Actionable Conclusions (1-10): Analysts Estimate 27.6% To 40.4% Net Gains For Ten Dividend Challengers By December 2018
Five of ten top dividend-yielding Challenger dogs were verified as being among the top ten gainers for the coming year based on analyst 1-year target prices. So this month the dog strategy for the Challengers, as graded by Wall St. wizards, was 50% accurate.
Ten probable profit-generating trades were revealed by YCharts:
The GEO Group (GEO) nets $404.25 based on dividends, plus mean target price estimates by four analysts, less broker fees. The Beta number showed this estimate subject to volatility 51% more than the market as a whole.
DDR Corp. (DDR) was projected to net $389.88, based on a median target price estimate from twenty-one analysts, combined with projected annual dividend, less broker fees. The Beta number showed this estimate subject to volatility 24% less than the market as a whole.
Maiden Holdings (MHLD) was projected to net $366.86, based on a median target price estimate from four analysts, combined with projected annual dividend, less broker fees. The Beta number showed this estimate subject to volatility 18% more than the market as a whole.
Macquarie Infrastructure (MIC) was projected to net $340.92, based on dividends, plus a mean target price estimate from seven analysts, less broker fees. The Beta number showed this estimate subject to volatility 12% less than the market as a whole.
Western Gas Equity (WGP) was projected to net $340.76, based on dividends, plus the median of annual price estimates from fourteen analysts, less broker fees. The Beta number showed this estimate subject to volatility 54% more than the market as a whole.
Tallgrass Energy Partners (TEP) was projected to net $331.57, based on dividends, plus median target price estimates from fourteen analysts, less broker fees. The Beta number showed this estimate subject to volatility 6% more than the market as a whole.
Andeavor Logistics (ANDX) was projected to net $325.56, based on dividends, plus a mean target price estimate from fourteen analysts, less broker fees. The Beta number showed this estimate subject to volatility 15% more than the market as a whole.
Sabra Health Care REIT (SBRA) was projected to net $299.18, based on dividends, plus mean target price estimates from twelve analysts, less broker fees. The Beta number showed this estimate subject to volatility 8% less than the market as a whole.
Kite Realty Group Trust (KRG) was projected to net $277.25, based on dividends, plus mean target price estimates from eleven analysts, less broker fees. The Beta number showed this estimate subject to volatility 38% less than the market as a whole.
BT Group (BT) was projected to net $273.57, based on dividends, plus mean target price estimates from three analysts, less broker fees. The Beta number showed this estimate subject to volatility 1% less than the market as a whole.
Average net gain in dividend and price was estimated at 33.5% on $10k invested as $1k in each of these ten dogs. This gain estimate was subject to average volatility 6% more than the market as a whole.
December Top Yield 30 Challenger Dogs Represented 7 Business Sectors
Yield (dividend / price) results from here listed as of 11/30/17 were paired with annual dividends and prices posted as of 12/7/17 verified by Yahoo Finance for thirty stocks from seven of eleven Morningstar sectors revealed the actionable conclusions discussed in this article.
The U.S. Dividend Challengers are maintained by Dave Fish of Moneypaper's DirectInvesting.com, whose articles appear at Seeking Alpha. They are selected based on "5-9 straight years of higher dividends."
The Dividend Dogs Rule
Stocks earned the "dog" moniker by 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".
Top 30 Dividend Challengers
U.S. Dividend Challengers were selected based on "5-9 straight years of higher dividends."
Actionable Conclusion (11-20) Yield Metrics Identified 10 Top Dividend Challenger Stocks
Top ten Dividend Challengers selected 11/30/17 showing top yields 12/7/17, represented four sectors in the Morningstar eleven sector scheme: (1) energy [3 listed]; (2) real estate [5 listed]; (3) financial [1 listed]; (4) industrials [1 listed].
First Challenger stock by yield, Sunoco (SUN)  was the first of three energy firms listed. The others placed fifth, and sixth, Delek Logistics Partners (DKL) , and Andeavor Logistics (ANDX) .
One of the five real estate firms placed second, New Residential Investments (NRZ) . The other four real estate challenger dogs placed third, fourth, eighth and ninth, Sabra Health Care REIT (SBRA) , DDR Corp. (DDR) , Arbor Realty Trust (ABR) , and Spirit Realty Capital (SRC) .
One financial services stock placed seventh, Maiden Holdings (MHLD) , and finally, one industrial firm placed tenth, Macquarie Infrastructure (MIC)  to complete the top ten December December dividend Challengers by yield.
Actionable Conclusions: (21-30) Ten Challengers Promised 21.7% To 34.8% Upsides, While (31) Three Showed -2.57% To -6.53% Downsides To December, 2018
To quantify top dog rankings, analyst mean price target estimates provide a "market sentiment" gauge of upside potential. Added to the simple high-yield "dog" metrics, analyst mean price target estimates became another tool to dig out bargains.
Actionable Conclusions: Wall St. Wizards Wanted (32) A 14.46% Median Target Price Upside And (33) A 17.36% Gain From 30 Challenger Upside Dogs Come December 2018
Challenger stocks were graphed below to show relative strengths by dividend and price as of December 7, 2017, and those projected by analyst mean price target estimates to the same date in 2018.
A hypothetical $1,000 investment in each equity was divided by the current share price to find the number of shares purchased. The shares number was then multiplied by projected annual per share dividend amounts to find the dividend return. Thereafter, the analyst mean target price gauged the stock price upsides and net gains including dividends, less broker fees, as of 2018.
Historic prices and actual dividends paid from $10,000 invested as $1k in each of the stocks and the aggregate single share prices of those ten stocks created data points for 2017. Projections based on estimated dividend amounts from $1,000 invested in the ten stocks and aggregate 1-year analyst target share prices from Yahoo Finance created the 2018 data points green for price and blue for dividend.
Yahoo analysts' median 1-year targets projected a 12.2% lower dividend from $10k invested as $1k in ten dogs in this group while aggregate single share price for those ten was projected to increase by 16.4% in the coming year. Notice, price below dividend in the coming year by $420 indicates no overbought conditions immediately ahead for Challenger top yield dogs.
The number of analysts contributing to the target price estimate for each stock was noted in the next to the last column of the chart. Three to nine analysts was optimal for a valid projection estimate. Estimates provided by one analyst were not applied (n/a).
A beta (risk) ranking for each stock was provided in the far right column of the above chart. 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's movement opposite of market direction.
Brokers Calculated A 10.31% Disadvantage For 5 Highest Yield, Lowest Priced Challenger Stocks In December As Big Dogs Took The Challenge
Ten top Dividend Challengers were culled by yield for their monthly update from here. Yield (dividend / price) results verified by YCharts did the ranking.
As noted above, top ten Dividend Challenger dogs selected 11/30/17 showing the highest dividend yields as of 12/7/17 represented four sectors in the Morningstar eleven sector scheme.
Actionable Conclusions: Analysts Projected 5 Lowest-Priced of the Top Ten Highest-Yield Challenger Dogs (34) Delivering 22.91% Vs. (35) 25.54% Net Gains by All Ten Come December 2018
$5000 invested as $1k in each of the five lowest-priced stocks in the top ten Challenger kennel by yield were predicted by analyst 1-year targets to deliver 10.31% less net gain than $5,000 invested in all ten. The second lowest priced Challenger dividend dog, DDR Corp. (DDR), was projected to deliver the best net gain of 38.99%.
The five lowest-priced dividend Challengers for December 7 were: Maiden Holdings (MHLD); DDR Corp. (DDR); Spirit Realty Capital (SRC); Arbor Realty Trust (ABR); New Residential Investment (NRZ), with prices ranging from $6.85 to $17.93.
Five higher-priced dividend Challengers for December 7 were: Sabra Health Care REIT (SBRA); Delek Logistics Partners (DKL); Sunoco (SUN); Andeavor Logistics (ANDX); Macquarie Infrastructure (MIC), whose prices ranged from $19.05 to $65.97.
That distinction between the five low-priced dividend dogs and the general field of ten reflected Michael B. O'Higgins' "basic method" for beating the Dow. The scale of projected gains based on analyst targets added 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. Caution is advised, since analysts are historically only 20% to 80% accurate on the direction of change and just 0% to 20% accurate on the degree of change.
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
The net gain/loss estimates 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.
Five of these Challenger dividend pups qualify as 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 there. A Dogs of the Week III (DC Safari to Sweet Success) portfolio launched September 8. Click here to subscribe or get more information.
Make investing fun again. Watch for your underdog on Facebook!
At 2PM every NYSE trading day on the Dividend Dog Catcher page in Facebook, Fredrik Arnold does a quick live video summary of one of five stocks of the week contending for a slot on the Safari To Sweet Success portfolio.
Just go to Dividend Dog Catcher on facebook at 2 PM trading days and watch, comment and share, Remember: Root for the Underdog
Stocks listed above were suggested only as possible reference points for your Challenger Dividend dog stock purchase or sale research process. These were not recommendations.
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.indexarb.com; YCharts.com; finance.yahoo.com; analyst mean target price by Thomson/First Call in YahooFinance. Dog photo: e55amg.homestead.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.