3 Cool Champion Dividend Dogs Claim 10.2% To 29.5% January Upsides; 5 Curse 10.3% To 21.2% Downsides

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Includes: BKH, BRC, BWL.A, CTBI, CVX, ED, EMR, HCP, HP, MCD, MCY, MO, NNN, NUE, NWN, ORI, PNY, SYY, T, THFF, UBSI, UHT, UVV, VVC, XOM
by: Fredrik Arnold

Summary

10 Champion dogs (noted for 25 or more years of regular dividend increases) claimed modest 1-year upside targets averaging 9.94% as of January 21. 9 downside Champs averaged (10.99%).

Last year, Champion dogs alternated bull and bear months. Dow dogs, however, tended to a bull run all year. Champs and Dow dogs both charged bull-like into January.

Analysts projected average 11.4% January 1-year net gains for NUE, HP, BKH, CTBI, BRC, EMR, CVX, MCD, UBSI, and XOM.

On the downside, analysts projected an average 9.5% January 1-year net loss for PNY, MO, NNN, SYY, ED, VVC, MCY, NWN, and WGL.

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

How Now, Champions?

Yield (dividend/price) results from David Fish's Dividend Champions Index members (as of the January 21 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 six of nine business sectors represented on the upside by four basic materials, one utility, two financial, one technology, one industrial goods, plus one service firm represented by ten stocks posting 4.2% to 42.01% price upsides. Meanwhile, on the downside, four of nine business sectors were dominated by five utilities, along with one consumer goods, two financial, plus one service firm composing nine issues predicted to drop 4.9% to 21.2%.

Below, six actionable conclusions are drawn as Arnold top dog selections for January by price upsides, yield, and net gain are disclosed step by step.

Actionable Conclusions: (1) Ten Champion Dogs Harried 9.94% Average Upsides for January 2016; (2) Nine Others Downcast 10.99% On Average

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.

Forty-Five For the Money

This article was written to reveal bargain stocks to buy and hold from January 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.

Dog Metrics Sorted Champion Dog Stocks by Yield

David Fish's December Champions list (from here) listed December 31 contained stocks distinguished as having paid increasing dividends for 25 years or longer. Champion stocks listed below were ranked by yields calculated based on January 21 prices and December 31 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 champions dog list selected by yield below: technology; consumer goods; financials; services; basic materials. The top dog was the lone technology representative, AT&T Inc. (NYSE:T) [1]. The second place was secured by the lone consumer goods firm, Universal Corporation (NYSE:UVV) [2].

In third place, Old Republic International (NYSE:ORI) [3] was tops of five financial firms. The other financials placed fourth, fifth, seventh, and tenth: Universal Health Realty Trust (NYSE:UHT) [4]; HCP Inc. (NYSE:HCP) [5]; Mercury General Corp. (NYSE:MCY) [7]; National Retail Properties (NYSE:NNN) [10], respectively.

The balance of the top ten contenders occupied the sixth, eighth, and ninth places. Sixth was one little services stock, Bowl America Class A (NYSEMKT:BWL.A) [6]. Last, but not least were the two basic materials representatives in eighth and ninth place, Helmerich & Payne Inc. (NYSE:HP) [8], and Chevron Corp. (NYSE:CVX) [9], respectively, which completed the top ten champion dogs for January.

Dividend vs. Price Results Compared to Dow Dogs

Periodic strength of the ten top Champions by yield was graphed below as of market closing prices through 1/21/2015 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 And Dow Dogs Charged Into January

Champions top ten dividend dogs sent bullish signals as dividend fell while price rose after December. Champions top ten dog dividend sagged 1%, while the price popped up 15%. The Champions displayed an overbought sign as the aggregate single share price of the ten top dogs exceeded the total annual dividend from $10k invested as $1k in each of the ten by $10.15.

Dow dogs got bullish, too, dropping 3% in annual dividend from $10k invested as $1K in each of the top ten, while the aggregate single share price popped up nearly 17% after December 15.

As a result, the Dow dogs' overbought condition (in which the aggregate single share price of the ten exceeded projected annual dividend from $10k invested as $1k each in those ten) widened beyond 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; narrowed to $198 or 50% December 15; then gapped wider to $311 or 81% January 20.

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 2.5% Average Net Gain from Top 30 Dividend Champions Into 2016

The top thirty dogs from David Fish's Dividend Champions index were graphed below as of January 21, 2015 as compared to analyst mean price target estimates for the same date in 2016.

A hypothetical $1000 investment in each equity was divided by the current share price to find the number of shares purchased. The number of shares 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 2016.

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 thirty stocks divided by 3 created data points for 2015. 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 2016 data points green for price and blue for dividend.

Analyst data reported by Yahoo Finance projected 1% higher dividend from $30K invested as $1k in each stock in this group, while aggregate single share price was projected to decrease 0.17% in the coming year.

Notice that the chart showed the price exceeded dividend. So, analysts predicted the recent overbought Champions index continuing into 2016. 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's price movement opposite of market direction.

Actionable Conclusion (5): Analysts Advise Ten Dividend Champion Dogs to Net 4.4% to 30.9% By January 2016

Just two 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 20% accurate.

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

Nucor Corp. (NYSE:NUE) was projected to net $309.02, 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 23% more than the market as a whole.

Helmerich & Payne Inc. was projected to net $149.43, based on a median target price estimate from twenty-three analysts, combined with projected annual dividend less broker fees. The Beta number showed this estimate subject to volatility 19% less than the market as a whole.

Black Hills Corp. (NYSE:BKH) was projected to net $111.81, based on dividends plus median target price estimate from five analysts less broker fees. The Beta number showed this estimate subject to volatility 1% more than the market as a whole.

Community Trust Banc (NASDAQ:CTBI) was projected to net $116.86, based on dividends plus median target price estimate from three analysts less broker fees. The Beta number showed this estimate subject to volatility 17% less than the market as a whole.

Brady Corp. (NYSE:BRC) was projected to net $96.52, based on dividends plus median target price estimate from six analysts less broker fees. The Beta number showed this estimate subject to volatility 14% more than the market as a whole.

Emerson Electric (NYSE:EMR) was projected to net $93.25, based on a median target price estimate from twenty-five analysts, combined with projected annual dividend less broker fees. The Beta number showed this estimate subject to volatility 13% more than the market as a whole.

Chevron Corp. was projected to net $92.06, based on dividends plus a median target price estimate from twenty-one analysts less broker fees. The Beta number showed this estimate subject to volatility 8% more than the market as a whole.

McDonald's Corp. (NYSE:MCD) was projected to net $80.29, based on dividends plus a median target price estimate from twenty analysts less broker fees. The Beta number showed this estimate subject to volatility 35% less than the market as a whole.

United Bankshares Inc. (NASDAQ:UBSI) was projected to net $65.93, based on dividends plus a median target price estimate from three analysts less broker fees. The Beta number showed this estimate subject to volatility 19% less than the market as a whole.

ExxonMobil Corp. (NYSE:XOM) was projected to net $44.11, based on dividends plus a median 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.

A note about First Financial Corp. (NASDAQ:THFF):

Last month's top dog by upside was selected in error, as the author recorded a stock price $10 less than the Yahoo reported amount. Based on that erroneous base price report, THFF was projected to net $440.16 in December.

This month, THFF is properly positioned in thirty-first place by yield. However, it could just as well have landed in 30th place instead of SYY, with an identical yield of 2.98%. In that event. THFF would have made the top ten upside and net gain lists this month. THFF's $64.70 net gain would have put it in tenth place, ahead of XOM's $44.11.

Actionable Conclusion (6): (Bear Alert) Analysts Forecast 9 Champion Dogs to Post An Average Net Loss of 9.5% By 2016

Nine probable losing trades revealed by Thomson/First Call in Yahoo Finance in 2015 were:

Piedmont Natural Gas (NYSE:PNY) was projected to lose $37.78, based on dividend and a median target price estimate from eight analysts, including $20 estimated broker fees. The Beta number showed this estimate subject to volatility 36% less than to the market as a whole.

Altria Group Inc. (NYSE:MO) was projected to lose $41.93, based on dividend and a median target price estimate from eight analysts, including $20 estimated broker fees. The Beta number showed this estimate subject to volatility 27% less than to the market as a whole.

National Retail Properties was projected to lose $59.85, based on dividend and a median target price estimate from ten analysts, including $20 estimated broker fees. The Beta number showed this estimate subject to volatility 26% less than to the market as a whole.

Sysco Corp. (NYSE:SYY) was projected to lose $71.87, 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 22% less than to the market as a whole.

Consolidated Edison (NYSE:ED) was projected to lose $89.98, based on dividend and a median target price estimate from thirteen analysts, including $20 estimated broker fees. The Beta number showed this estimate subject to volatility 75% less than to the market as a whole.

Vectren Corp. (NYSE:VVC) was projected to lose $91.78, based on dividend and a median target price estimate from five analysts, including $20 estimated broker fees. The Beta number showed this estimate subject to volatility 22% less than the market as a whole.

Mercury General Corp. was projected to lose $98.50, 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 77% less than to the market as a whole.

Northwest Natural Gas (NYSE:NWN) was projected to lose $161.17, 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 42% less than to the market as a whole.

WGL Holdings Inc. (NYSE:WGL) was projected to lose $201.65, 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 7% less than the market as a whole.

The average net loss in dividend and price was projected at 9.495% on $9k invested as $1k in each of these nine dogs. This loss estimate was subject to average volatility 37% 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 T, VZ, PFE, GE, CSCO.

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.