S&P 500 'Safer' Dividend Stocks Yield 4.2% To 6% For June

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Includes: CVX, DLR, F, IVZ, LEG, MET, O, PAYX, PEP, PM, PRU, QCOM, REG, SPG, STX, VTR, VZ, WELL
by: Fredrik Arnold
Summary

35 of 90 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 6/5/18.

Broker target-estimated top-ten net 'safer' price gains from ETN, PEP, IP, MET, PFG, PRU, QCOM, IVZ, LEG, & topped by PM, ranged 14.66%-38.2%.

Top 10 "safer" dividend S&P 500 yields ranged 4.2% to 6% from QCOM; STX; IVZ; SPG; VZ; O; F; PM; VTR; WELL Their free cash flow yields ranged 4.24%-21.46%.

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 90 shrank to 65 by scrubbing stocks with negative annual returns.

Analyst one-year targets revealed that ten highest yield "safer" dividend S&P 500 Index stockholders could make a 0.67% gain by investing $5k in the lowest priced five, rather than putting $5K in all ten. Little low price dogs kept the lead in the S&P 500 'safer' dividend June chase.


Actionable Conclusions (1-10): Brokers Estimate Top Ten 'Safer' Dividend S&P 500 Stocks Could Net 14.66% to 38.2% Gains By June, 2019

Two 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 20% 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 June 5, 2019 by that reckoning were:

Invesco (IVZ) netted $382.04 based on estimates from seventeen analysts plus dividends less broker fees. The Beta number showed this estimate subject to volatility 67% more than the market as a whole.

Philip Morris International (PM) netted $346.02, based on dividends plus a target price estimate from nineteen analysts, minus broker fees. The Beta number showed this estimate subject to volatility 12% less than the market as a whole.

Prudential Financial (PRU) netted $246.64 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 46% more than the market as a whole.

Principal Financial Group (NYSE:PFG) netted $228.75 based on a median target price estimates from fourteen analysts plus dividends less broker fees. The Beta number showed this estimate subject to volatility 53% more than the market as a whole.

Leggett & Platt (LEG) netted $215.13 based on a median target price set by seven analysts, plus estimated dividends less broker fees. The Beta number showed this estimate subject to volatility 10% less than the market as a whole.

MetLife (MET) netted $185.17 based on a mean target estimate from nineteen analysts, plus dividends less broker fees. The Beta number showed this estimate subject to volatility 20% more than the market as a whole.

PepsiCo (PEP) netted $171.60 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 33% less than the market as a whole.

Chevron (CVX) netted $162.11, based on dividends plus a median target price estimate from thirty-three analysts, less broker fees. The Beta number showed this estimate subject to volatility 93% less than the market as a whole.

Regency Centers (REG) netted $160.21 based on estimates from nineteen analysts, plus dividends less broker fees. The Beta number showed this estimate subject to volatility 52% less than the market as a whole.

Digital Realty Trust (DLR) netted $146.62 based on a median target estimate from eighteen analysts, plus dividends, less broker fees. The Beta number showed this estimate subject to volatility 98% less than the market as a whole.

Average net gain in dividend and price was 22.44% 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 11% less than the market as a whole.


Actionable Conclusion (11 & 12): (Bear Alert) Analysts Expected Two 'Safer' Dividend S&P500 Stocks To Lose 3.15% & 3.88% By June, 2019

The probable losing trades revealed by Y-Charts to 2019 were:

Seagate Technology (STX) lost $31.15 net per the median target estimate from twenty-nine analysts, including dividends, and broker fees. The Beta number showed this estimate subject to volatility 84% more than the market as a whole.

Paychex (PAYX) lost $38.78 net per the median target estimate from sixteen analysts, including dividends, and broker fees. The Beta number showed this estimate subject to volatility equal to the market as a whole.

Average net loss in dividend, price and broker fees was 3.49% 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 42% 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".

All Eleven Sectors Were Represented In This 'Safer' Dividend S&P 500 Collection

All eleven sectors are represented by the thirty-five "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 June 5.

The "safer" dividend S&P 500 Index sector representation broke-out, thus: Real Estate (10); Consumer Defensive (4); Consumer Cyclical (5); Communication Services (1); Financial Services (5); Technology (3); Healthcare (2); Energy (1); Basic Materials (1); Utilities (1); Industrials (2).

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

35 of 90 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 90.

You see grouped below the tinted list documenting 35 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 twenty six with sagging returns from the master list of 90.

Corporate financial fortunes, however, are frequently re-prioritized by boards of directors manipulating company policy canceling 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 Tiny 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 June 5 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 12.85% VS. (13) 12.77% Net Gains from All Ten by June, 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 0.67% 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 34.6% per target estimates.

Lowest priced five 'safer' Dividend S&P500 Index stocks as of June 5 were: Ford Motor (F); Invesco (IVZ); Verizon Communications (VZ); Realty Income (O); Ventas (VTR), with prices ranging from $11.83 to $54.50.

Higher priced five "Safer" Dividend S&P500 Index stocks as of May 3 were: Welltower (WELL); Qualcomm (QCOM); Seagate Technology (STX); Philip Morris Intl (PM); Simon Property Group (SPG), with prices ranging from $57.41 to $162.93. This time little, low-priced, S&P 500 Index stocks barely 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: fanpop.com

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.