Actionable Conclusions (1-10): Analysts Allege Top Ten 'Safer' Dividend Energy Dog Stocks Net 22% to 51% Gains By October, 2018
Six of the ten top-gain "safer" dividend energy dogs, based on analyst 1-year target-prices (tinted gray in the chart above), were verified as being among the top ten yielders for the coming year. Thus the dog strategy for this group as graded by analyst estimates proved 60% accurate.
Ten probable profit-generating trades documented by YCharts data were:
CONE Midstream Partners (CNNX) netted $511.15 based on 'safer' dividends plus price estimates from nine analysts less broker fees. No Beta number was available for CNNX.
China Petroleum (SNP) netted $358.11, per estimates from three analysts, plus dividends less broker fees. The Beta number showed this estimate subject to volatility 18% more than the market as a whole.
Archrock Partners (APLP) netted $341.58 based on target price estimates from seven analysts, plus dividends less broker fees. The Beta number showed this estimate subject to volatility 130% more than the market as a whole.
Blueknight Energy (BKEP) netted $333.04 based on mean target price estimates from five analysts plus dividends less broker fees. The Beta number showed this estimate subject to volatility 16% less than the market as a whole.
Seadrill Partners (SDLP) netted $326.15 based on dividends plus a median target price estimate from two analysts less broker fees. The Beta number showed this estimate subject to volatility 125% more than the market as a whole.
Tallgrass Energy Partners (TEP) netted $296.32 based on a median target price estimate from fourteen analysts, plus dividends less broker fees. The Beta number showed this estimate subject to volatility 11% more than the market as a whole.
Green Plains Partners (GPP) netted $248.54, based on dividends plus the median of estimates from six analysts, with broker fees subtracted. No Beta number was available for GPP.
Sprague Resources (SRLP) netted $242.48 based on a mean price estimated by four analysts combined with projected annual dividend less broker fees. The Beta number showed this estimate subject to volatility 50% more than the market as a whole.
Crestwood Equity Partners (CEQP) netted $223.13 based on estimates from nine analysts plus dividends less broker fees. The Beta number showed this estimate subject to volatility 177% more than the market as a whole.
TC Pipelines (TCP) netted $220.86 based on dividends and the median price estimate from ten analysts less broker fees. The Beta number showed this estimate subject to volatility 3% more than the market as a whole.
Average net gain in dividend and price was 31% on $1k invested in each of these ten 'Safer' dividend Energy dogs. This gain estimate was subject to average volatility 62% 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 October Energy Sector Dogs
Yield (dividend / price) results from here October 18 supplemented by 1 year total returns (Annual) verified by YCharts for thirty-four stocks in the energy sector projected the actionable conclusions discussed herein.
All Six Component Industries Were Represented By The 34 'Safer' Dividend Energy Equities For October
The set of 34 firms showing positive annual returns and whose dividends were backed by adequate cash as of October 18 broke-out thus, by industry: refining & marketing (4); drilling (2); midstream (12); equipment & services (3); integrated (12); E&P (1).
Top ten "safer" dividend energy dogs showing positive returns and the safety margin of cash to cover dividends as of October 18 represented the first four industries on the list above.
Energy Sector Stocks With 'Safer' Dividends
Periodic Safety Inspection
A previous article discussed the attributes of the 50 Top yield energy sector stocks carved out of this master list of 104. Below is the list of 34 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 sometimes manipulated by a 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 remarkable 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 became another tool to dig out bargains.
Actionable Conclusions: Wall St. Forecast (11) A 9.84% 1 yr. Average Upside And (12) A 15.35% Net Gain From Top 30 'Safer' Dividend Energy Sector Dogs
Dogs on the "Safer" dividend energy stock list were graphed above to compare relative strengths by dividend and price as of October 18, 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 not applied (n/a).
Analysts projected a 9.2% lower dividend from $10K invested as $1k in the top ten September energy 'Safer' dogs while aggregate single share price was projected to increase by 9.7% 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 Showed Nice Gains From Lowest Priced 'Safer' Dividend Energy Sector Dogs
Ten 'Safer' dividend energy firms with the biggest yields October 18 per YCharts data ranked themselves by yield as follows:
Actionable Conclusions: Analysts Expected (13) 5 Lowest Priced, of Ten "Safer" High Yield Dividend Energy Dogs, To Deliver 28.35.% VS. (14) 23.6% Net Gains from All Ten To October, 2018
$5000 invested as $1k in each of the five lowest priced stocks in the "safer" ten energy pack by yield were determined by analyst 1 year targets to deliver 20.14% more net gain than $5,000 invested as $.5k in all ten. The third lowest priced 'safer' dividend energy dog, Archrock Partners (APLP) showed the best net gain of 34.16% per analyst targets.
The lowest priced five "safer" dividend energy dogs as of October 18 were: Seadrill Partners (SDLP); Blueknight Energy (BKEP); Archrock Partners (APLP); Global Partners (GLP); Green Plains Partners (GPP), with prices ranging from $3.64 to $19.55.
Higher priced five "Safer" Dividend energy dogs as of October 18 were: BP Prudhoe Bay (BPT); GasLog Partners (GLOP); Crestwood Equity Partners (CEQP); Sprague Resources (SRLP); DCP Midstream (DCP), with prices ranging from $20.05 to $33.57.
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.
See my instablog for specific instructions about how to best apply the dividend dog data featured in this article, this glossary instablog to interpret my abbreviated headings, and this instablog to aid your safe investing. --Fredrik Arnold
Stocks listed above were suggested only as possible starting points for your "safer" dividend energy dog stock research process. These were not recommendations.
Two of these 26 "safer" dividend energy pups by yield qualify as a valuable catches! Find them among the now 52 Dogs of the Week I found on The Dividend Dog Catcher premium site, or the 52 Dogs of the Week II now accumulating returns. Also, a Safari to Success (Dogs of the Week III) launched in early September. 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: izismile.com
Disclosure: I am/we are long PTRC.
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.