32 'Safer' Dividend Consumer Defensive Stocks For April 2019

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Includes: ADRNY, AXFOF, AXFOY, BIG, BTI, BUD, CBYDF, CLX, EDESY, HSY, IMBBY, KKOYY, KOF, MHTLY, PEP, PG, PM, TATYY
by: Fredrik Arnold

Summary

32 of 91 top yield Consumer Defensive stocks were tagged "safer" because they showed positive annual-returns, and free cash-flow yields greater than their dividend yields.

Top 10 'safer' net gain dividend Consumer Defensive dogs, topped by Big Lots, averaged 14.46% gains as of 4/10/18 per analyst-estimated price targets, plus dividends, less broker fees.

Top 10 Annual yields ranged 4.05%-9.16% from EDESY; MHTLY; PM; CBYDF; TATYY; BTAFF; KKOYY; AXFOY; ADRNY; IMBBY. Their free cash flow yields ranged 4.69%-18.54%.

Besides safety margin, your 'safer' dividend Consumer Defensive stocks reported payout ratios (lower is better), total annual returns, dividend growth, and  p/e ratios to further measure their cash reserves backing up their dividends.

Analyst one-year targets revealed that $5k invested in the lowest priced five of ten top "safer" dividend Consumer Defensive  stocks projected 16.2% LESS gain than from investing in all ten.

Actionable Conclusions (1-10): Brokers Predicted Top Ten 'Safer' Dividend Consumer Defensive Stocks To Net 2.85% to 30.45% Gains By April, 2019

Three of the ten top-yield "safer" Consumer Defensive eqiities (tinted gray 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 selection strategy for this group, as graded by analyst estimates for April, proved 30% accurate.

Projections based on 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 from one analyst were not applied (n/a). Ten probable profit-generating trades projected to April, 2019 were:

Big Lots (BIG) netted $304.50 based on the median of target estimates from thirteen analysts, plus dividend, less broker fees. The Beta number showed this estimate subject to volatility 13% more than the market as a whole.

Coca-Cola Femsa (KOF) netted $212.63 based on target price estimates from twelve analysts, plus dividends less broker fees. The Beta number showed this estimate subject to volatility 3% more than the market as a whole.

Procter & Gamble (PG) netted $179.29 based on median price targets from twenty-five analysts, plus dividends, less broker fees. The Beta number showed this estimate subject to volatility 43% less than the market as a whole.

Clorox (CLX) netted $169.89 per the median of estimates from thirteen analysts, plus dividends less broker fees. The Beta number showed this estimate subject to volatility 16% less than the market as a whole.

Anheuser-Busch InBev (BUD) netted $167.65 based on the median of estimates from ten analysts, plus projected dividends, less broker fees. The Beta number showed this estimate subject to volatility 1% less than the market as a whole.

PepsiCo (PEP) netted $141.97 based on the median of estimates from twenty-six analysts, plus projected dividends, less broker fees. The Beta number showed this estimate subject to volatility 34% less than the market as a whole.

The Hershey (HSY) netted $139.23 based on the median target estimate from twenty analysts, plus projected dividends, less broker fees. The Beta number showed this estimate subject to volatility 67% under the market as a whole.

Imperial Brands (OTCQX:IMBBY) netted $71.59 based on projected dividends alone less broker fees. The Beta number showed this estimate subject to volatility 34% less than the market as a whole.

Koninklijke Ahold (OTCQX:ADRNY) netted $30.40 based just on dividends, less broker fees.The Beta number showed this estimate subject to volatility 34% less than the market as a whole.

Axfood (OTCPK:AXFOY) netted $28.53, based on dividend only with broker fees subtracted. No Beta number was available for AXFOY.

Average net gain in dividend and price minus broker fees was 14.46% on $10k invested as $1k in each of these ten “Safer” Consumer Defensive dividend stocks. This gain estimate was subject to average volatility 24% 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."

'Safer' Dividend Consumer Defensive Equities

Yield (dividend / price) results from here April 10, supplemented by 1 year total returns (Annual) verified by YahooFinance for thirty-two of ninty-one stocks from the Consumer Defensive sector revealed the actionable conclusions discussed below.

11 Industries Were Represented By 32 "Safer" Dividend Consumer Defensive Stocks

The Consumer Defensive sector embraces thirteen industries. Twenty-eight stocks selected by returns and yield for this writing represented eleven of those industries.

Industry representation broke-out, thus: Tobacco (3); Grocery Stores (5); Food Distribution (3); Packaged Foods (7); Beverages - Wineries & Distilleries (1); Farm Products (2); Beverages - Brewers (2); Household & Personal Products (3); Discount Stores (2); Beverages - Soft Drinks (3); Confectioners (1); Education & Training (0); Pharmaceutical Retailers (0).

Top ten "safer" consumer defensive dogs showing positive returns and the safety margin of cash to cover dividends as of April 10 included the first seven industries on the list above.

'Safer' Dividend Consumer Defensive Firms

Periodic Safety Inspection

A previous article discussed the attributes of the 50 Top yield Consumer Defensive stocks culled from this master list of 91. Below is the list of 32 of those 91 resulting from the "safety" check that noted positive annual returns and free annual cash flow yield sufficient to cover estimated annual dividend yield.

18 of the 91 Consumer Defensive big yield dogs at the end of the above list were rejected in this "safer" screening process due to their negative annual returns.

Corporate financial priorities, however, are easily revised by any board of directors choosing to institute 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.

Three 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 show additional methods to reach beyond yield to select reliable dividend stocks. Positive results in the 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 metric, analyst mean price target estimates became another tool to dig out bargains.

Yield Metrics Uncovered No Gain Advantage From Lowest Priced 'Safer' Dividend Consumer Defensive Stocks

Ten firms with the biggest yields April 10, per YCharts data, ranked themselves by yield as follows:

Actionable Conclusions: Analysts Predicted 5 Lowest Priced, of Ten "Safer" High Yield Dividend Consumer Defensive Stocks, (11) To Deliver 2.50% VS. (12) 3.98% Net Gains from All Ten by January, 2019

$5000 invested as $1k in each of the five lowest priced stocks in the "safer" ten Consumer Defensive kennel by yield were determined by analyst 1 year targets to deliver 16.2% LESS net gain than $5,000 invested as $.5k in all ten. The eighth lowest priced "safer" dividend Consumer Cyclicals equity, Imperial Brands (OTCQX:IMBBY) showed the best net gain of 7.16% per analyst targets.

Lowest priced five "safer" dividend Consumer Defensive stocks as of April 10 were: Metcash (OTCPK:MHTLY); Elders (OTCPK:EDESY); Corby Spirit and Wine (OTCPK:CBYDF) Axfood (OTCPK:AXFOF); Koninklijke Ahold (OTCQX:ADRNY), with prices ranging from $14.08 to $24.26.

Higher priced five "Safer" Dividend Consumer Defensive stocks as of March 1 were: Kesko (OTCPK:KKOYY); Tate & Lyle (OTCQX:TATYY); Imperial Brands (OTCQX:IMBBY); British American Tobacco (BTI); Philip Morris International (PM), with prices ranging from $28.35 to $101.10.

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 suggestions for your "Safer" Dividend Consumer Defensive 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: terrafaelis.de

Disclosure: I am/we are long MHGVY.

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.

Editor's Note: This article covers one or more stocks trading at less than $1 per share and/or with less than a $100 million market cap. Please be aware of the risks associated with these stocks.