Actionable Conclusions (1-10): Brokers Estimate Top Ten 'Safer' Dividend Aristocrats Stocks to Net 8.23% to 23.59% Gains To February, 2019
Three of ten top yield "safer" Dividend Aristocrats (tinted in the chart above) were also in the Top ten gainers for the coming year based on analyst 1 year target prices. Thus the yield selection strategy for this group as graded by analyst estimates proved 30% accurate.
Projections based on estimated dividend returns from $1000 invested in the thirty highest yielding stocks and their aggregate one year analyst median target prices, as reported by YCharts, created the 2018-19 data points. Note: one year target prices by lone analysts were not applied. Ten probable profit-generating trades projected to February 2, 2019 were:
Leggett & Platt (LEG) netted $235.94, based on dividends plus a target price estimate from eight analysts, minus broker fees. The Beta number showed this estimate subject to volatility 8% less than the market as a whole.
Procter & Gamble (PG) netted $133.22 based on estimates from twenty-four analysts plus dividends less broker fees. The Beta number showed this estimate subject to volatility 49% less than the market as a whole.
Air Products & Chemicals (APD) netted $127.24 based on a mean target estimate from twenty-one analysts, plus dividends less broker fees. The Beta number showed this estimate subject to volatility 22% more than the market as a whole.
Nucor (NUE) netted $122.90 based on dividends plus a median target price estimate from fifteen analysts less broker fees. The Beta number showed this estimate subject to volatility 56% more than the market as a whole.
Praxair (PX) netted $122.21 based on a median target price estimate from nineteen analysts , plus projected annual dividends less broker fees. The Beta number showed this estimate subject to volatility 3% more than the market as a whole.
McDonald's (MCD) netted $117.32 based on a median target estimate from thirty-sx analysts, plus dividends, less broker fees. The Beta number showed this estimate subject to volatility 41% less than the market as a whole.
Abbott Laboratories (ABT) netted $95.58 based on estimates from twenty-two analysts, plus dividends less broker fees. The Beta number showed this estimate subject to volatility 56%more than the market as a whole.
Medtronic (MDT) netted $90.01 based on mean target price estimates from twenty-six analysts plus dividends less broker fees. The Beta number showed this estimate subject to volatility 7% less than the market as a whole.
Franklin Resources (BEN) netted $88.61 based on a median target price set by fourteen analysts, plus estimated dividends less broker fees. The Beta number showed this estimate subject to volatility 63% more than the market as a whole.
Johnson & Johnson (JNJ) netted $82.27, based on dividends plus a median target price estimate from twenty-six analysts, less broker fees. The Beta number showed this estimate subject to volatility 26% less than the market as a whole.
Average net gain in dividend and price was 12.15% on $10k invested as $1k in each of these ten "safer" Dividend Aristocrats stocks. This gain estimate was subject to average volatility 7% more than the market as a whole.
Actionable Conclusion (11): (Bear Alert) Analysts Predicted One 'Safer' Dividend Aristocrat To Show A 3.72% Loss to February, 2019
The one probable losing trade revealed by Y-Charts for 2019 was:
W.W. Grainger (GWW) projected a loss of $37.21 based on dividend and a median target price estimate from twenty-three analysts including $20 of broker fees. The Beta number showed this estimate subject to volatility 12% 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".
Six of Eleven Sectors Showed "Safer" Dividends On The S&P 500 Aristocrats Index
Six sectors were represented by the 42 "Safer" members of the S&P 500 Dividend Aristocrats Index. Those showed positive annual returns and margins of cash to cover dividends by this screen as of February 2.
The "safer" Aristocrats sector representation broke-out, thus: Consumer Defensive (10); Consumer Cyclical (5); Financial Services (4); Industrials (12); Basic Materials (6); Healthcare (4); Communication Services (0); Energy (0); Real Estate (0); Technology (0); Utilities (0).
The first five sectors shown above list composed the top ten Aristocrats 'safer' dividend team by yield.
42 of 53 Aristocrats Firms Showed "Safer" Dividends
Periodic Safety Inspection
A previous article discussed the attributes of the 53 constituents of S&P 500 Dividend Aristocrats Index.
You see grouped below the tinted list documenting 42 that passed the dividend 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 negative returns.
Financial choices, however, are easily adjusted by boards of directors or company policy 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 to shareholders.
Four additional columns of financial data, listed after the Safety Margin figures above, reveal payout ratios (lower is better), total annual returns, dividend growth, and p/e ratio 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 remarkably 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.
Yield Metrics Revealed No Bargains From Lowest Priced Top Ten Yielding "Safe" Dividend Aristocrats In January/February
Ten "Safer" S&P 500 Dividend Aristocrats firms with the biggest yields February 2 per YCharts data ranked themselves by yield as follows:
Actionable Conclusions: Analysts Predicted 5 Lowest Priced, of Ten 'Safer' Dividend Aristocrats, Will (12) Deliver 7.38% VS. (13) 7.56% Net Gains from All Ten by February, 2019
$5000 invested as $1k in each of the five lowest priced stocks in the "safer" Dividend Aristocrats Top Ten by yield were determined by analyst 1 year targets to deliver 2.35% LESS gain than $5,000 invested as $.5k in all ten. The very lowest priced "safer" Dividend Aristocrat, Leggett & Platt (LEG) showed the best analyst-augured net gain of 23.59% per the median of eight estimates.
Lowest priced five "safer" Dividend Aristocrats as of February 2 were: Leggett & Platt (LEG); Target Corporation (TGT); Emerson Electric (EMR); Cincinnati Financial (CINF); Procter & Gamble (PG); Genuine Parts (GPC) , with prices ranging from $45.05 to $102.19.
Higher priced five "Safer" Dividend Aristocrats Index dogs as of February 2 were: AbbVie, Inc. (ABBV); Kimberly-Clark (KMB); PepsiCo (PEP); Clorox (CLX); Air Products & Chemicals (APD), with prices ranging from $115.17 to $162.84. The high-priced (BIG) Aristocrats took January/February.
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 safest "Safer" Dividend Aristocrats Index dog 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 www.ycharts. com; www.finance.yahoo.com; analyst mean target price by Thomson/First Call in Yahoo Finance. Dog photo from: hdwallpapers.com
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Make investing green again. Catch your underdog on Facebook!
At 2 PM every NYSE trading day on Facebook/ Dividend Dog Catcher Fredrik Arnold does a quick live video summary of one of four or five stocks contending for a weekly slot on the Safari To Sweet Success portfolio.
Just go to Facebook/Dividend Dog Catcher at 2 PM trading days and watch, like, comment and share the video. Remember: Root for the Underdog.
Disclosure: I am/we are long PFE, T. 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.