5 Flying Safe Sector Leader Dogs For 2017

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Includes: AGNC, APO, ARLP, CEQP, CTL, GME, GMLP, KEP, SNY, STX, TEF
by: Fredrik Arnold

Summary

30 of 55 Morningstar sector-leading stocks after December pay dividends deemed safe because their free cash flow yield exceeds dividend yield. 30 have sufficient margin to pay as promised.

Top 10 safe sector leader yields from SNY, GME, STX, APO, KEP, ARLP, TEF, CEQP, GMLP, and AGNC ranged 4.24% to 12.06% December 28. Consumer cyclical and defensive sectors backed GME.

All 11 sectors showed at least one safe leader. Three sectors showed four: Basic materials, technology, and consumer defensive. Four sectors showed three: Communication services, consumer cyclical, healthcare, and real estate.

Broker targets revealed 10 top yield sector leader stocks promising 4.75% more gains from $5k invested in the lowest priced (flying) five than from $5k invested in all 10.

Finding Sector Leaders

Eleven Morningstar business sectors (in alphabetical order) were: basic materials, communication services, consumer cyclicals, consumer defensive, energy, financial services, healthcare, industrials, real estate, technology, and utilities. Yield (dividend/price) results from here verified by Yahoo Finance for sector-leading stocks as of market closing prices December 28 revealed the actionable conclusions discussed below.

30 Safest December Sector Leaders Have Cash Margins To Cover Dividends

Periodic Safety Inspection

A previous article discussed the attributes of the collection of 55 sector-leading stocks from which these 30 were selected. You see below the list that passed the dividend "stress" test. These dogs report sufficient annual cash flow yield to cover their anticipated annual dividend yield. The margin of excess is shown in the bold "Safety Margin" column.

Financial sufficiency, however, is easily overruled by a cranky board of directors or company policy canceling or varying the payout of dividends to shareholders. For example, AGNC Investment Corp. (NASDAQ:AGNC) announced a reduction of its $.20 monthly shareholder payout to $.18 as of September 2016, and CenturyLink (NYSE:CTL) cut its dividend from $0.725 per quarter to $0.54 in March of 2013.

The Dividend Dog Rule

The "dog" moniker was earned by stocks exhibiting three traits: (1) paying reliable, repeating dividends, (2) their prices fell to where, and (3) yield (dividend/price) grew higher than their peers. Thus, the highest-yielding stocks in any collection became known as "dogs." More specifically, these are, in fact, best called "underdogs."

Dog Metrics Uncovered Bargains From Lowest Priced Top Yield Sector Leaders

Ten safest top sector leader revenue stocks that showed the biggest yields December 28 per YCharts data represented all 11 sectors by combining consumer cyclical and consumer defensive representation. Thus, the top 10 of 30 safe sector December leaders ranked themselves by yield as follows:

Actionable Conclusions: (1) Analysts Predicted Five Lowest Priced Of Safe 10 High Yield Sector Leader Dogs To Deliver 11.98% Vs. (2) 11.44% Net Gains From All 10 By January 2018

$5,000 invested as $1k in each of the five lowest-priced stocks in the safe 10 sector Leader kennel by yield were determined by analyst one-year targets to deliver 4.75% more net gain than $5,000 invested as $.5k in all 10. This came despite the highest-priced safe sector leading dog, Sanofi (NYSE:SNY), was projected to deliver the best net gain of 28.34%.

Lowest-priced five safe sector leader dogs as of December 28 were: Telefonica (NYSE:TEF); AGNC Investment; Korea Electric Power (NYSE:KEP); Apollo Global Management (NYSE:APO); Alliance Resource (NASDAQ:ARLP), with prices ranging from $9.03 to $22.60.

Higher-priced five safe sector leader dogs for December 28 were: Golar LNG Partners (NASDAQ:GMLP); Crestwood Equity Partners (NYSE:CEQP); GameStop (NYSE:GME); Seagate Technology (NASDAQ:STX); Sanofi, whose prices ranged from $23.16 to $39.26.

This distinction between five low-priced dividend dogs and the general field of 10 reflects the "basic method" Michael B. O'Higgins employed for beating the Dow. 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.

The net gain estimates mentioned 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 apply the dividend dog data featured in this article and this instablog to aid your safe investing. - Fredrik Arnold

Stocks listed above were suggested only as possible starting points for your safest sector leader dog dividend stock purchase research process. These were not recommendations.

Three of these sector-leading dividend pups are qualified as valuable catches! They are listed with the now 52 Dogs Of The Week I (DOTWI) found on The Dividend Dog Catcher premium site. Click here to subscribe or get more information.

It's about time to make investing fun again. For a free copy of the monthly top dogs, the quarterly reports, and the dog of the year winner from the 52 Dogs of the Week I, send your e-mail address, ticker symbol for your favorite dividend stock, and name of your favorite team of any sport or activity to fredrika120@gmail.com. Remember: E-mail, ticker, team!

Root for the Underdog.

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; finance.yahoo.com; analyst mean target price by Thomson/First Call in Yahoo Finance. Dog photo: gentleleadercanada.com.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

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.