46 Nasdaq 'Safer' Dividend Net Gains Led By Lam, Western, Broadcom, Vodafone, And KLA-Tencor, Per Broker July Targets

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Includes: AVGO, CSCO, FAST, FOX, GILD, KLAC, LRCX, MCHP, PAYX, PCAR, QCOM, SBUX, STX, VOD, WDC
by: Fredrik Arnold

Summary

46 of 52 NASDAQ Index dividends were presumed "safer" because they showed positive one-year returns and free cash flow yields greater than dividend yields as of 7/12/17.

Broker target-estimated top ten 'safer' dividend net-gains ranged 13.7-50.5%, by CSCO, PCAR, SBUX, MCHP, CMCSA, KLAC, VOD, AVGO, WDC, & LRCX.

Top 10 "safer" dividend NASDAQ yields ranged 3.73-10.32% from SBUX; KLAC; FAST; GILD; CSCO; PAYX; AVGO; QCOM; STX; VOD. Their free cash flow yields ranged 4.12-11.14%.

Besides safety margin, NASDAQ dividend stocks also reported payout ratios (lower is better), total annual returns, dividend growth, and P/E ratios. Total annual returns narrowed the Index list from 52 to 48 by disqualifying stocks reporting negative returns.

Analyst one-year targets revealed ten highest yield "safer" dividend NASDAQ stocks that could average 7.74% more gain from $5k invested in the lowest priced five than from $5K invested in all ten. Low price little equities dominated this July collection.

Actionable Conclusions (1-10): Brokers Estimated Top Ten NASDAQ "Safer" Dividend Stocks to Net 13.7% to 50.5% Gains By July 2019

Five of the ten top yield "safer" Dividend NASDAQ stocks (with name backgrounds tinted grey in the list above) were found among the top ten gainers for the coming year based on analyst one-year target prices. Thus the yield strategy for this group as graded by analyst estimates for June proved 50% accurate.

Projections based on estimated dividends 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 by lone analysts were not applied. Ten probable profit-generating trades projected to July 12, 2019, were:

Lam Research (LRCX) netted $505.22, based on a median target price estimate from twenty-three analysts plus dividends less broker fees. The Beta number showed this estimate subject to volatility 42% more than the market as a whole.

Western Digital (WDC) netted $457.49, based on a median target price set by thirty-three analysts plus estimated dividends less broker fees. The Beta number showed this estimate subject to volatility 2% more than the market as a whole.

Broadcom (NASDAQ:AVGO) netted $449.66, based on dividends plus a target price estimate from thirty-five analysts, minus broker fees. The Beta number showed this estimate subject to volatility 7% less than the market as a whole.

Vodafone Group (VOD) netted $440.91, based on a mean target estimate from three analysts plus dividends less broker fees. The Beta number showed this estimate subject to volatility 18% less than the market as a whole.

KLA-Tencor (KLAC) netted $276.99, based on dividends plus a median target price estimate from sixteen analysts less broker fees. The Beta number showed this estimate subject to volatility 54% more than the market as a whole.

Comcast (NASDAQ:CMCSA) netted $269.73, 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 22% more than the market as a whole.

Microchip Technology (MCHP) netted $212.01, based on a median target estimate from nineteen analysts plus dividends, less broker fees. The Beta number showed this estimate subject to volatility 15% more than the market as a whole.

Starbucks (SBUX) netted $188.25, based on a median target price estimate from thirty-seven analysts plus projected annual dividends less broker fees. The Beta number showed this estimate subject to volatility 6% less than the market as a whole.

PACCAR (PCAR) netted $164.51, 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 23% more than the market as a whole.

Cisco Systems (CSCO) netted $136.95, based on the median of estimates from thirty-two analysts, plus dividends less broker fees. The Beta number showed this estimate subject to volatility 10% more than the market as a whole.

Average net gain in dividend and price was 31.02% on $10k invested as $1k in each of these ten "safer" dividend NASDAQ 100 stocks. This gain estimate was subject to average volatility 10% more than the market as a whole.

Actionable Conclusion (11): (Bear Alert) Analysts Expected One 'Safer' Dividend NASDAQ Stock To Lose 9.06% By July 2019

The probable losing trade revealed by Y-Charts to 2019 was:

Twenty-First Century Fox (FOX) lost $90.58 net per the median target estimate from twenty-one analysts, including dividends, and broker fees. The Beta number showed this estimate subject to volatility equal to the market as a whole.

NASA (2) NASAFDOG JUL18 topactu.net

The Dividend Dog Rules

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."

46 of 52 NASDAQ 100 Firms Showed "Safer" Dividends

Periodic Safety Inspection

A previous article discussed the attributes of the 52 constituents of this master dividend NASDAQ 100 Index list.

You see grouped below the tinted list documenting 45 of 52 that passed the dividend dog "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 4 with sagging price returns.

Financial priorities, however, are easily re-adjusted by boards of directors revising 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 to shareholders.

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 send a remarkably solid financial signal.

Six of Eleven Sectors Show "Safer" Dividend NASDAQ Stocks

Six Morningstar sectors of eleven are represented by the 46 "Safer" members of the NASDAQ 100 Index. They showed positive annual returns and margins of cash to cover their dividends as July 12.

The "safer" dividend NASDAQ 100 Index sector representation broke-out, thus: Communication Services (2); Technology (25); Industrials (7); Healthcare (3); Consumer Cyclical (8); Consumer Defensive (1); Basic Materials (0); Energy (0); Financial Services (0); Real Estate (0); Utilities (0).

The first five industries listed above made the top ten 'safer' dividend NASDAQ 100 Index team by yield.

To quantify top dog rankings, analyst median price target estimates provide a "market sentiment" gauge of upside potential. Added to the simple high yield "dog" metric, analyst median price target estimates became another tool to dig out bargains.

Yield Metrics Revealed Small Bargains From Lowest Priced 5 of Top 10 Top Yielding 'Safer' Dividend NASDAQ Stocks

Ten "Safer" Dividend NASDAQ firms with the biggest yields July 12 per YCharts data ranked themselves by yield as follows:

Actionable Conclusions: Analysts Predicted 5 Lowest Priced, of Ten "Safer" Dividend NASDAQ, Could Likely (11) Deliver 18.57% Vs. (12) 17.24% Net Gains from All Ten by July 2019

$5000 invested as $1k in each of the five lowest priced stocks in the "safer" NASDAQ 100 Index 10 pack by yield were determined by analyst one-year targets to deliver 7.74% more gain than $5,000 invested as $.5k in all ten. The very highest priced "safer" NASDAQ 100 stock, Broadcom (AVGO) showed the best analyst predicted net gain of 44.97% per target estimates.

Lowest priced five "safer" Dividend NASDAQ 100 Index stocks as of July 12 were Vodafone Group; Cisco Systems; Starbucks; Fastenal (FAST); Qualcomm (QCOM), with prices ranging from $24.36 to $58.32.

Higher priced five 'Safer' Dividend NASDAQ 100 Index dogs as of July 12 were Seagate Technology (STX); Paychex (PAYX); Gilead Sciences (GILD); KLA-Tencor; Broadcom, with prices ranging from $59.02 to $209.98. The little, low-priced NASDAQ 100 'Safer' dividend dogs prevailed.

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. It is 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 NASDAQ 100 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 CSCO, INTC.

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.