Actionable Conclusions (1-10): Brokers Estimate Top 10 "Safer" Dividend S&P 500 Stocks Could Net 14.5% to 29.66% Gains By June 2019
Three of the ten tops-by-yield "safer" Dividend S&P 500 (tinted in the chart above) were among the top 10 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 1-year analyst median target prices, as reported by YCharts, created the 2018-19 data points. Note: 1-year target prices by lone analysts were not applied. The ten probable profit-generating trades projected to July 9, 2019, by that reckoning were:
Invesco Ltd. (NYSE:IVZ) netted $296.57 based on estimates from seventeen analysts, plus dividends less broker fees. The Beta number showed this estimate subject to volatility 66% more than the market as a whole.
Carnival Corp. (NYSE:CCL) netted $272.72 based on a median target price set by twenty-four analysts, plus estimated dividends less broker fees. The Beta number showed this estimate subject to volatility 11% less than the market as a whole.
Philip Morris International (NYSE:PM) netted $262.06 based on dividends plus a target price estimate from twenty analysts, minus broker fees. The Beta number showed this estimate subject to volatility 13% less than the market as a whole.
Prudential Financial, Inc. (NYSE:PRU) netted $254.70 based on a median target estimate from eighteen analysts, plus dividends less broker fees. The Beta number showed this estimate subject to volatility 50% more than the market as a whole.
Principal Financial Group (NASDAQ:PFG) netted $229.86 based on a median target price estimates from thirteen analysts, plus dividends less broker fees. The Beta number showed this estimate subject to volatility 54% more than the market as a whole.
International Paper Co. (NYSE:IP) netted $212.80 based on a median target price estimate from sixteen analysts, plus projected annual dividends less broker fees. The Beta number showed this estimate subject to volatility 54% more than the market as a whole.
MetLife (NYSE:MET) netted $200.15 based on a mean target estimate from nineteen analysts, plus dividends less broker fees. The Beta number showed this estimate subject to volatility 23% more than the market as a whole.
AbbVie (NYSE:ABBV) netted $178.89 based on dividends plus a median target price estimate from twenty-four analysts less broker fees. The Beta number showed this estimate subject to volatility 62% more than the market as a whole.
Ford Motor (NYSE:F) netted $149.64 based on estimates from twenty-three analysts, plus dividends less broker fees. The Beta number showed this estimate subject to volatility 2% more than the market as a whole.
Chevron Corp. (NYSE:CVX) netted $145.01, based on dividends plus a median target price estimate from twenty-four analysts less broker fees. The Beta number showed this estimate subject to volatility 13% more than the market as a whole.
The 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.
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 July 9.
The "safer" dividend S&P 500 Index sector representation broke out thus: Consumer Defensive (4), Real Estate (11), Consumer Cyclical (8), Communication Services (1), Financial Services (6), Technology (4), Healthcare (2), Basic Materials (1), Energy (2), Industrials (3), and Utilities (1).
The first six sectors listed above composed the top 10 "safer" dividend S&P 500 Index by yield.
43 of 101 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 101.
You see grouped below the tinted list documenting 43 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-faced "Safety Margin" column. The total returns column screened out twenty-seven with sagging returns from the master list of 101.
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 Large Bargains From Lowest-Priced 5 of the Top 10 Yielding "Safer" Dividend S&P 500 Index Stocks
Ten "safer" Dividend S&P 500 firms with the biggest yields July 9 per YCharts data ranked themselves by yield as follows:
Actionable Conclusions: Analysts Predicted 5 Lowest-Priced of 10 "Safer" Dividend S&P 500 Stocks (12) Delivering 15.05% Vs. (13) 10.62% Net Gains from All 10 by July 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 41.65% more gain than $5,000 invested as $.5k in all ten. The ninth-lowest priced "safer" Dividend S&P 500 equity, Philip Morris International, showed the best analyst-augured net gain of 26.21% per target estimates.
The lowest-priced five "safer" Dividend S&P 500 Index stocks as of July 9 were Ford Motor, Invesco Ltd., Verizon Communications (NYSE:VZ), Realty Income (NYSE:O), and Ventas (NYSE:VTR), with prices ranging from $11.83 to $54.50.
Five higher-priced "safer" Dividend S&P 500 Index stocks as of July 9 were Welltower (NYSE:WELL), Qualcomm (NASDAQ:QCOM), Seagate Technology (NASDAQ:STX); Philip Morris International, Simon Property Group (NYSE: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 20-80% accurate on the direction of change and about 0-20% 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.
The 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 YCharts. com; Yahoo Finance; analyst mean target price by Thomson/First Call in Yahoo Finance. Dog photo from: fanpop.com
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Make investing gains again. Catch your underdog on Facebook!
At 8:45 AM nearly every NYSE trading day on Facebook/Dividend Dog Catcher, Fredrik Arnold does a quick live video summary of four or five stocks contending for one weekly slot on the Safari To Sweet Success portfolio.
Go to Facebook/Dividend Dog Catcher at 8:45 AM EDT most trading days and watch, like, comment and share the videos. Or view the archives anytime.
Yet, always remember: Root for the Underdog.
Disclosure: I am/we are long PFE, T. 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.