Healthcare SML Dog Diagnosis
Yield (dividend / price) results from here verified by Yahoo Finance were calculated as of April 7, 2016 for Small, Mid, and Large cap Technology stocks. Small cap firms were valued at $200M(illion) to $2B(illion); Mid cap firms were worth $2B to $10B; Large caps were valued above $10B. Those yield results led to the actionable conclusions discussed below.
Fifty Ready To Operate
Since late 2011 this report series has applied dog dividend methodology to uncover possible buy opportunities in each of eight major market sectors listed by Yahoo Finance: basic materials (BasMats), consumer goods (ConGo), financials (Fins), healthcare (Heal), industrial goods (IndiGo), services (Svcs), technology (Tec), and utilities (Utes). In the past few years the series expanded to report (1) dividend yield; (2) price upside; (3) net gain results based on analyst 1 yr. target projections.
This article intended to reveal bargain stocks to buy and hold 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, as desired.
Dog Metrics Examined Healthcare Stocks For Yield
Actionable Conclusion (1): Drug Makers Still Top by Yield And Make Majority 6-4
Top ten healthcare sector dogs showing the biggest dividend yields by this screen as of April 7 represented five industries: (1) drug manufacturers - major; (2) biotechnology; (3) drug delivery; (4) diagnostic substances; (5) long-term care facilities.
Top was the best of the six drug manufacturers - major, GlaxoSmithKline PLC (NYSE:GSK) ; The other five drug manufacturers found themselves in third, sixth, seventh, ninth, and tenth places: AstraZeneca (NYSE:AZN) , Sanofi SA (NYSE:SNY) , AbbVie Inc. (NYSE:ABBV) , Novartis (NYSE:NVS) , and Pfizer (NYSE:PFE) .
Second place healthcare sector stock by yield was a biotechnology firm, PDLI BioPharma, Inc. (NASDAQ:PDLI) . The lone drug delivery enterprise, PetMed Express Inc. (NASDAQ:PETS), placed fourth by yield.
A single diagnostic substances firm took fifth, Meridian Bioscience, Inc. (NASDAQ:VIVO) . Finally, a long-term care facility concern placed eighth, Kindred Healthcare, Inc. (NYSE:KND)  to complete the top ten April healthcare dogs by yield.
Healthcare Dividend vs. Price Moves Mimic Dow Dogs
Graphs below compared relative strengths of the top ten healthcare sector dogs by yield as of market close 4/7/2016 with those of the Dow industrials index. Annual dividend history from $10,000 invested as $1k in each of the ten highest yielding stocks, along with the total single share price of those ten stocks, made the data points shown in green for price and blue for dividends.
Actionable Conclusion (2): Healthcare Dogs Slowed a Bullish Move Into April
The Healthcare collection of dividend payers continued their bullish ways after March as dividend sagged while price sauntered up into April. Aggregate dividend from $10k invested as $1k in each of the top ten healthcare dogs dropped just 2.2% after March while their single share price rose 2.1%, to keep the bull run moving.
Healthcare pups mimicked Dow dogs who slowed their charge as their dividend dropped as price rose after March. Projected annual dividend from $10k invested as $1K in each of the top ten Dow dogs declined 2.3%. At the same time, aggregate single share price inclined 3.2% to set the Dow charge.
The Dow dogs' overbought condition (in which aggregate single share price of the ten exceeded projected annual dividend from $1k invested in each of the ten) expanded.
Actionable Conclusion (3): Dow Dogs Get More Overbought
The overhang was $320 or 90% to begin May; soared to the new record $406 or 112% in June.
The Dow bubble deflated as DuPont replaced IBM in the ten slot of the top ten for July to peg the gap at $269 or 71%, then inflated again as IBM replaced Pfizer to widen the gap to $331 or 85% for August. September brought some sanity back to the runaway Dow when the gap stood at $279 or 67%. October increases in price by CVX and XOM pushed the gap to $334 or 85%.
November changed out MCD for WMT, and GE for KO. The resulting price over dividend gap went to $303 or 78%. As of December 4 the gap stood at $294 or 75%. Come January 12, prices of the ten Dow top dogs fell, and dividends rose, as Boeing replaced General Electric to reduce the overbought gap to $215 or 53%. February moves put the gap at $276 or 65%. March 10 put the gap at $361 or 92%. April saw JPMorgan Chase (NYSE:JPM) replace Merck (NYSE:MRK) in the top ten to widen the gap to $394 or 102%
This gap between high share price and low dividend per $1k invested defines the Dow over-bought condition. Meaning these are low risk and low opportunity Dow dog stocks. The Dow top ten average price per dollar of annual dividend as of 4/7/16 was $26.09 and rising.
Conversely, the healthcare dog chart shows those dogs to be higher risk but prime potential healthy gain pups compared to those of the Dow. Top ten average Healthcare stock price per dollar of annual dividend as of April 7 was $23.61 or 9.5% below the Dow prices per annual dividend dollar.
Wall Street Wizards Watch Dog Rules Measured Upside and Gains
One-year mean target price set by brokerage analysts multiplied by the number of shares in a $1k investment revealed ten stocks showing the highest upside price potential into 2017 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 have usually provided the most accurate mean target price estimates.
Actionable Conclusions: (4) Analysts Asserted 26.28% Average Price Upsides For Top Ten April Healthcare Dogs, While (5) One Dog Was Down 13.84%
Actionable Conclusions: (6) Wall St. Wizards Psyched Top 30 April Healthcare Dogs Making (7) 14.33% Average Upside And (8) 11.41% Average 1 yr. Net Gain
Health sector dogs were graphed below to show relative strengths by dividend and price as of April 7, 2016 and those as projected by analyst median price target estimates to the same date in 2017.
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 median target price was used to gauge the stock upside to 2017.
Historic 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 the data points for 2016. 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 2017 data points green for price and blue for dividends.
Analyst targets reported by Yahoo! Finance forecast 11.3% less dividend from $10K invested as $1k in ten dogs in this group while aggregate single share price for those ten was projected to increase by 14.2% in the coming year.
Notice the forecast shows price moving higher than dividend. So the analyst forecast predicted Health dogs moving into an overbought condition one year out.
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 historically provided the most accurate estimates. Estimates provided by one analyst were not applied (n/a).
A beta (risk) ranking for each stock was provided in the far right column of 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 stocks movement opposite of market direction.
Actionable Conclusions: Analysts Forecast (9) 20.13% to 53.29% Net Gains By Ten Healthcare Dividend Dogs As Of April, 2017.
Five of ten top dividend yielding healthcare dogs were among the ten top gainers for the coming year based on analyst 1 year target prices. So this month the dog strategy for the healthcare sector as graded by Wall St. wizards was 50% accurate.
Ten probable profit generating trades were revealed by Thomson/First Call in Yahoo Finance for 2017:
Trinity Biotech plc (NASDAQ:TRIB) was predicted to net $532.91 based on dividends plus the median of annual price estimates from six analysts less broker fees. The Beta number showed this estimate subject to volatility 10% more than the market as a whole. TRIB Target gains continue to be super optimistic from analysts as they have for two years despite its price move down.
Teva Pharmaceutical (NYSE:TEVA) netted $313.81 based on median target prices from twenty-two analysts less broker fees. The Beta number showed this estimate subject to volatility 67% less than the market as a whole.
Eli Lilly (NYSE:LLY) netted $287.68 based on dividends plus a mean target price estimate from twenty-two analysts less broker fees. The Beta number showed this estimate subject to volatility 80% less than the market as a whole.
Sanofi SA netted $275.16 based on a mean target price estimate from three analysts combined with projected annual dividend less broker fees. The Beta number showed this estimate subject to volatility 10% less than the market as a whole.
PDL BioPharma, Inc. was expected to net $260.49 based on mean target price estimates from two analysts plus dividends less broker fees. The Beta number showed this estimate subject to volatility 21% less than the market as a whole.
AstraZeneca netted $242.23 based on estimates from three analysts plus dividends less broker fees. The Beta number showed this estimate subject to volatility 41% less than the market as a whole.
Smith & Nephew PLC (NYSE:SNN) netted $223.14 based on estimates from three analysts plus dividends less broker fees. The Beta number showed this estimate subject to volatility 24% less than the market as a whole.
AbbVie Inc. netted $215.75 based on dividend plus a median target price estimate from eighteen analysts less broker fees. The Beta number showed this estimate subject to volatility 47% more than the market as a whole.
Novartis netted $204.77 based on dividends plus the mean of annual price estimates from four analysts less broker fees. The Beta number showed this estimate subject to volatility 27% less than the market as a whole.
Gilead Sciences (NASDAQ:GILD) target net was $201.30 based on dividends plus median target price estimate from twenty-one analysts less broker fees. The Beta number showed this estimate subject to volatility 25% more than the market as a whole.
Average net gain in dividend and price was 27.57% on $10k invested as $1k in each of these ten dogs. This gain estimate was subject to average volatility 19% less than the market as a whole.
Actionable Conclusion (10): (Bear Alert) Analysts Predicted One Healthcare Dog To Lose 11.7% By April 2017
One probable losing trade revealed by Thomson/First Call in Yahoo Finance in 2017 was:
PetMed Express Inc. was projected to lose $117.07 based on dividend and a median target price estimate from two analysts including $20 of broker fees (which the dividend more than covered). The Beta number showed this estimate subject to volatility 16% less than the market as a whole. Analysts' target estimates go against price gains from PETS over the past year. The momentum of PETS is definitely up while TRIB, the lead dog of this pack, is down. This call by analysts is contrary to market facts.
Dog Metrics Extracted NO Bargains From Five Lowest Priced Highest Yield Health Dogs For April
Ten small, mid, and large cap healthcare equities were culled by yield from here. Yield (dividend / price) results verified by Yahoo Finance did the ranking.
Actionable Conclusions: (11) Analysts Predict 5 Lowest Priced of Top Ten Highest Yield Healthcare Dividend Dogs To Generate 8.53% VS. (12) 14.99% Net Gains by All Ten by April, 2017
$5000 invested as $1k in each of the five Lowest priced stocks of the top ten healthcare dividend kennel by yield were predicted by analyst 1 year targets to deliver 43.11% LESS net gain than $5,000 invested as $.5k in all ten. The eighth lowest priced healthcare dividend dog, Sanofi SA, was projected to deliver the best net gain of 27.52%.
Lowest priced five healthcare dividend dogs for April 7 were: PDL BioPharma, Inc.; Kindred Healthcare, Inc.; PetMed Express Inc.; Meridian Bioscience, Inc.; AstraZeneca, with prices ranging from $3.28 to $29.63.
Higher priced five healthcare dividend dogs for April 7 were: Pfizer; GlaxoSmithKline PLC; Sanofi SA; AbbVie Inc.; Novartis, whose prices ranged from $32.76 to $74.92.
This distinction between five low priced dividend dogs and the general field of ten reflects the opposite of a "basic method" Michael B. O'Higgins employed for beating the Dow. The same technique, you now see, can also be used to find the more rewarding dogs in the Healthcare kennel.
The added scale of projected gains based on analyst targets contributed a unique element of "market sentiment" gauging upside potential. It provided a here and now equivalent of waiting a year to find out what might happen in the market. It's also the work analysts got paid big bucks to do.
A caution is advised, however, as analysts are historically 20% to 80% accurate on the direction of change and about 0% to 20% accurate on the degree of the change.
See my instablog for specific instructions about how to best use the dividend dog data featured in this article.
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 Healthcare 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 indexarb.com; dividend.com; finance.yahoo.com; analyst mean target price by Thomson/First Call in Yahoo Finance.
Disclosure: I am/we are long 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.