S&P Aristocrat Dogs AbbVie, VF, And Target, January Net Gains Deemed 'Safe'

by: Fredrik Arnold


16 of 20 top-yield S&P500 Aristocrats pay "safe" dividends because their free cash flow yield exceeds dividend yield. Those 16 had cash margin to cover anticipated dividends as of 1/27/17.

Top-ten safe S&P Aristocrat dividend yields from, MCD, PG, EMR, KMB, VFC, KO, ABBV, TGT, ABBV, T, and HCP ranged 3.06%-5.01%. Cash-flow yields ranged 3.54%-8.95%.

Besides safety margin, S&P Aristocrats were also screened for payout ratios (low is best), total annual returns, and dividend growth as of 1/27/17 market close, to further test dividend reliability.

Corporate cash is allocated by directors of company policies that can cancel or vary dividend payouts anytime.

Broker targets revealed 10 top yield safe S&P 500 stocks with 25.36% more gain from $5k invested in the lowest priced five than from $5K invested in all 10.

The Dividend Dogs Rule

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

What Sectors Do S&P Aristocrat "Safe" Dogs Represent?

Top ten S&P safe Aristocrats dogs came from six of 11 business sectors in the following distribution: real estate (1); communication services (1); healthcare (1); consumer defensive (4); industrials (1); consumer cyclical (2).

16 of 20 Top Yield S&P Aristocrat Dogs Show Cash Margins to Cover Dividends

Periodic Safety Check

A previous article discussed the attributes of these 50 S&P 500 Aristocrat Dividend dogs from which the "safest" were sorted. You see below the green tinted short list that passed the dividend "stress" test. These 16 S&P 500 Dividend Aristocrat dogs report sufficient annual cash flow yield to cover their anticipated annual dividend yield. The margin of excess is shown in the bold face "Safety Margin" column.

Corporate financial matters, however, are easily over-ruled by a board of directors establishing company policy canceling or varying payout of dividends to shareholders. On the list below, for example, HCP, Inc. (NYSE:HCP) cut it's dividend from $0.52369 per quarter to $0.37 in November after spinning off over 200 of their healthcare property holdings into a new entity Quality Care Properties (NYSE:QCP). Emerson Electric (NYSE:EMR), while steadily increasing it's dividend every year, has occasionally reached multi-year plateaus where quarterly pay-outs rose just hundredths of a cent. Examples include 1990-1995; 2000-2003; 2008-2011.

Likewise, many Aristocrats utilize the dividend upward creep strategy to remain qualified as an annual dividend increasing Aristocrat, Recently, since 2014, Procter & Gamble (NYSE:PG) has similarly plateaued. Aristocrat firms have also switched dividend payment modes. McDonald's (NYSE:MCD) dividend amount chart fell precipitously between 2006 and 2007 when the firm went from annual payment of $1.50 dividend to a quarterly payments of $0.375.

Dog Metrics Found Gains In Lower Priced January S&P Aristocrats"Safe" Stocks

Ten "Safest" top S&P 500 stocks that showed the biggest yields January 27 per YCharts data ranked themselves as follows:

Actionable Conclusions: (1) Analysts Predicted Five Lowest Priced of "Safe" Ten High Yield S&P 500 Aristocrat Dogs To Deliver 11.64% VS. (2) 9.28% Net Gains from All Ten by January, 2018

$5000 invested as $1k in each of the five lowest priced stocks in the 10 S&P Aristocrats Safe kennel by yield were determined by analyst one-year targets to deliver 25.36% more net gain than $5,000 invested as $.5k in all ten. The fifth lowest priced S&P Aristocrats Safe dog, AbbVie (NYSE:ABBV) showed the best net gain of 19.9% per analyst targets.

Lowest priced five "safe" S&P 500 Aristocrats dogs as of January 27 were: HCP, Inc., Coca-Cola Co. (NYSE:KO), AT&T Inc. (NYSE:T), VF Corporation (NYSE:VFC), and AbbVie, whose prices ranged $29.56 to $60.00.

Higher priced five Safe S&P 500 Aristocrats dogs as of January 27 were: Emerson Electric , Target (NYSE:TGT), Procter & Gamble , Kimberly-Clark (NYSE:KMB), and McDonald's , whose prices ranged from $60.14 to $122.86

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. Its also the work analysts got paid big bucks to do.

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 S&P 500 Aristocrats dog dividend stock research process. These were not recommendations.

Two of these S&P 500 Aristocrats qualifies as valuable catches! It is one of the now 52 Dogs of the Week (AKA "Valuable Catches") 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 report detailing:

(1) Q1 through Q4 winners of DOTW I;

(2) twelve top dogs for each month since August 2015 up to November 2016;

(3) the Dog of the Year (DOTYI);

(4) plus the runner up (underdog) (DOTYU) who may turn out to be the dog of the first year when all the votes are counted;

(5) know the darker dog that has taken the lead;

(6) find out the first three contenders for dogs of the month in portfolio II.

That's twenty-four top dogs, yours free.

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!

Get In On The Fun!

The next Dividend Dogcatcher Shindig Webinar is February 15 at 2PM EST. Here's your link to register.

If you registered online for the first Shindig in November you have a free pass to the next four. Otherwise, a $9.97 cover charge buys access to all four upcoming 2017 DDC Shindigs. (It's a boga4!)

Root for the Underdog.

Gains/declines as reported do 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.

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 from: dogfather.it

Disclosure: I am/we are long T.

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.

About this article:

Author payment: $35 + $0.01/page view. Authors of PRO articles receive a minimum guaranteed payment of $150-500.
Want to share your opinion on this article? Add a comment.
Disagree with this article? .
To report a factual error in this article, click here