S&P 500 'Safer' Dividend Stock Yield Leaders Are Welltower, Ventas, & Ford For May

Summary

• 46 of 114 S&P 500 Index top-yield dividend stocks were labeled as "safer" for dividends because they showed positive one-year returns, and free cash-flow yields greater than their dividend-yields 5/3/18.
• Broker target-estimated top-ten net 'safer' dividend gains from ETN, PEP, IP, MET, PFG, PRU, QCOM, IVZ, LEG, & topped by PM, ranged 21.22%-36.34%.
• Top 10 "safer" dividend S&P 500 yields ranged 4.29% to 6.27% from IVZ; STX; SPG; QCOM; VZ; O; PM; F; VTR; WELL Their free cash flow yields ranged 4.97%-22.67%.
• Besides safety margin, S&P 500 Index dividend stocks also reported payout ratios, total annual returns, dividend growth, and p/e ratios, to confirm their dividend support. The list of 114 shrank to 82 by scrubbing stocks with negative annual returns.
• Analyst one-year targets revealed that ten highest yield "safer" dividend S&P 500 Index stockholders could get a 14.32% gain by investing $5k in the lowest priced five, rather than putting $5K in all ten. Little low price dogs took the lead in the S&P 500 May chase.

Actionable Conclusions (1-10): Brokers Estimate Top Ten 'Safer' Dividend S&P500 Stocks May Net 21.2% to 36.34% Gains By May, 2019

Three of the ten tops-by-yield 'safer' Dividend S&P 500 (tinted in the chart above) were among the top ten gainers for the coming year based on analyst 1 year target prices. Thus, the dog strategy for this group, as graded by analyst estimates for this month, proved 30% accurate.

Projections based on estimated dividend returns from $1000 invested in each of 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. The ten probable profit-generating trades projected to May 3, 2019 by that reckoning were:

Philip Morris International (PM) netted $363.39, based on dividends plus a target price estimate from eighteen analysts, minus broker fees. The Beta number showed this estimate subject to volatility 12% less than the market as a whole.

Leggett & Platt (LEG) netted $315.80 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 11% less than the market as a whole.

Invesco (IVZ) netted $299.74 based on estimates from seventeen analysts plus dividends less broker fees. The Beta number showed this estimate subject to volatility 70% more than the market as a whole.

Qualcomm (QCOM) netted $295.44, based on dividends plus a median target price estimate from twenty-five analysts, less broker fees. The Beta number showed this estimate subject to volatility 47% more than the market as a whole.

Prudential Financial (PRU) netted $283.28 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 52% more than the market as a whole.

Principal Financial Group (PFG) netted $243.97 based on a median target price estimates from seventeen analysts plus dividends less broker fees. The Beta number showed this estimate subject to volatility 56% more than the market as a whole.

MetLife (MET) netted $242.43 based on a mean target estimate from nineteen analysts, plus dividends less broker fees. The Beta number showed this estimate subject to volatility 24% more than the market as a whole.

International Paper (IP) netted $230.34 based on estimates from sixteen analysts, plus dividends less broker fees. The Beta number showed this estimate subject to volatility 52% more than the market as a whole.

PepsiCo (PEP) netted $220.88 based on dividends plus a median target price estimate from thirty-one analysts less broker fees. The Beta number showed this estimate subject to volatility 33% less than the market as a whole.

Eaton (ETN) netted $212.24 based on a median target estimate from twenty-one analysts, plus dividends, less broker fees. The Beta number showed this estimate subject to volatility 37% more than the market as a whole.

Average net gain in dividend and price was 27.08% on $10k invested as $1k in each of these ten "safer" Dividend S&P 500 Index stocks. This gain estimate was subject to average volatility 28% more 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 Were Represented In This 'Safer' Dividend S&P 500 Collection

Nine sectors are represented by the nineteen "Safer" members of the S&P 500 Index. Those were called 'safer' because they showed positive annual returns and margins of cash to cover dividends by this screen as of May 3.

The "safer" dividend S&P 500 Index sector representation broke-out, thus: Real Estate (8); Consumer Cyclical (7); Consumer Defensive (5); Communication Services (1); Technology (4); Financial Services (8); Healthcare (5); Basic Materials (2); Industrials (4); Energy (1); Utilities (1).

The first six sectors listed above composed the top ten 'safer' dividend S&P 500 Index by yield.

46 of 114 S&P 500 Firms With "Safer" Dividends

Periodic Safety Inspection

A previous article discussed the attributes of 50 top yield constituents of the S&P 500 Index culled from this master list of 114.

You see grouped below the tinted list documenting 46 that passed the dividend "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 thirty-two with sagging returns.

Corporate financial fortunes, however, are frequently re-prioritized by boards of directors manipulating company policy 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. Positive results in the five columns after the dividend ratio portend 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 Uncovered Nice Bargains From Lowest Priced 5 of Top 10 Yielding 'Safer' Dividend S&P 500 Index Stocks

Ten "Safer" Dividend S&P 500 firms with the biggest yields May 3 per YCharts data ranked themselves by yield as follows:

Actionable Conclusions: Analysts Predicted 5 Lowest Priced, of Ten "Safer" Dividend S&P 500 Stocks, (12) Delivering 20.95% VS. (13) 18.33% Net Gains from All Ten by May, 2019

$5000 invested as $1k in each of the five lowest priced stocks in the "safer" Dividend S&P 500 Index 10 pack by yield were determined by analyst 1 year targets to deliver 14.32% more gain than $5,000 invested as $.5k in all ten. The ninth lowest priced "safer" Dividend S&P 500 equity, Philip Morris International (PM) showed the best analyst-augured net gain of 36.34% per target estimates.

Lowest priced five 'safer' Dividend S&P500 Index stocks as of May 3 were: Ford Motor (F); Invesco (IVZ); Verizon Communications (VZ); Qualcomm (QCOM); Realty Income (O), with prices ranging from $11.20 to $51.29.

Higher priced five "Safer" Dividend S&P500 Index stocks as of May 3 were: Ventas (VTR); Seagate Technology (STX); Welltower (WELL); Philip Morris Intl (PM); Simon Property Group (SPG), with prices ranging from $52.53 to $159.04. This time litlle, low-priced, S&P 500 Index stocks prevailed.

This distinction between five low priced dividend equities 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. It's 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 S&P 500 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: fox8.com

Analyst’s Disclosure: I am/we are long T, PFE. 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.