10 'Safer' Dividend Champions, Contenders And Challengers Are Distilled From 90 WallStars By Broker June Targets

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Includes: ABR, HMLP, KMB, LEG, NNN, O, PBCT, PG, PM, SIR, SUN
by: Fredrik Arnold

Summary

Champion dividend stocks sustain 25 or more annual dividend increases; Contenders show 10-24; Challengers have 5-9. WallStars show >.7% price-target upsides.

Ten of 30 ChaConCha (CCC) WallStars were deemed 'safer' by showing positive annual-returns, and cash-flow yields >dividend yields 6/8/18. Price target-upsides ranged 2.86%-27.94% as of 6/8/18.

Top 10 'Safer' Dividend ChaConCha (CCC) WallStar annual yields ranged 3.65% to 12.6% from PBCT; PG; KMB; NNN; O; PM; SIR; HMLP; ABR; SUN. Their free cash-flow yields ranged 5.03%-51.57%.

Besides safety margin, 'safer' dividend CCC stocks also reported payout ratios,  (lower is better), total annual returns, dividend growth, and p/e ratios to further document their dividend support. Ten CCC WallStars were disqualified in this "safer" screening process for showing negative annual returns.

Analyst one-year targets revealed that $5k invested in the lowest priced five of ten top "safer" CCC WallStar stocks projected 18.55% more gain than from $5K invested in all ten.

Actionable Conclusions (1-10): Analysts Claim Ten WallStar CCC 'Safer' Dividend Stocks Could Net 5.25% to 31% Gains To June, 2019

All ten top yield "safer" dividend Champion dogs (tinted gray in the chart above) were the top ten gainers for the coming year based on analyst one-year target prices. Thus the yield-based strategy for this group, as graded by analyst estimates, for May proved 100% accurate.

The following probable profit-generating trades were tagged by estimated dividend returns from $1000 invested in each of the thirty highest yielding stocks. Those dividends 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 June 8, 2019 were:

Philip Morris International (PM) netted $310.40 based on estimates from twenty analysts plus dividends less broker fees. The Beta number showed this estimate subject to volatility 12% less than the market as a whole.

Hoegh LNG Partners (HMLP) netted $286.52 based on a target price from nine analysts combined with projected annual dividend less broker fees. The Beta number showed this estimate subject to volatility 9% less than the market as a whole.

Sunoco (SUN) netted $270.15 based on dividends plus a median target price estimate from seventeen analysts less broker fees. The Beta number showed this estimate subject to volatility 36% less than the market as a whole.

Select Income REIT (SIR) netted $155.59 based on median target price estimate from five analysts plus dividends less broker fees. The Beta number showed this estimate subject to volatility 17% less than the market as a whole.

Arbor Realty Trust (ABR) was found to net $112.08 per estimates from four analysts, plus dividends less broker fees. The Beta number showed this estimate subject to volatility 62% less than the market as a whole.

Realty Income (O) netted $91.96 based on dividends and the median price estimate from eighteen analysts less broker fees. The Beta number showed this estimate subject to volatility 79% less than the market as a whole.

Kimberly-Clark (KMB) netted $79.06 based on target price estimates from sixteen analysts, plus dividends less broker fees. The Beta number showed this estimate subject to volatility 33% more than the market as a whole.

Procter & Gamble (PG) netted $69.26 based on target price estimates from twenty-five analysts, plus dividends less broker fees. The Beta number showed this estimate subject to volatility 42% less than the market as a whole.

People's United (PBCT) netted $53.48, based on dividends plus upside estimates from 12 analysts, with broker fees subtracted. The Beta number showed this estimate subject to volatility 13% less than the market as a whole.

National Retail Properties (NNN) netted $52.45 based on dividends plus price estimates from fourteen analysts less broker fees. The Beta number showed this estimate subject to volatility 69% less than the market as a whole.

Average net gain in dividend and price was 14.8% on $1k invested in each of these ten "Safer" WallStar CCC Stocks. This gain estimate was subject to average volatility 37% 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 June CCC WallStars

The late David Fish's Dividend Champion, Dividend Challenger, and Dividend Contender Index members listed as of 6/4/18 were paired with annual dividends and prices posted as of 6/8/18 on YCharts. Results from that data charted below and screened for "safer" supporting annual returns and cash flow yields to produce the actionable conclusions in this article.

Five Of Eleven Sectors Were Represented In The 10 "Safer" Wall Star Dividend CCC List

Five Morningstar sectors were represented by the set of 10 firms showing positive annual returns and whose dividends were backed by adequate cash as of June 8. The sector representation broke out as follows: Energy (1); Real Estate (4); Industrials (1); Consumer Defensive (3); Financial Services (1); Basic Materials (0); Communication Services (0); Consumer Cyclical (0); Healthcare (0); Technology (1); Utilities (0).

Top ten Champion "safer" dogs showing positive returns and the safety margin of cash to cover dividends by this screen as of June 8 included all five sectors on the list above.

CCC WallStars With "Safer" Dividends

Periodic Safety Inspection

A previous article discussed the attributes of 90 WallStar CCC stocks culled by yield and broker target upsides. From which these ten with "Safer" dividends were here derived. You see grouped below the list that passed the "safety" check with positive annual returns and free annual cash flow yield enough to cover their estimated annual dividend yield.

Corporate financial priorities however are easily redirected by a board of directors promoting company policies 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, and dividend growth 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 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 Uncovered Good Gains From Lowest Priced "Safer" Dividend Highest Yield CCC WallStars To 2019

Ten "Safer" Dividend CCC WallStar firms with the biggest yields June 8 per YCharts data lined up as follows:

Actionable Conclusions: Analysts Predicted 5 Lowest Priced, of Ten "Safer" Dividend High Yield CCC WallStar Dogs, To (12) Deliver 17.56% VS. (13) 14.81% Net Gains from All Ten by June, 2019

$5000 invested as $1k in each of the five lowest priced stocks in the 'safer' ten dividend CCC WallStar pack by yield were determined by analyst 1 year targets to deliver 18.55% more net gain than $5,000 invested as $.5k in all ten. The ninth lowest priced 'safer' dividend CCC WallStar, Philip Morris International (PM) showed the best net gain of 31.04% per analyst targets.

Lowest priced five "safer" dividend CCC WallStars as of June 8 were: Arbor Realty Trust (ABR); Hoegh LNG Partners (HMLP); People's United (PBCT); Select Income REIT (SIR); Sunoco (SUN), with prices ranging from $9.54 to $26.20.

Higher priced five ""safer" dividend CCC WallStars as of June 8 were: National Retail Props (NNN); Realty Income (O); Procter & Gamble (PG); Phillip Morris (PM); Kimberly-Clark (KMB), with prices ranging from $41.96 to $103.27.

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 "safer" dividend Champions dog 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: michigancogtraining.com

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

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.