Champion Dogs of January
Yield (dividend/price) results from David Fish's Dividend Champions Index members (as of January 22 market closing prices) were paired with annual dividends projected by dripinvesting.org as of December 31. Results from that data charted below showed six of nine business sectors represented by top yield Champions: three financials, two basic materials, one technology, one services, two utilities, and one industrial goods. Those 10 stocks posted yields averaging 5.15%.
Actionable conclusions by yield, target price upsides and net gains were drawn below as top Champion dog selections for January were investigated, step by step.
Actionable Conclusion (1) 10 Dividend Champion Dogs Showed 4.3% to 6.11% Yields as of January 22
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 2000, NASDAQ 100, Champions, Contenders, Challengers, CCC Combined, and Global. Bonus reports cover Bad Boy AllStars, and Sector Leaders.
50 For the Money
This article was written to reveal bargain stocks to buy and hold up to one full year. See Dow 30 article for explanation of the term "dogs" for stocks reported based on Michael B. O'Higgins's book "Beating The Dow" (HarperCollins, 1991), now named Dogs of the Dow. O'Higgins's 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, as desired.
Dog Metrics Graded 50 Champion Stocks by Yield
David Fish's Champions list (from here) as of December 31 contained stocks distinguished as having paid increasing dividends for 25 years or longer. Champion stocks listed below were ranked by yields calculated as of January 22 prices to reveal the top 10. Price data was sourced from Yahoo.com. Annual dividend calculations as of 12/31 came from dripinvesting.org.
As mentioned previously, six of nine Yahoo Finance market sectors were represented in the top 10 champions dog list selected by yield below: financials, basic materials, technology, services, utilities, and industrial goods.
Second and sixth positions were secured by two basic materials firms, Helmerich & Payne Inc. (NYSE:HP) , and Chevron Corp. (NYSE:CVX) . A lone technology representative placed fourth, AT&T Inc. (NYSE:T) .
The balance of the top 10 champions in services, utilities, and industrial goods occupied seventh, eighth, ninth, and tenth places.
Seventh place was held by one steadfast services stock, Bowl America Class A (NYSEMKT:BWL.A) . Two industrial goods firms took the eighth and ninth slots, MDU Resources (NYSE:MDU) , and Emerson Electric (NYSE:EMR) . Last, but not least, one utilities industry representative placed tenth, Questar Corp. (NYSE:STR) , which completed the top 10 champion dogs by yield for January.
Champion Dividend vs. Price Results Contrasted With Dow Dogs
Periodic strength of 10 top Champions by yield was graphed below as of market closing prices on 1/22/2016 and compared to those of the Dow. Projected annual dividend history from $10k invested as $1k in each of the 10 highest yielding stocks and the total single share price history of those 10 stocks created the data points shown in green for price and blue for dividend.
Actionable Conclusions: (2) Champions Retreated Bearishly As (3) Dow Dogs Mixed Up For January
Champions dividend from $10k invested as $1k in each dog rose as aggregate single share price for the 10 dropped after December to signal the retreat. Champions top 10 dog dividend grew 3.87% while price fell 13.89% lower. The Champions widened the gap to move further away from becoming overbought as aggregate single share price of the 10 top dogs fell lower to a level 24% removed from the total annual dividend amount estimated to be derived from $10k invested as $1k in each of those 10 dogs in January
Dow dogs, however, mixed up, with aggregate single share price for the 10 growing 3% between November 25 and January 22, while annual dividend from $10k invested as $1K in each of the top 10 increased 11% according to IndexArb.
As a result, the Dow dogs overbought condition (where aggregate single share price of the 10 exceeded projected annual dividend from $10k invested as $1k each in those 10) shrank a bit again after December.
Actionable Conclusion (4): Dow Dogs Are Overbought
The overhang was $250 or 65% for February, slid to $243 or 62% in March, gapped to $295 or 81% for a new record in April, then broke the new annual record again in May at $311 or 87%. June saw the gap narrow to $286 or 77%. The July/August market set a new high for the gap at $329 or 85%. September shrank the gap to $279 or 67%. October expanded the chasm again to $323 or 82%. November-December constricted the gap somewhat to $271 or 70%. January narrowed the gap slightly to $267 or 63%.
This gap between high share price and low dividend per $1k invested shows an overbought condition. Meaning, these are low risk and low opportunity Dow dogs.
Compared to the DOW, the Champion 10 has sporadically retreated in a pattern where aggregate dividend value of $1k investments in each generally rose above the aggregate single share price.
(I invite you to sign on to my premium site, The Dividend Dog Catcher, to share my discussion about how the Dow (short of tossing out IBM) could return to a normal balance where dividends from 10 $1k investments can again exceed the aggregate single share price of those top 10 stocks.)
As Dow prices continue to crash to a level 30-35% lower, they could again become attractive dividend buys! As it stands, the Dow has become an index of growth stocks as their dividends have been progressively devalued by the market price.
Actionable Conclusions: (5) 10 Champion Dogs Chased 23.85% Average Upsides into January 2017; (6) Two Champs Tumbled To An 11.77% Average Downside
The O'Higgins dividend/price metrics system works to find bargains in any collection of dividend paying stocks. Utilizing analyst price upside estimates has expanded the stock universe to include popular growth equities, if desired.
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 Conclusions: Wall St. Wizards Wanted (7) 10.52% Average Upside & (8) 11.33% Average Net Gain from Top 30 Dividend Champions By January 2017
Top 30 dogs from David Fish's Dividend Champions index were graphed below as of January 22, 2016 as compared to analyst mean price target estimates for the same date in 2017.
A hypothetical $1k investment in each equity was divided by the current share price to find the number of shares purchased. The share 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 2017.
Historic prices and actual dividends paid from $30k invested as $1k in each of the highest yielding stocks and the aggregate single share prices of those 30 stocks divided by three created data points for 2016. Projections based on estimated increases in dividend amounts from $1k invested in the 30 highest yielding stocks and aggregate one-year analyst target share prices from Yahoo Finance divided by three created the 2017 data points green for price and blue for dividend.
Analyst data reported by Yahoo Finance projected a 8% lower dividend from $30k invested as $1k in each stock in this group while aggregate single share price was projected to increase 9.5% in the coming year.
Notice that the chart showed price exceeded dividend. So, analysts predicted the an overbought Champions index returning by 2017. 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 track record 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 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 number indicated the degree of a stock price's movement opposite of market direction.
Actionable Conclusion (9): Analysts Asserted 10 Dividend Champion Dogs Would Net 15.66% to 40.8% By January 2017
Only two of the 10 top dividend yielding Champion dogs were among the 10 gainers for the coming year based on analyst one-year target prices. So this month, the dog strategy as graded by Wall St. wizards was all of 20% accurate.
10 probable profit-generating trades were revealed by Thomson/First Call in Yahoo Finance into 2017:
Raven Industries (NASDAQ:RAVN) was projected to net $407.99 based on dividends plus median target price estimate from two analysts less broker fees. The Beta number showed this estimate subject to volatility 24% more than the market as a whole.
National Fuel Gas (NYSE:NFG) was projected to net $379.23 based on dividends plus a median target price estimate from five analysts less broker fees. The Beta number showed this estimate subject to volatility 6% more than the market as a whole.
Nucor Corp. (NYSE:NUE) was projected to net $351.61 based on dividends plus a median target price estimate from 18 analysts less broker fees. The Beta number showed this estimate subject to volatility 36% more than the market as a whole.
MDU Resources (MDU) was projected to net $280.84 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 4% more than the market as a whole.
Eaton Vance Corp. (NYSE:EV) was projected to net $246.60 based on dividends plus a median target price estimate from 11 analysts less broker fees. The Beta number showed this estimate subject to volatility 62% more than the market as a whole.
Chevron Corp. was projected to net $222.28 based on a median target price estimate from 22 analysts combined with projected annual dividend less broker fees. The Beta number showed this estimate subject to volatility 25% more than the market as a whole.
United Bankshares Inc. (NASDAQ:UBSI) was projected to net $216.76 based on dividends plus a median target price estimate from four analysts less broker fees. The Beta number showed this estimate subject to volatility 6% less than the market as a whole.
Brady Corp. (NYSE:BRC) was projected to net $159.95 based on dividends plus a median target price estimate from four analysts less broker fees. The Beta number showed volatility 32% more than the market as a whole.
Sonoco Products Co. (NYSE:SON) was projected to net $158.30 based on a median target price estimate from 13 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.
Black Hills Corp. (NYSE:BKH) was projected to net $156.64 based on dividends plus a median target price estimate from five analysts less broker fees. The Beta number showed this estimate subject to volatility 13% more than the market as a whole.
The average net gain in dividend and price was predicted to be 25.8% on $10k invested as $1k in each of these 10% more than the market as a whole.
Actionable Conclusion (10): (Bear Alert) Analysts Augured Two Champion Dogs To Show Net Losses Averaging 10% By 2017
Two probable losing trades revealed by Thomson/First Call in Yahoo Finance in 2017 were:
Consolidated Edison (NYSE:ED) was projected to lose $76.94 based on dividend and a median target price estimate from 21 analysts including $20 of broker fees. The Beta number showed this estimate subject to volatility 87% less than the market as a whole.
Northwest Natural Gas (NYSE:NWN) was projected to lose $123.18 based on dividend and a median target price estimate from two analysts including $20 of broker fees. The Beta number showed this estimate subject to volatility 54% less than the market as a whole.
The average net loss in price plus broker fees including annual dividends was predicted to be 10.01% on $2k invested as $1k in each of these two dogs. This loss estimate was subject to average volatility 70% less than the market as a whole.
See my instablog for specific instructions about how to best apply the dividend dog data featured in this article.- Fredrik Arnold
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.
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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 the 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: I am/we are long T, CSCO, PFE, VZ.
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have 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.