May Consumer Cyclical (ConCy) SML Dogs
Yield (dividend / price) results from here verified by Yahoo Finance were calculated as of May 13, 2016 for Small, Mid, & Large cap ConCy 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 ConCy For The Money
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 two years the series expanded to report (1) dividend yield; (2) price upside; (3) net gain results based on analyst 1 yr. target projections.
Now the series is being revised to report on eleven sectors as defined by Morningstar and tracked here: Basic Materials; Communication Services; Consumer Cyclical; Consumer Defensive; Energy; Financial Services; Healthcare; Industrials; Real Estate; Technology; Utilities.
This article was 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 Captured Consumer Cyclical Stocks by Yield
Actionable Conclusion (1): Apparel, Books, & Cars Lead ConCy Sector Yields
Ten stocks showing the biggest dividend yields after April represented six industries: broadcasting-TV; media-diversified; marketing services; specialty retail; apparel stores; resorts & casinos; auto manufacturing-major.
Tops by yield was the one broadcasting-TV firm: Vivendi (OTCPK:VIVHY) . A lone media-diversified company was second, Corus Entertainment (OTCPK:CJREF) , and a marketing services outfit competed the top three, National CineMedia (NASDAQ:NCMI) .
Tops of three specialty retail firms placed fourth, Outerwall Inc. (NASDAQ:OUTR) . The other specialty retailers placed sixth and eighth: Staples (NASDAQ:SPLS) , and Barnes & Noble (NYSE:BKS) .
A resort and casino placed seventh, Las Vegas Sands (NYSE:LVS) . Finally, the major auto manufacturer placed ninth, Daimler AG (OTCPK:DDAIF) , and completed the May consumer cyclical top ten dog list by yield.
Consumer Cyclical Sector Dividend vs. Price Results Differed From Those of The Dow
Relative strengths of the top ten consumer cyclical dogs (graphed below by yield as of 5/13/2016) were 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 prices of those ten stocks created the data points shown in green for price and blue for dividends.
Actionable Conclusions: (2) Consumer Dogs Mixed Up As (3) Dow Dogs Retreated Bearishly
As of May 13, dividend from $10k invested as $1k in each of the top ten consumer cyclical stocks increased as also went up. Price rose 10% and dividend increased 13% to make the mix up.
Dow dogs ended their bullish ways after April. Projected annual dividend from $10k invested as $1K in each of the top ten increased 0.5%. At the same time, aggregate single share price tumbled 19% to sound bearish growl.
The Dow dogs' overbought condition (in which aggregate single share price of the ten exceeded projected annual dividend from $1k invested in each) constricted in May.
Actionable Conclusion (4): Dow Dogs Narrow Their Overbought Status
The overhang was $392 or 106% in June. The Dow bubble deflated big time as Dupont replaced IBM in the ten slot of the top ten for July to peg the gap at $237 or 63%, then inflated again as IBM replaced Pfizer to widen the gap to $343 or 89% 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 $302 or 78%. Come January 12, prices of the ten Dow top dogs fell, and dividends rose, as Boeing replaced General Electric to push the overbought gap down to $215 or 53%. February moves put the gap at $208 or 48%. March put the chasm at $293 or 73%. April saw JPMorgan Chase replace Merck in the top ten to widen the gap to $394 or 102%. May's retreat was triggered by Intel and Merck returning to the top ten in place of JPMorgan and Proctor & Gamble. So, the overbought gap shrank to $357 or 93%.
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 May average price per dollar of annual dividend is $26.21.
In contrast to the Dow, consumer cyclical dog charts show higher risk but also higher gain potential than the Dow. The consumer cyclical top ten average price per dollar of annual 40% less than the Dow price per dividend dollar.
Wall Street Wizard Wishing
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: Analysts Estimate (5) 37.17% Average Price Upsides For Ten Consumer Cyclical Dogs Come May 2017
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. Analysts Calculated (6) A 19.51% Average Upside; (7) A 23.36% Average 1 yr. Net Gain from Top 30 May Consumer Cyclical Dogs
ConCy sector dogs were graphed below to show relative strengths by dividend and price as of May 13, 2016 and those projected by analyst mean 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.
Analysts reported by Yahoo finance projected a 14.5% lower dividend from $10K invested in this group while aggregate single share price was projected to increase by 17.6% 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 proven to be most accurate in projected estimates. Estimates provided by one analyst were not applied (n/a).
A beta (risk) ranking for each stock was shown 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 market direction.
Actionable Conclusion (8): Wall St. Analysts Predict 10 Consumer Cyclical Dogs To Net 23.6% to 68.86% Gains by May, 2017
Four of the ten top dividend yielding consumer cyclical dogs were verified as being among the ten top net gainers for the coming year based on analyst 1 year target prices. So this period the dog strategy for these consumer stocks as graded by Wall St. wizards was 40% accurate.
Ten probable profit generating trades were revealed by Thomson/First Call in Yahoo Finance for May 2017:
Barnes & Noble was projected to net $688.57 based on dividends plus the median target price estimate from two analysts less broker fees. The Beta number showed this estimate subject to volatility 189% more than the market as a whole.
Stein Mart (NASDAQ:SMRT) was projected to net $665.76 based on estimates from three analysts plus dividends less broker fees. The Beta number showed this estimate subject to volatility 15% less than the market as a whole.
H&R Block (NYSE:HRB) was projected to net $485.05 based on estimates from nine analysts plus dividends less broker fees. The Beta number showed this estimate subject to volatility 63% less than the market as a whole.
Daimler AG was projected to net $438.92 based on the median target price estimate from two analysts combined with projected annual dividend less broker fees. The Beta number showed this estimate subject to volatility 88% more than the market as a whole.
International Game Tech (NYSE:IGT) was projected to net $377.53 based on estimates from five analysts plus dividends less broker fees. The Beta number showed this estimate subject to volatility 34% less than the market as a whole.
National CineMedia was projected to net $371.24, based on dividends plus a median target price estimate from nine analysts less broker fees. The Beta number showed this estimate was subject to volatility 47% less than the market as a whole.
L Brands was projected to net $269.61, based on dividends plus a median target price estimate from twenty-nine analysts less broker fees. The Beta number showed this estimate subject to volatility 18% less than the market as a whole.
GameStop (NYSE:GME) was projected to net $258.48, based on dividends plus a mean target price estimate from ten analysts less broker fees. The Beta number showed this estimate was subject to volatility 13% more than the market as a whole.
DineEquity (NYSE:DIN) was projected to net $242.42 based on estimated dividends plus median target price estimate from three analysts less broker fees. The Beta number showed this estimate subject to volatility 40% less than the market as a whole.
General Motors Company (NYSE:GM) was projected to net $236.28 based on dividends plus the median of annual price estimates from sixteen analysts less broker fees. The Beta number showed this estimate subject to volatility 62% more than the market as a whole.
Average net gain in dividend and price was 40.34% on $10k invested as $1k in each of these ten dogs. This gain estimate was subject to average volatility 14% more than the market as a whole.
Dog Metrics Extracted Even More Bargains From Five Lowest Priced Highest Yield Consumer Cyclical Stocks
Ten consumer cyclical sector equities were culled by yield from here. Yield (dividend / price) results verified by Yahoo Finance did the ranking.
As noted above, ten stocks that showed the biggest dividend yields after April, per YCharts data, represented six industries: broadcasting-TV; media-diversified; marketing services; specialty retail; apparel stores; resorts & casinos; auto manufacturing-major.
Actionable Conclusions: (9) Analysts Announce 5 Lowest Priced of Ten Highest Yield Consumer Goods Dividend Dogs Deliver 32.96% VS. (10) 28.53% Net Gains by All Ten as of May 13, 2017
$5000 invested as $1k in each of the five Lowest priced stocks in the top ten consumer cyclical dividend kennel by yield were predicted by analyst 1 year targets to deliver 15.54% more net gain than $5,000 invested as $.5k in each of all ten. The third lowest priced, Barnes & Noble , was projected to deliver the best net gain of 68.86%.
Lowest priced five consumer cyclical dividend dogs as of May 13 were: Staples ; Corus Entertainment ; Barnes & Noble ; National CineMedia ; Guess? , with prices ranging from $8.31 to $16.27.
Higher priced five consumer goods dividend dogs for April 13 were: Vivendi ; Outerwall ; Las Vegas Sands ; Daimler AG ; TL Brands , whose prices ranged from $19.08 to $67.54.
This distinction between five low priced dividend dogs and the general field of ten reflects the "basic method" Michael B. O'Higgins employed for beating the Dow. The same technique, you now see, can also be used to find the consumer cyclical sector.
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. Its 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.
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.
See my instablog for specific instructions about how to best use the dividend dog data featured in this article. --Fredrik Arnold
Stocks listed above were suggested only as possible starting points for your consumer cyclical dog dividend stock purchase/sale research process. These were not recommendations.
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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 ycharts.com; 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, INTC, 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 discusses one or more securities that do not trade on a major U.S. exchange. Please be aware of the risks associated with these stocks.