Actionable Conclusions (1-10): Analysts Predict Top Ten Utilities 'Safer' Dividend Stocks Netting 3.9% to 40% Gains To February 2019
Seven of ten top dividend Utilities (whose names are 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 metrics for this Utilities group, as graded by analyst estimates for January, proved 70% accurate.
Projections based on estimated dividend returns from $1000 invested in the twenty-seven highest yielding 'safer' stocks and their aggregate one year analyst median target prices, as reported by YCharts, created the 2019 data points. Note: one year target prices from one analyst were not applied (n/a). Ten probable profit-generating trades to February, 2019 were:
Pattern Energy Group (PEGI) netted $401.00 based on estimates from fifteen analysts plus dividends less broker fees. The Beta number showed this estimate subject to volatility 8% under the market as a whole.
NRG Yield (NYLD) netted $257.44 based on dividends plus a median target price estimate from five analysts less broker fees. The Beta number showed this estimate subject to volatility 82% more than the market as a whole.
NRG Yield (NYLD.A) netted $218.92 based on dividends plus a median target price estimate from seven analysts less broker fees. A Beta number was not available for NYLD.A.
TerraForm Power (TERP) netted $218.92 based on a median target price estimate from seven analysts, plus dividends, less broker fees. The Beta number showed this estimate subject to volatility 2% less than the market as a whole.
Brookfield Infrastructure (BIP) netted $181.78 based on a median target price estimate from ten analysts, plus projected annual dividends, less broker fees. The Beta number showed this estimate subject to volatility 4% less than the market as a whole.
8point3 Energy Partners (CAFD) netted $142.21, based on target price estimates from nine analysts, plus estimated dividends minus broker fees. No Beta number was available for CAFD.
FirstEnergy (FE) netted $141.15 based on dividends plus a median target price estimate from eighteen analysts less broker fees. The Beta number showed this estimate subject to volatility 68% less than the market as a whole.
Great Plains Energy (GPP) netted $91.49 based on a median target price estimate from eleven analysts, plus estimated dividends less broker fees. The Beta number showed this estimate subject to volatility 58% less than the market as a whole.
Engie SA (OTCPK:ENGQF) netted $41.29, based on dividend alone, with no target price estimate from any analysts, less broker fees. The Beta number showed this estimate subject to volatility 25% less than the market as a whole.
Atlantica Yield (AY) netted $39.09 based on mean target price estimates from six analysts plus dividends less broker fees. The Beta number showed this estimate subject to volatility 4% more than the market as a whole.
Average net gain in dividend and price was 17.33% on $10k invested as $1k in each of these ten Utilities "safer" dividend stocks. This gain estimate was subject to average volatility 9% less than the market as a whole.
Actionable Conclusion (11): (Bear Alert) Analysts Predicted One 'Safer' Dividend Utilities Stock To Lose 7.69% By February 2019
The probable losing trade revealed by YCharts for 2019 was:
Enel Generacion Chile (EOCC) projected a $76.87 loss based on dividend plus a median target price estimate from four analysts including $20 of broker fees. The Beta number showed this estimate subject to volatility 29% 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".
Five Utilties Industries Show "Safer" Dividends
Five industries constitute the Utilities sector, and all five were represented by the 27 firms whose stocks showed positive annual returns with margins of cash to cover dividends by this screen as of February 28.
The industry representation broke-out, thus: Independent Power Producers (5); Regulated Electric Utilities (9); Diversified Utilities (7); Regulated Gas Utilities (4); Regulated Water Utilities (2).
The first four industries listed above populated the top ten Utilities 'safer' dividend team by yield.
27 of 97 Utilities Firms Show "Safer" Dividends
Periodic Safety Inspection
A previous article discussed the attributes of the 50 Top yield Utilities stocks culled from this master list of 97.
You see grouped below the tinted list documenting 27 that passed the Utilities dog "safer" check with positive past-year returns and cash flow yield sufficient to cover their anticipated annual dividend yield. The margin of cash excess is shown in the bold face "Safety Margin"column.
Financial fortunes, however, are easily revised by boards of directors setting company policies cancelling or varying the payout of dividends to shareholders. This article contends that adequate cash flow is a 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 levels, and p/e ratios, for each stock. This data is provided to reach beyond yield to select reliable payout stocks.
Total annual returns by positive results narrowed the 97 Utilities dogs list to 89 for this article. 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 became another tool to dig out bargains.
Yield Metrics Revealed Healthy Bargains From Lowest Priced Top Ten Yielding "Safe" Dividend Utilities Sector Stocks
Ten "Safe" Dividend Utilities firms with the biggest yields February 28 per YCharts data ranked themselves by yield as follows:
Actionable Conclusions: Analysts Predicted 5 Lowest Priced, of Ten "Safer" Dividend High Yield Utilities Sector Dogs, (11) To Deliver 18.14% VS. (12) 14.58% Net Gains from All Ten by February 2018
$5000 invested as $1k in each of the five lowest priced stocks in the ten "safer" dividend Utilities Sector pack by yield were determined by analyst 1 year targets to deliver 24.47% more gain than $5,000 invested as $.5k in all ten. The ninth lowest priced "safer" dividend Utilities stock, Pattern Energy Group (PEGI) showed the best analyst estimated net gain of 40.1% per their targets.
Lowest priced five "safer" Utilities dogs as of February 28 were:
Higher priced five "Safer" Dividend Utilities dogs as of January 26 were: Engie (OTCPK:ENGIY); Engie (OTCPK:ENGQF); Valener (OTCPK:VNRCF); Pattern Energy Group (PEGI); Atlantica Yield (AY), with prices ranging from $15.69 to $19.63. The low priced little Utility dogs came back in a big way.
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" Utilities 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 YCharts, Yahoo Finance; analyst mean target price by Thomson/First Call from Yahoo Finance. Dog photo taken from topdogtips.com.
Editor's Note: This article discusses one or more securities that do not trade on a major U.S. exchange. Please be aware of the risks associated with these stocks.
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Make investing gains again. Catch your underdog on Facebook!
At 2 p.m. ET every NYSE trading day on Facebook, Dividend Dog Catcher Fredrik Arnold posts a quick live video summary of one of four or five stocks contending for a single weekly slot in his Safari To Sweet Success portfolio. Go to Facebook/Dividend Dog Catcher at 2 p.m. ET on trading days and watch, like, comment and share it. Of course you're welcome to view all the replays, too.
Yet always remember: Root for the Underdog!