend rose 0.7%, while price bumped up 1.8%.

Dow dogs got bearish showing 8% more annual dividend from $10k invested as $1K in each of the top ten, while 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 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 Wish 6.25% Average Net Gain from Top 30 Dividend Champions Into 2015

Top thirty dogs from David Fish's Dividend Champions index were graphed below as of December 17, 2014 compared to analyst mean price target estimates for 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 $30,000 invested as $1k in each of the 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 green for price and blue for dividend.

Yahoo data projected 1.5% lower dividend from $30K invested as $1k in each stock in this group, while aggregate single share price was projected to increase over 1.9% in the coming year.

Notice that the chart showed price exceeded dividend. So, analysts predicted an pending overbought Champions index into 2015. 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 had a better history of accurate 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 price movement opposite of market direction.

Actionable Conclusion (5): Analysts Estimate Ten Dividend Champion Dogs to Net 5.24% to 44% By December 2015

Three of the ten top dividend yielding Champion dogs were 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 30% accurate.

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

First Financial Corp. (NASDAQ:THFF) netted $440.16 based on a median target price estimate from two analysts combined with projected annual dividend less broker fees. The Beta number showed this estimate subject to volatility 31% more than the market as a whole.

Helmerich & Payne Inc. netted $338.57 based on a median target price estimate from twenty-four analysts combined with projected annual dividend less broker fees. The Beta number showed this estimate subject to volatility 21% less than the market as a whole.

Nucor Corp. (NYSE:NUE) netted $204.79 based on a median target price estimate from seventeen analysts combined with projected annual dividend less broker fees. The Beta number showed this estimate subject to volatility 17% more than the market as a whole.

Old Republic International netted $197.27 based on dividends plus median target price estimate from two analysts less broker fees. The Beta number showed this estimate subject to volatility 11% more than the market as a whole.

Chevron Corp (NYSE:CVX) netted $165.73 based on dividends plus a median target price estimate from twenty analysts less broker fees. The Beta number showed this estimate subject to volatility 11% more than the market as a whole.

Black Hills Corp (NYSE:BKH) netted $116.86 based on dividends plus mean target price estimate from five analysts less broker fees. The Beta number showed this estimate subject to volatility equal to the market as a whole.

Emerson Electric (NYSE:EMR) netted $107.10 based on a mean target price estimate from twenty-three analysts combined with projected annual dividend less broker fees. The Beta number showed this estimate subject to volatility 14% more than the market as a whole.

AT&T Inc. netted $79.37 based on dividends plus a mean target price estimate from twenty-five analysts less broker fees. The Beta number showed this estimate subject to volatility 82% less than the market as a whole.

Middlesex Water Co. (NASDAQ:MSEX) netted $64.45 based on dividends plus a mean target price estimate from two analysts less broker fees. The Beta number showed this estimate subject to volatility 44% less than the market as a whole.

Exxon Mobil Corp. (NYSE:XOM) netted $52.40 based on dividends plus a mean target price estimate from nineteen analysts less broker fees. The Beta number showed this estimate subject to volatility 10% more than the market as a whole.

The average net gain in dividend and price was over 17.6% on $10k invested as $1k in each of these ten dogs. This gain estimate was subject to average volatility 5% less than the market as a whole.

Actionable Conclusion (6): (Bear Alert) Analysts Forecast 5 Champion Dogs to Post An Average Net Loss of 9.4% By 2015

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

Consolidated Edison (NYSE:ED) lost $66.37 based on dividend and a median target price estimate from twenty analysts including $20 estimated broker fees. The Beta number showed this estimate subject to volatility 73% less than to the market as a whole.

Mercury General Corp. lost $73.91 based on dividend and a median target price estimate from three analysts including $20 estimated broker fees. The Beta number showed this estimate subject to volatility 75% less than to the market as a whole.

Sysco Corp. (NYSE:SYY) lost $82.12 based on dividend and a median target price estimate from six analysts including $20 estimated broker fees. The Beta number showed this estimate subject to volatility 24% less than to the market as a whole.

Northwest Natural Gas (NYSE:NWN) lost $122.77 based on dividend and a median target price estimate from two analysts including $20 estimated broker fees. The Beta number showed this estimate subject to volatility 36% less than to the market as a whole.

WGL Holdings Inc. lost $125.77 based on dividend and a mean target price estimate from two analysts including $20 estimated broker fees. The Beta number showed this estimate subject to volatility 2% over the market as a whole.

The average net loss in dividend and price was 9.42% on $5k invested as $1k in each of these three dogs. This loss estimate was subject to average volatility 41% 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.

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, VZ, T.

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.

Editor's Note: This article covers one or more stocks trading at less than $1 per share and/or with less than a $100 million market cap. Please be aware of the risks associated with these stocks.