November SML Industrial Dogs
Yield (dividend / price) results from here verified by Yahoo Finance were calculated as of November 17, 2016 for Small, Mid, & Large cap Industrials sector 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.
The Dividend Dogs Rule
The "dog" moniker was earned in three steps: (1) any stock paying a reliable, repeating dividend (2) whose price fell to a point where its yield (dividend/price) (3) grew higher than its peers (such as this Industrials collection), is so tagged. Thus, the highest yielding stocks in any collection became known as "dogs."
Fifty For Show
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.
The series was recently revised to report on 11 sectors as defined by Morningstar and tracked here: Basic Materials, Communication Services, Consumer Cyclical, Consumer Defensive, Energy, Financial Services, Healthcare,Industrials, Real Estate, Technology, and Utilities.
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 Track Industrial Stocks by Yield
Actionable Conclusion (1): Ships & Ports Top Yields Sink
The shipping and ports firms sourced eight of the top ten industrial stocks showing the biggest yields, placing first, through sixth, eighth, and ninth. Average yield for these top ten industrial dogs sank 3% since October.
Top yield dog was Seaspan (NYSE:SSW) . The remaining seven shipping and ports firms were: Ship Finance International (NYSE:SFL) ; Navios Maritime (NYSE:NNA) ; Scorpio Tankers (NYSE:STNG) ; Nordic American Tankers (NYSE:NAT) ; Golar LNG Partners (NASDAQ:GMLP) ; Frontline ; Capital Product Partners .
Finally two were from distinct industries. Business services was seventh, Aimia (AIM.TO) , and rental and leasing services, tenth, Black Diamond Group (BDI.TO) . These completed the YChart calculated top ten Industrials sector dogs top yield list as of November 17.
Industrial Top Ten Compared With Dogs of The Dow
Relative strengths of the top ten Industrials sector dogs graphed below by yield were plotted as of market close 11/17/2016 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 prices of those ten stocks created the data points shown in green for price and blue for dividend.
Actionable Conclusions: (2) Top Ten Industrials Mixed Down
Dividend from $10k invested as $1k in each of the industrial top ten dogs tumbled after October, while the aggregate single share price of the top ten dropped, too. Dividend fell 21% while total single share price flopped 48%.
Dow dogs mixed down, also, as aggregate single share price for those top ten fell 0.77% between October 19 and November 17. Meanwhile, annual dividend from $10k invested as $1K in each of the top ten slipped 0.44%, according to IndexArb.
The Dow dogs overbought condition (in which aggregate single share price of the ten exceeded projected annual dividend from $1k invested in each) narrowed slightly.
Actionable Conclusion (4): Dow Dogs Ever Overbought
The overhang was $215 or 53% in January 2016. February pushed the gap higher to $246 or 59%. March saw the chasm at $293 or 73%. April widened the gap to $394 or 102%. May shrank the gap to $357 or 93%. In June the chasm settled to $344 or 89% but in July it soared to $486 or 136%. August made the gap $487 or 134%. In September the gap fell to $374 or 100%. October widened it to $455 or 121%. November trimmed the tab to $450 or 120%
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 November average price per dollar of annual dividend showed as $27.31.
Compared to the Dow dogs, the industrial top ten, while volatile, are far from overbought, maintaining their "normal" pattern of dividends above price.
In marked contrast to the Dow, Industrials Dog top ten average price per dollar of annual dividend came in at $8.37 as of November 17, which was more than 3.25 times less than the price of an annual dollar of Dow dividends.
Wall Street Wizards Wonk Upside & Downside November Industrial Dogs
One-year median target price set by brokerage analysts multiplied by the number of shares in a $1k investment were used to compare 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 were considered best for the most accurate mean target price estimate.
Actionable Conclusions: (4) Ten Industrial Sector Dividend Dogs Had Upsides of 19.45% to 62.28% per Analyst 1 yr. Targets & (5) Three Cast -10.4% to -13.77% Downsides
Dog Metrics Charted November Industrial 30 By Yield
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: Brokers Estimated (6) Average 12.4% Upsides; (7) & 18.35% Net Gains from Top 30 Industrials Dogs By November, 2017
Top thirty industrials were graphed below as of November 17, 2016 closing prices as compared to prices projected by analyst mean price target estimates for 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 mean target price was used to gauge the stock upsides 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 11.6% lower dividend from $10K invested in this group while aggregate single share price was projected to increase by 4.5% in the coming year (November to November).
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 were considered optimal for a valid projection estimate. Estimates provided by one analyst were not applied (n/a).
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 stocks movement opposite of market direction.
Actionable Conclusion (8): Analysts Alleged 10 Industrial Sector Dogs Would Net 22.3% to 67.3% By November, 2017
Four of ten top yielding Industrial sector dogs were verified as being among the top gainers for the coming year based on analyst 1 year target prices. So this month analysts graded the dog strategy as 40% accurate.
Ten probable profit generating trades were revealed by Thomson/First Call as reported in Yahoo Finance for 2017:
Tsakos Energy Navigation (NYSE:TNP) was projected to net $672.98 based on dividends plus the median of annual price estimates from eleven analysts less broker fees. The Beta number showed this estimate subject to volatility 53% more than the market as a whole.
Seaspan was projected to net $52091 based on estimated dividends plus mean target price estimate from nine analysts less broker fees. The Beta number showed this estimate subject to volatility 8% less than the market as a whole.
Scorpio Tankers Inc. was projected to net $484.63 based on the median of estimates from fifteen analysts plus dividends less broker fees. The Beta number showed this estimate subject to volatility 40% more than the market as a whole.
Capital Product Partners (NASDAQ:CPLP) was projected to net $427.81 based on dividends plus the median target price estimate from seven analysts less broker fees. The Beta number showed this estimate subject to volatility 60% more than the market as a whole.
Pitney Bowes (NYSE:PBI) was projected to net $407.13 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 18% less than the market as a whole.
Navios Maritime Acquisition Corporation was projected to net $329.69, based on dividend plus median target price estimates from seven analysts less broker fees. The Beta number showed this estimate was subject to volatility 23% more than the market as a whole.
Iron Mountain (NYSE:IRM) was projected to net $298.75 based on the median target price estimate from five analysts plus dividends less broker fees. The Beta number showed this estimate subject to volatility 12% less than the market as a whole.
Teekay Tankers (NYSE:TNK) was projected to net $269.26 based on the low target price estimate from twelve analysts combined with projected annual dividend less broker fees. The Beta number showed this estimate subject to volatility 147% more than the market as a whole.
Covanta Holding (NYSE:CVA) was projected to net $242.80, based on dividends plus a median target price estimate from nine analysts less broker fees. The Beta number showed this estimate subject to volatility 4% less than the market as a whole.
Teekay LNG Partners (NYSE:TGP) was projected to net $223.28 based on estimates from eight analysts plus dividends less broker fees. The Beta number showed this estimate subject to volatility 33% more than the market as a whole.
Average net gain in dividend and price was 38.77%. The average Beta number showed these estimates subject to volatility 32% more than the market as a whole.
Top vs Bottom Three Month Price Histories Contradict Broker Upside Predictions
Price performance of Tsakos Energy Navigation & Caterpillar (NYSE:CAT), the two extreme ends of analyst Industrial sector projections, show opposing paths year to date. CAT is sailing as TNP sinks.
In ironic contrast to the broker stated expectation, the favored TNP price has dropped lower by 42% while the Caterpillar history has moved 35.85% higher.
Momentum favors neither forecast prediction but advised that CAT is on the prowl. What market or operating conditions will conspire to lift future prices for the shipper or the heavy equipment firm price to slide?
Analysts Predict An 2.18% Disadvantage For Five Lowest Priced Highest Yield November Industrial Sector Dogs
Ten small, mid, and large cap industrial equities were culled by yield from 50 industrial sector equity choices from here. Yield (dividend / price) results verified by Yahoo Finance did the ranking.
Actionable Conclusions: (10) Analysts Projected 5 Lowest Priced of Ten Highest Yield To Net 25.48% VS. (11) 26.05% Net Gains From All Ten Industrial Dogs as of November 17, 2017
$5000 invested as $1k in each of the five Lowest priced stocks in the top ten basic materials dividend kennel by yield were predicted by analyst 1 year targets to deliver 2.18% LESS net gain than $5,000 invested as $500 in each of the top ten. The fourth lowest priced industrial dividend dog, Scorpio Tankers , was projected to deliver the best net gain of 48.46%.
Lowest priced five industrials dividend dogs for November 17 were: Navios Maritime Acquisition Corporation; Capital Product Partners; Black Diamond Group; Scorpio Tankers; Aimia, whose prices ranged from $1.63 to $7.65.
Higher priced five industrials dividend dogs for November 17 were: Frontline; Nordic American Tankers; Seaspan; Ship Finance International; Golar LNG Partners, whose prices ranged from $7.65 to $20.55.
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. It mostly works here too.
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.
Stocks listed above were suggested only as decent starting points for a small, mid, and large cap Industrials sector dog dividend stock investment research process in late-September, 2016. These were not recommendations.
Gains/declines as reported did not factor-in any tax problems resulting from dividend, profit, or return of capital distributions. Consult your tax advisor regarding the source and consequences of "dividends" from any investment.
Nine of these industrials sector dividend pups qualify as valuable catches! They are listed with the 52 Dogs Of The Week (DOTW) found on The Dividend Dog Catcher premium site. Click here to subscribe or get more information.
For a free copy of 4 previous quarterly reports and the dog of the year winner, send your e-mail address, ticker symbol for your favorite dividend stock, and name of your favorite team of any sport or activity to: email@example.com. Remember: E-mail, ticker, team!
Stocks listed above were suggested only as possible reference points for your Industrial 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 ycharts.com/screener; dividend.com; finance.yahoo.com; analyst mean target price by Thomson/First Call in Yahoo Finance. Dog Photo: darwindogs.org.
Disclosure: I am/we are long GE, 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.