Technology SML Dogs In June
The "dog" moniker was earned by stocks exhibiting three traits: (1) paying reliable, repeating dividends, (2) whose prices fell to where (3) yield (dividend/price) grew higher than their peers (such as this technology collection). Thus, the highest yielding stocks in any collection became known as "dogs."
Yield (dividend / price) results from here verified by Yahoo Finance were calculated as of June 16, 2016 for Small, Mid, & 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.
Forty-nine 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 expanding 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 intended to reveal bargain stocks to buy and hold up to one year. See Dow 30 article for further 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 Arranged Technology Stocks Per Yield
Actionable Conclusion (1): Tech Sector Now Highlights More Than One Technology
With telecom firms now parsed into their own communication services sector, ten technology stocks that showed the biggest dividend yields into June, per YCharts, verified by Yahoo!Finance data, represented six industries: data storage; semiconductors; health information services; computer systems; communication equipment; scientific & technical instruments.
Three semiconductor firms placed second, third, and sixth: Siliconware Precision Industries Co. Ltd. (NASDAQ:SPIL) ; STMicroelectronics (NYSE:STM) ; Advanced Semiconductor Engineering Inc. (NYSE:ASX) .
A health information services firm placed fourth, Computer Programs & Systems, Inc.(NASDAQ:CPSI) . Then two computer systems industry representatives placed fifth and ninth: Daktronics Inc. (NASDAQ:DAKT) , and Diebold, Incorporated (NYSE:DBD) .
One major communication equipment firm placed seventh, LM Ericsson Telephone (NASDAQ:ERIC) . Finally, a scientific & technical instruments maker placed eighth, Garmin Ltd. (NASDAQ:GRMN) , which completed the June technology top ten dog list by yield.
Technology Sector Dividend vs. Price Matched Dow Dogs
Relative strengths of the top ten technology dogs graphed below by yield 6/16/2016 ran parallel 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) Technology Dogs And (3) Dow Dogs Charged Bullishly
As of June 16, dividend from $10k invested as $1k in each of the top ten technology stocks plummeted as aggregate single share price of those ten increased. Price rose 0.55% since May while dividend dropped 24% to make the charge.
Dow dogs also charged into June. Projected annual dividend from $10k invested as $1K in each of the top ten continued to drop 2.25% after May. At the same time, price rose 2.4% to set its charge.
The Dow dog overbought condition (in which aggregate single share price of the ten exceeded projected annual dividend from $1k invested in each of the ten) expanded wider.
Actionable Conclusion (4): Dow Dogs Expand The Overbought Margins
The Dow overhang hit a new record $406 or 112% in June, 2015. Then 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%, but it 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, 2016, 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 $230 or 55%. March extended the move as high price PG replaced INTC in the ten slot moving the bar to $372 or 95%. April saw higher prices return to XOM and CVX and Boeing returned to the top ten to move the gap to $392 or 102%. Procter and Gamble dropped out of the top ten in May, so the gap receded to $349, or 91%. June saw price inflation move the gap wider to $376 or 100%.
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 is now $26.51 in June, which is up 1.3% from its $26.17 for May.
In contrast to the Dow, technology dog charts show higher risk but also higher gain potential than the pups of the Dow. The Technology top ten average price per dollar of annual dividend is now $16.81, a bullish gain of 3.7% from May's $16.19.
Wall Street Wizard Work
One-year mean target price set by brokerage analysts multiplied by the number of shares in a $1k investment attempted to reveal 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 in the larger chart below. Three to nine analysts have usually provided the most accurate mean target price estimates.
Actionable Conclusions: Analysts Estimate (5) 23.77% Average Price Upsides For Ten Technology Dogs As Of June 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. Wizards Guessed (6) A 10% Average Upside; (7) A 11.4% Average 1 yr. Net Gain from Top 30 June Technology Dogs
Tech sector dogs were graphed below to show relative strengths by dividend and price as of June 16 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 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 8.6% lower dividend from $10K invested in this group while aggregate single share price was projected to increase by 11.3% 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 provide more accurate 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. Wizards Want 10 Technology Dogs To Net 15.2% to 41.98% Gains by June, 2017
Five of the ten top dividend yielding technology 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 technology stocks as graded by Wall St. wizards was 50% accurate.
Ten probable profit generating trades were revealed by Thomson/First Call in Yahoo Finance for June 2017:
Diebold, Incorporated was projected to net $419.75, based on dividends plus a median target price estimate from five analysts less broker fees. The Beta number showed this estimate subject to volatility 89% more than the market as a whole.
Advanced Semiconductor was projected to net $321.01, based on dividends plus a median target price estimate from three analysts less broker fees. The Beta number showed this estimate was subject to volatility 70% less than the market as a whole.
MTS Systems Corporation (NASDAQ:MTSC) was projected to net $290.02 based on dividends plus a median target price estimate by three analysts less broker fees. The Beta number showed this estimate subject to volatility 11% more than the market as a whole.
STMicroelectronics was projected to net $275.97 based on estimates from five analysts plus dividends less broker fees. The Beta number showed this estimate subject to volatility 62% less than the market as a whole.
Computer Programs & Systems, Inc. was projected to net $266.84, based on dividends plus a mean target price estimate from nine analysts less broker fees. The Beta number showed this estimate was subject to volatility 9% opposite the market as a whole.
Himax Technologies (NASDAQ:HIMX) was projected to net $265.27 based on estimates from eight analysts plus dividends less broker fees. The Beta number showed this estimate subject to volatility 1% opposite the market as a whole.
Daktronics, Inc. was projected to net $233.97 based on estimates from two analysts plus dividends less broker fees. The Beta number showed this estimate subject to volatility 26% more than the market as a whole.
Microsoft Corporation (NASDAQ:MSFT) was projected to net $216.47 based on dividends plus the median of annual price estimates from thirty-five analysts less broker fees. The Beta number showed this estimate subject to volatility 4% more than the market as a whole.
Western Digital was projected to net $201.36 based on a median target price estimate from twenty-six analysts combined with projected annual dividend less broker fees. The Beta number showed this estimate subject to volatility 20% more than the market as a whole.
Intel Corporation (NASDAQ:INTC) was projected to net $151.78 based on estimated dividends plus median target price estimate from thirty-four analysts less broker fees. The Beta number showed this estimate subject to volatility 5% more than the market as a whole.
Average net gain in dividend and price was 26.42% 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.
Dog Metrics Tried Get More Bargains From Five Lowest Priced Highest Yield Technology Stocks
Ten technology stock equities were culled by yield. Results of dividend/price verified by Yahoo Finance did the ranking.
As noted above, with telecom firms now moved into their own communication services sector, ten technology stocks that showed the biggest dividend yields through June, per YCharts, verified by Yahoo! Finance data, represented six technology sector industries: data storage; semiconductors; health information services; computer systems; communication equipment; scientific & technical instruments.
Actionable Conclusions: (9) Analysts Assert 5 Lowest Priced of Ten Highest Yield Technology Dividend Dogs Project 18.43% VS. (10) 19.80% Net Gains by All Ten as of June 16, 2017
$5000 invested as $1k in each of the five Lowest priced stocks in the top ten technology dividend kennel by yield were predicted by analyst 1 year targets to deliver 6.92% LESS net gain than $5,000 invested as $.5k in each of all ten. The seventh lowest priced, Diebold, Incorporated , was projected to deliver the best net gain of 41.97%.
Lowest priced five technology dividend dogs for June 16 were: Advanced Semiconductor; STMicroelectronics; Daktronics Corporation; LM Ericsson Telephone; Siliconware Precision, with prices ranging from $5.45 to $7.83.
Higher priced five Technological dividend dogs for June 16 were: Seagate Technology; Diebold, Incorporated; Computer Programs & Systems, Inc.; Garmin Ltd.; Western Digital, whose prices ranged from $22.72 to $46.26.
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 more rewarding dogs in the Technology 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 Technology dog dividend stock purchase/sale research process. These were not recommendations.
Three of the old phone infused technology sector dividend pups qualified as valuable catches! And two of the new software and equipment list are part of the now 43 Dogs of the Week found on The Dividend Dog Catcher premium site. Click here to preview and subscribe:
A top performing DOTW dog for the first quarter has been named. A second quarterly winner was discovered May 13. For a free copy of both quarterly reports and analysis of the winning Arnold Q1 & Q2 picks, plus a surprise bonus bottom dog report, send your e-mail address, ticker symbol for your favorite dividend stock, and name of your favorite team of any type to: email@example.com. Remember: E-mail, ticker, team!
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.
Disclosure: I am/we are long INTC, CSCO, VZ, PFE.
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.