Wall Street's 32 Favorite "Safer" Dividend Stocks For January 2019

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Includes: AHGP, BGSF, CHL, CMRE, CPLP, DLNG, FE, GPP, HMLP, MBT, ORAN, SHI, SXCP, TEF, TGE
by: Fredrik Arnold
Summary

Wall Street thrives on picking prices for equities. My articles include broker one-year target estimates for dividend stocks. This Wall Street favorite ranking was suggested by a reader, Minnesota72.

32 of 66 Wall Street Favored Dividend stocks were tagged as "safer" for dividends because they showed positive one-year returns and free cash flow yields greater than their dividend yields.

Broker target-estimated top ten net "safer" gains ranged from 23.67% to 49.31%, and were topped by TEF.

Top ten Wall Street Favorite "Safer" Dividend annual yields ranged from 6.13% to 13.5%, topped by SXCP. Their free cash flow yields ranged from 8.51% to 32.22%.

Analyst one-year targets revealed that the ten highest yield Wall Street Favorite "Safer" Dividend stocks could produce 0.53% more gains from $5k invested all ten.

Actionable Conclusions (1-10): Brokers Predicted Top Ten Wall St Favorite 'Safer' Dividend Stocks To Net 23.67% to 49.31% Gains To January 2019

Seven of the ten top Wall St. Favorite 'Safer' DiviDogs by yield (shaded 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 yield-based "dog" strategy for this group, as graded by analyst estimates for this month, proved 70% accurate.

Ten probable profit-generating trades were culled by YCharts to 2019:

Telefonica (TEF) was forecast to net $493.13based on estimates from two analysts plus dividends less broker fees. The Beta number showed this estimate subject to volatility 33% more than the market as a whole.

China Mobile (CHL) netted $395.49 based on a median target price estimate from three analysts, plus projected annual dividends less broker fees. The Beta number showed this estimate subject to volatility 71% less than the market as a whole.

Capital Product Partners (CPLP) netted $373.16 based on a median target price set by eight analysts, plus estimated dividends less broker fees. The Beta number showed this estimate subject to volatility 62% more than the market as a whole.

SunCoke Energy Partners (SXCP) netted $326.93, based on dividends plus a median target price estimate from three analysts, less broker fees. The Beta number showed this estimate subject to volatility 33% more than the market as a whole.

Green Plains Partners (GPP) netted $324.41, based on dividends plus a median target price estimate from six analysts, minus broker fees. A beta number was not available for GPP.

Tallgrass Energy Partners (TEP) netted $283.32 based on a median target estimate from fiftheen analysts, plus dividends, less broker fees. The Beta number showed this estimate subject to volatility 6% more than the market as a whole.

Costamare (CMRE) netted $266.64 based on dividends plus a median target price estimate from eight analysts less broker fees. A beta number was not available for CMRE.

BG Staffing (BGSF) netted $262.76 based on estimates from two analysts, plus dividends, less broker fees. The Beta number showed this estimate subject to volatility 69% less than the market as a whole.

Orange (ORAN) netted $241.24 based on a median target estimate from two analysts, plus dividends less broker fees. The Beta number showed this estimate subject to volatility 38% less than the market as a whole.

FirstEnergy (FE) netted $236.73 based on mean target price estimates from seventeen analysts plus dividends less broker fees. The Beta number showed this estimate subject to volatility 77% less than the market as a whole.

Average net gain in dividend and price was 32.04% on $10k invested as $1k in each of these ten Wall St. Favorite 'Safer' Dividend stocks. This gain estimate was subject to average volatility 25% 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."

Nine of Eleven Sectors Are Represented By The 32 Wall St Favorite 'Safer' Dividend Dogs For January

Sectors represented by the 32 Wall St Favorite 'Safer' Dividends were nine out of eleven. Those 32 stocks showed positive annual returns and margins of cash to cover dividends by this screen as of January 5.

The Wall St Favorite 'Safer' Dividend sector representation broke-out, thus: Basic Materials (4); Energy (3); Industrials (5); Communication Services (5); Financial Services (3); Utilities (1); Consumer Defensive (3); Healthcare (6); Technology (2); Consumer Cyclical (0); Real Estate (0).

Six of the nine sectors were represented in the top ten by yield.

32 of 66 Wall St. Favorites Are 'Safer' Dividend Firms

Periodic Safety Inspection

A previous article discussed the attributes of the top 50 Wall St Favorite Dividend stocks culled by yield from this list of 66.

You see grouped below a tinted list showing 32 that passed the dog "safer" check with positive past-year returns and cash flow yield sufficient to cover their anticipated annual dividend yield. The margin of excess is shown in the bold face "Safety Margin" column. The total returns column screened out thirteen with sagging prices.

Corporate financial results, however, are easily re-directed by boards of directors making company policy cancelling or varying the payout of dividends to shareholders. Some may not cut or reduce dividends but carefully regulate their annual pay outs in slow business periods.

This article contends that adequate cash flow is strong justification for a company to sustain annual dividend pay increases to shareholders.

Note that many of these Wall St Favorites have cut their dividends lower recently, including:

  • Alliance Holdings (AHGP) in May 2016
  • Mobile TeleSystems (MBT) pays variably since May, 2011
  • Costamare (CMRE) in October 2016
  • China Mobile (CHL) pays variably since October 2011
  • Sinopec Shanghai (SHI) pays variably since June 2011, among others

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 a solid financial signal.

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" metric, analyst mean price target estimates became another tool to dig out bargains.

Dog Metrics Revealed Small Bargains From Lowest Priced, High Yielding, Wall St Favorite 'Safer' DiviDogs

Ten Wall St Favorite 'Safer' DiviDog firms with the biggest yields January 5 per YCharts data ranked themselves as follows:

Actionable Conclusions: Analysts Predicted 5 Lowest Priced, of Ten "Safer" Dividend Wall St Favorite Stocks, (13) Will Deliver 28.28% VS. (14) 28.13% Net Gains from All Ten by January 2019

$5000 invested as $1k in each of the five lowest priced stocks in the ten Wall St Favorite 'Safer' Dividends pack by yield were determined by analyst 1 year targets to deliver 5.04% less gain than $5,000 invested as $.5k in all ten. The sixth lowest priced Wall Street Favorite 'Safer' DiviDog, Dynagas LNG Partners (DLNG) showed the best broker-calculated net-gain of 49.74% per their target estimates.

Lowest priced five Wall St Favorite 'Safer' Dividends as of January 5 were: Capital Product Partners (CPLP); Costamare (CMRE); Mobile Telesystems (MBT); BG Staffing (BGSF); SunCoke Energy Partners (SXCP), with prices ranging from $3.51 to $17.60.

Higher priced five Wall St Favorite 'Safer' Dividends as of January 5 were: Green Plains Partners (GPP); Hoegh LNG Partners (HMLP); Alliance Holdings (AHGP); Tallgrass Energy Partners (TEP); China Mobile (CHL), with prices ranging from $18.35 to $50.31. The smaller low-priced Wall St Favorite 'Safer' Dividend stocks prevailed!

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 Wall St Favorite 'Safer' DiviDogs dividend stock 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 Ycharts, Yahoo Finance; analyst mean target price by Thomson/First Call from Yahoo Finance. Dog photo taken from houzz.com.

Disclosure: I am/we are long BGSF. 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.