Actionable Conclusion (1): Analysts Assert Top Ten "Safer" Consumer Cyclical Dog Stocks Could Net 12.2% to 97% Gains By May, 2018
Four of the ten top "safer" Consumer Cyclical dogs (tinted gray in the chart above) were verified as being among the Top ten yielders for the coming year based dog metrics. Thus the dog strategy for this group as graded by analyst estimates for April proved 40% accurate.
The ten probable profit generating trades illustrated by YCharts analytics for 2018 were:
Tailored Brands (TLRD) netted $969.80 per estimates from five analysts, plus dividends less broker fees. The Beta number showed this estimate subject to volatility 55% more than the market as a whole.
International Game Tech (IGT) netted $357.36 based on estimates from eight analysts plus dividends less broker fees. The Beta number showed this estimate subject to volatility 35% more than the market as a whole.
Big 5 Sporting Goods (BGFV) netted $298.84 based on targets pricing from five analysts, plus dividends, less broker fees. The Beta number showed this estimate subject to volatility 63% less than the market as a whole
Macy's (M) netted $280.72 based on dividends plus target price estimates from twenty-four analysts less broker fees. The Beta number showed this estimate subject to volatility 20% less than the market as a whole.
Meredith (MDP) netted $175.64 based on target estimates from six brokers plus projected annual dividends less broker fees. The Beta number showed this estimate subject to volatility 10% more than the market as a whole
Kohl's (KSS) netted $158.41 based on 1yr price targets from twenty-four analysts, plus dividends less broker fees. The Beta number showed this estimate subject to volatility 14% more than the market as a whole.
Cedar Fair (FUN) netted $136.51 based on target price estimates from ten analysts, plus projected dividends less broker fees. The Beta number showed this estimate subject to volatility 25% less than the market as a whole.
Six Flags Entertainment (SIX) netted $124.70 based on mean target price estimates from twelve analysts plus dividends less broker fees. The Beta number showed this estimate subject to volatility 19% more than the market as a whole.
Pier 1 Imports (PIR) netted $121.94, based on dividends plus guesses from seventeen analysts, with broker fees subtracted. The Beta number showed this estimate subject to volatility 61% more than the market as a whole.
Crown Crafts (CRWS) netted $121.77 based on dividends and a median price estimate from three analysts less broker fees. The Beta number showed this estimate subject to volatility 53% more than the market as a whole.
Average net gain in dividend and price was 27.46% on $10k invested as $1k in each of these ten “Safer” Consumer Cyclical dividend dogs. This gain estimate was subject to average volatility 15% more than the market as a whole.
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 specifically, these are, in fact, best called, "underdogs."
"Safer" Dividend Consumer Cyclical May Dogs
Yield (dividend / price) results from here May 12 supplemented by 1 year total returns (Annual) verified by YahooFinance for twenty-five of eighty-nine stocks from the Consumer Cyclical sector revealed the actionable conclusions discussed herein.
14 Industries Were Represented By 25 "Safer" Consumer Cyclical Stocks
The Consumer Cyclical sector embraces twenty-eight industries. The 28 stocks selected by returns and yield for this writing represented fourteen.
The industry representation broke-out, thus: Media -Diversified (2); Department Stores (3); Resorts & Casinos (3); Apparel Stores (1); Home Furnishings (3); Specialty Retail (3); Leisure (3); Lodging (1); Advertising Agencies (1); Apparel Manufacturers (1); Packaging & Containers (1); Restaurants (1); Publishing (1); Gambling (1).
Top ten "safer" basic materials dogs showing positive returns and the safety margin of cash to cover dividends as of May 12 represented the first seven industries on the list above.
Consumer Cyclical Firms With "Safer" Dividends
Periodic Safety Inspection
A previous article discussed the attributes of the 50 Top yield Consumer Cyclical stocks. Below is the list of 25 resulting from the "safety" check noting positive annual returns and free annual cash flow yield sufficient to cover their estimated annual dividend yield.
Corporate financial success, however, is easily manipulated by any board of directors choosing to promote company policies cancelling or varying the payout of dividends to shareholders. This article contends that adequate cash flow is strong justification for a company to sustain annual dividend increases.
Three additional columns of financial data, listed after the Safety Margin figures above, reveal payout ratios (lower is better), total annual returns, and dividend growth levels for each stock. This data is provided to show additional methods to reach beyond yield to select reliable payout stocks. Positive results in all five columns after the dividend ratio is a sterling financial accomplishment.
To quantify top dog rankings, analyst mean price target estimates provided a "market sentiment" gauge of upside potential. Added to the simple high yield "dog" metric, analyst mean price target estimates were another tool to dig out bargains.
Actionable Conclusion (3): Wall St. Analysts Estimated A 10.33% 1 yr. Average Upside and 14% Net Gain From Top 28 “Safer” Consumer Cyclical Dogs
Dogs on the “Safer” Consumer Cyclical stock list were graphed above to compare relative strengths by dividend and price as of May 12, 2017 with those projected by analyst mean price target estimates to the same date in 2018.
Historic prices and actual dividends paid from $10,000 invested as $1K in each of the ten highest yielding stocks and the aggregate single share prices of those ten stocks created the data points applied to 2017.
Projections based on estimated increases in dividend amounts from $1000 invested in the ten highest yielding stocks and aggregate one year analyst mean target prices as reported by Yahoo Finance created the 2018 data points in blue for dividend and green for price. Note: one year target prices from one analyst were usually not applied (n/a).
Analysts projected a 7.7% lower dividend from $10K invested as $1k in the top ten May Consumer Cyclical "Safer" dogs while aggregate single share price was projected to increase by 8.7% 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 above chart. Three to nine analysts were considered optimal for a valid projection estimate. Estimates provided by one analyst were usually not applied (n/a).
A beta (risk) ranking for each stock was provided in the far right column. 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 opposed to market direction.
Dog Metrics Uncovered More Gains From Lowest Priced "Safer" Consumer Cyclical Dogs
Ten "Safer" Dividend Consumer Cyclical firms with the biggest yields May12 per YCharts data ranked themselves by yield as follows:
Actionable Conclusions: (5) Analysts Expected 5 Lowest Priced, of Ten "Safer" High Yield Consumer Cyclical Dogs, To Deliver 24.18% VS. (6) 19.18% Net Gains from All Ten by May 2018
$5000 invested as $1k in each of the five lowest priced stocks in the "safer" ten Consumer Cyclical pack by yield were determined by analyst 1 year targets to deliver 26.12% more net gain than $5,000 invested as $.5k in all ten. The fifth lowest priced "safer" Consumer Cyclicals dog, Tailored Brands (TLRD) showed the best net gain of 96.98% per analyst targets.
Lowest priced five "safer" dividend Consumer Cyclical dogs as of May 12 were: SkyCity Entertainment Group (OTCPK:SKYZF); GWA Group (OTCPK:GWAXY); Staples (SPLS); Corus Entertainment (OTCPK:CJREF); Tailored Brands (TLRD), with prices ranging from $2.85 to $11.77.
Higher priced five "Safer" Dividend Consumer Cyclical dogs as of May 12 were: Harvey Norman Holdings (OTCPK:HNORY); Macy's (M); Kohl's (KSS); Las Vegas Sands (LVS); Cedar Fair (FUN) with prices ranging from $16.42 to $69.71.
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 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.
Stocks listed above were suggestions for your "Safer" Dividend Consumer Cyclical stock 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 www.ycharts. com; www.finance.yahoo.com; analyst mean target price by Thomson/First Call in Yahoo Finance. Dog photo from: consumeraffairs.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.
Editor's Note: This article covers one or more stocks trading at less than $1 per share and/or with less than a $100 million market cap. Please be aware of the risks associated with these stocks.