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10 'Safer' Utilities WallStars Deal Positive Returns And Cash To Cover Dividends August 2019

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Includes: BIP, BKH, CWCO, CWEN, CZZ, NEP, NRG, SBS, TGS, UGI
by: Fredrik Arnold
Fredrik Arnold
Dividend investing, Growth, momentum, research analyst
Summary

WallStars show positive broker target price upsides. Ten top "safer" high yield dividend Utilities WallStars showed 1.6-54% net gains as of 7/31/18 broker targets plus dividends.

10 of 57 of these WallStar Utilities stocks were deemed "safer" for dividends because they showed positive one-year returns and free cash-flow yields greater than their dividend yields.

Top 10 annual 'safer' dividend yields ranged 0.38% to 6.65% from NRG, CZZ, TGS, UGI, CWCO, BKH, NEP, BIP, SBS, NYLD. Their free cash flow yields ranged 3.7-35.37%.

Besides safety margin, 'Safer' dividend Utilities WallStars also reported payout ratios (lower is better), total annual returns, dividend growth, and P/E ratios, to further bolster their dividend credentials. Total annual returns narrowed the "Safer" Utility list of 57 to 46 by excluding firms reporting negative annual returns.

Analyst one-year targets also revealed ten highest yield "safer" Utilities Sector stocks primed to produce 62.66% more gain from $5k invested in the lowest-priced five than from $5K invested in all ten.

Actionable Conclusions (1-10): Analysts Expect Top Ten Utilities 'Safer' Dividend WallStars To Net 1.5% to 54% Gains To August 2019

Ten of ten top WallStar dividend Utilities (whose names are shaded in the chart above) were verified as being among the Top ten gainers for the coming year based on analyst 1-year target prices. Thus the yield metrics for this Utilities group, as graded by analyst estimates for this month, proved 100% accurate.

Projections based on estimated dividend returns from $1000 invested in highest yielding 'safer' stocks and their aggregate one-year analyst median target prices, as reported by YCharts, provided the 2019 data. Note: one-year target prices from one analyst were not applied (n/a). Ten probable profit-generating trades to July 2019 were:

Transportadora de Gas (TGS) netted $540.33, based on dividends plus a median target price estimate from four analysts, less broker fees. The Beta number showed this estimate subject to volatility 35% more than the market as a whole.

Cosan Limited (CZZ) netted $450.57, based on estimated dividends plus a median target price estimate from six analysts, less broker fees. The Beta number showed this estimate subject to volatility 139% more than the market as a whole.

Companhia De Saneamento (SBS) netted $369.77, based on estimates from four analysts plus dividends, less broker fees. The Beta number showed this estimate subject to volatility 80% over the market as a whole.

Brookfield Infrastructure (BIP) netted $161.73, based on a median target price estimate from eleven analysts plus projected annual dividends, less broker fees. The Beta number showed this estimate subject to volatility 1% more than the market as a whole.

Consolidated Water Co. (CWCO) netted $142.99, based on target price estimates from two analysts plus estimated dividends, minus broker fees. The Beta number showed this estimate subject to volatility 35% less than the market as a whole.

NRG Energy (NRG) netted $133.14, based on dividends plus a median target price estimate from ten analysts, less broker fees. The Beta number showed this estimate subject to volatility 2% over the market as a whole.

NRG Yield (NYLD) netted $78.71, based on dividends plus a median target price estimate from six analysts, less broker fees. The Beta number showed this estimate subject to volatility 72% more than the market as a whole.

NextEra Energy Partners (NEP) netted $35.45, based on dividends plus a median target price estimate from thirteen analysts, less broker fees. The Beta number showed this estimate subject to volatility 20% above the market as a whole.

Black Hills (BKH) netted $17.19, based on dividends plus a median target price estimate from eight analysts, less broker fees. The Beta number showed this estimate subject to volatility 55% less than the market as a whole.

UGI Corporation (UGI) netted $15.75, based on dividends plus a median target price estimate from five analysts, less broker fees. The Beta number showed this estimate subject to volatility 48% less than the market as a whole.

Average net gain in dividend and price was 19.46% on $10k invested as $1k in each of these ten Utilities "safer" dividend WallStars. This gain estimate was subject to average volatility 52% 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."

Five Utilities WallStars Industries Show "Safer" Dividends

Five industries constitute the Utilities sector, and all five were represented by the 10 firms whose stocks showed positive annual returns with margins of cash to cover dividends July 31.

The industry representation broke out, thus: Regulated Electric Utilities (1), Regulated Water Utilities (2), Diversified Utilities (3), Independent Power Producers (2), Regulated Gas Utilities (2).

All five industries listed above populated the top ten Utilities 'safer' dividend team by yield.

10 of 57 Utilities WallStars Show "Safer" Dividends

Periodic Safety Inspection

A previous article discussed the attributes of 50 the 57 Top yield and top target gain Utilities WallStars from this master list.

You see grouped below the tinted list documenting 10 that passed the Utilities dog "safer" check with positive past-year returns and cash flow yield sufficient to cover their anticipated annual dividend yield. The margin of cash excess is shown in the bold face "Safety Margin"column.

Financial fortunes, however, are easily rearranged by boards of directors setting company policies 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 dividend paying stocks.

Total annual returns by positive results narrowed the 57 Utilities dogs list to 46 for this article. 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 Revealed Yuge Bargains From Lowest Priced Five of Top Ten Yielding "Safer" Dividend Utilities Sector WallStars

Ten "Safer" Dividend Utilities WallStars with the biggest yields July 31 per YCharts data ranked themselves by yield as follows:

Actionable Conclusions: Analysts Predicted 5 Lowest Priced, of Ten "Safer" Dividend High Yield Utilities Sector Dogs,(11) To Deliver 31.65% Vs. (12) 19.46% Net Gains from All Ten by August 2019

$5000 invested as $1k in each of the five lowest priced stocks in the ten "safer" dividend Utilities Sector WallStars by yield were estimated by analyst 1-year targets to deliver 62.66% more gain than $5,000 invested as $.5k in all ten. The fourth lowest priced "Safer" Dividend Utilities WallStar, Transportadora de Gas, showed the best analyst estimated net gain of 54.03% per their targets.

Lowest priced five "safer" Utilities stocks as of July 31 were:

Companhia De Saneamento; Cosan Limited; Consolidated Water Co.; Transportadora de Gas; NRG Yield, with prices ranging from $6.70 to $18.60.

Higher priced five "Safer" Dividend Utilities as of July 31 were: NRG Energy; Brookfield Infrastructure; NextEra Energy Partners; UGI Corporation; Black Hills, with prices ranging from $31.67 to $59.97. Low priced little Utility WallStars took charge or August.

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" Utilities 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: twistedsifter.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.