June Safer Dividend Achiever Dogs
Yield (dividend / price) results from here June 9 supplemented by 1 year total returns verified by YCharts for twenty-six stocks from ten of eleven Morningstar sectors revealed the actionable conclusions discussed below.
"The NASDAQ Dividend Achievers Index is made up of 265 stocks with 10+ consecutive years of dividend increases that meet certain minimum size and liquidity requirements. It is one of the best sources to find high quality dividend growth stocks."
Actionable Conclusions (1-10): Analysts Asserted Top Ten "Safer" Dividend Achiever Dog Stocks To Net 8.9% to 26.6% Gains By June, 2018
Six of the ten top yield "safer" dividend Achiever dogs (tinted gray in the chart above) were verified as being among the Top ten gainers for the coming year based on analyst 1 year target prices. Thus the dog strategy for this group as graded by analyst estimates for April proved 60% accurate.
The ten probable profit generating trades illustrated by YCharts analytics for 2018 were:
McGrath RentCorp (MGRC) netted $266.21 based on target price estimates from three analysts, plus dividends less broker fees. The Beta number showed this estimate subject to volatility 2% less than the market as a whole.
Enbridge Energy Partners (EEP) netted $257.51 per estimates from fourteen analysts, plus dividends less broker fees. The Beta number showed this estimate subject to volatility 19% more than the market as a whole.
Urstadt Biddle Properties (UBA) netted $211.73, based on dividends plus guesses from 5 analysts, with broker fees subtracted. The Beta number showed this estimate subject to volatility 41% less than the market as a whole.
TC Pipelines (TCP) netted $184.68 based on target price estimates from eleven analysts, plus dividends less broker fees. The Beta number showed this estimate subject to volatility 3% less than the market as a whole
Old Republic International (ORI) netted $162.09 based on estimates from two analysts plus dividends less broker fees. The Beta number showed this estimate subject to volatility 19% more than the market as a whole.
ONEOK (OKE) netted $158.16 based on a target price from sixteen analysts combined with projected annual dividend less broker fees. The Beta number showed this estimate subject to volatility 28% more than the market as a whole.
Meredith (MDP) netted $104.31 based on mean target price estimates from six analysts plus dividends less broker fees. The Beta number showed this estimate subject to volatility 25% more than the market as a whole.
AT&T (T) netted $97.81 based on dividends and the median price estimate from twenty-nine analysts less broker fees. The Beta number showed this estimate subject to volatility 52% less than the market as a whole.
Qualcomm (QCOM) netted $94.46 based on dividends plus a median target price estimate from twenty-seven analysts less broker fees. The Beta number showed this estimate subject to volatility 25% more than the market as a whole.
International Bus Machines (IBM) netted $89.02 based on dividends plus price estimates from twenty-six analysts less broker fees. The Beta number showed this estimate subject to volatility 3% less than the market as a whole.
Average net gain in dividend and price was 16.26% on $1k invested in each of these ten "Safer" Dividend Achiever dogs. This gain estimate was subject to average volatility 2% more than the market as a whole.
Actionable Conclusions (11 & 12): (Bear Alert) Brokers Projected Two "Safer" Achiever Dogs To Lose 9.7% & 10.15% By June, 2018
The probable losing trades revealed by YCharts for 2018 were:
Mercury General (MCY) projected a loss of $96.91 based on dividend and a median target price estimate from two analysts including $20 of broker fees. The Beta number showed this estimate subject to volatility 56% less than the market as a whole.
Northwest Natural (NWN) projected a loss of $101.45 based on dividend and a median target price estimate from eight analysts including $20 of broker fees. The Beta number showed this estimate subject to volatility 56% less than the market as a whole.
Average net loss in dividend and price was 9.9% on $2k invested as $1k in each of these two "safer" dividend Achiever dog stocks. This loss estimate was subject to average volatility 56% less 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."
10 Sectors Were Represented By The 26 "Safer" Achievers
Ten of eleven Morningstar sectors were represented by the set of 26 firms showing positive annual returns and whose dividends were backed by adequate cash as of June 9. The sector representation broke-out, thus: Energy (3); Real Estate (2); Communication Services (1); Financial Services (6); Technology (2); Consumer Defensive (5); Consumer Cyclical (2); Healthcare (1); Industrials (2); Utilities (2); Basic Materials (0).
Top ten "safer" dividend Achiever dogs showing positive returns and the safety margin of cash to cover dividends as of June 9 placed the first six sectors on the above list.
Achievers With "Safer" Dividends
Periodic Safety Inspection
A previous article discussed the attributes of the 68 Achiever stocks from which the 26 "Safer" list was sorted. Below is that list resulting from the "safety" check noting positive annual returns and free annual cash flow yield enough to cover their estimated annual dividend yield.
Corporate financial success however is easily withheld 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 reach beyond yield to select reliable payout stocks. Positive results in all five columns after the dividend ratio is remarkable as a solid financial signal.
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 Conclusions : Wall St. Analysts Forecast (13) A 5.22% 1 yr. Average Upside and (14) A 7.33% Net Gain From Top 26 "Safer" Achiever Stocks
Dogs on the "Safer"Achiever stock list were graphed above to compare relative strengths by dividend and price as of June 9, 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 estimated a 5.5% lower dividend from $10K invested as $1k in the top ten June "Safer" Dividend Achiever dogs, while aggregate single share price was projected to increase by 4.1% 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 Revealed Significant Gains From Lowest Priced "Safer" Dividend Achievers
Ten "Safer" Dividend Achiever firms with the biggest yields June 9 per YCharts data ranked themselves by yield as follows:
Actionable Conclusions: (5) Analysts Anticipated 5 Lowest Priced, of Ten "Safer" High Yield Dividend Achiever Dogs, To Deliver 15.37% VS. (6) 10.35% Net Gains from All Ten by June, 2018
$5000 invested as $1k in each of the five lowest priced stocks in the "safer" ten Achiever pack by yield were determined by analyst 1 year targets to deliver 48.48% more net gain than $5,000 invested as $.5k in all ten. The very lowest priced "safer" dividend Achiever dog, Enbridge Energy Partners (EEP) showed the best net gain of 25.75% per analyst targets.
Lowest priced five "safer" dividend Achiever dogs as of June 9 were: Enbridge Energy Partners (EEP); People's United (PBCT); Urstadt Biddle Properties (UBA); AT&T (T); ONEOK (OKE), with prices ranging from $16.36 to $49.45.
Higher priced five "Safer" Dividend Achiever dogs as of June 9 were: TC Pipelines (TCP); Mercury General (MCY); Westwood Holdings Group (WHG); Target (TGT); Qualcomm (QCOM), with prices ranging from $54.67 to $57.05.
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 suggested only as possible starting points for your "safer" dividend "Safer" Dividend Achiever dog stock research process. These were not recommendations.
Two of these Dividend Achiever pups qualified as great catches! Find them among the now 52 Dogs of the Week (DOTW)I or among the 43 and growing DOTWII found on The Dividend Dog Catcher premium site. Click here to subscribe or get more information.
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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: nasa.gov.
Disclosure: I am/we are long T, 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.