11 'Safer' Utilities WallStars Show Positive Returns And Cash To Cover Dividends To September 2019

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Includes: BEP, BIP, BKH, CZZ, HNP, JE, NEP, PEGI, SBS, TGS, UGI
by: Fredrik Arnold
Summary

WallStars show positive broker target price upsides. Ten top "safer" high yield dividend Utilities WallStars showed 0.84-78% net gains as of 9/11/18 broker targets plus dividends.

11 of 54 of these WallStar Utilities stocks were deemed "safer" for dividends because they showed positive 1-year returns and free cash flow yields greater than their dividend yields.

Top 10 annual "safer" dividend yields ranged 1.31-8.39% from Cosan Limited, UGI Corp., Transportadora de Gas, Huaneng Power International, Black Hills Corp., NextEra Energy Partners, Brookfield Infrastructure Partners, Companhia de Saneamento; Brookfield Renewable Partners, and Pattern Energy Group. Their free cash flow yields ranged from 4.55% to 43.19%.

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 53 to 39 by excluding firms reporting negative annual returns.

Actionable Conclusions (1-10): Analysts Expect Top Ten Utilities "Safer" Dividend WallStars To Net 0.84% to 78.23% Gains To September 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 1-year analyst median target prices, as reported by YCharts, provided the 2019 data. Note: 1-year target prices from one analyst were not applied (n/a). Ten probable profit-generating trades to September, 2019 were:

Cosan Limited (NYSE:CZZ) netted $782.27 based on estimated dividends plus a median target price estimate from seven analysts, less broker fees. The Beta number showed this estimate subject to volatility 123% more than the market as a whole.

Transportadora de Gas del Sur (NYSE:TGS) netted $696.723 based on dividends plus a median target price estimate from four analysts, less broker fees. The Beta number showed this estimate subject to volatility 25% more than the market as a whole.

Companhia de Saneamento (NYSE:SBS) netted $539.08 based on estimates from five analysts, plus dividends less broker fees. The Beta number showed this estimate subject to volatility 64% over the market as a whole.

Brookfield Infrastructure Partners (NYSE:BIP) netted $226.26 based on a median target price estimate from twelve analysts, plus projected annual dividends less broker fees. The Beta number showed this estimate subject to volatility 3% less than the market as a whole.

Brookfield Renewable Partners (NYSE:BEP) netted $167.46 based on the median of target price estimates from six analysts, plus estimated dividends minus broker fees. The Beta number showed this estimate subject to volatility 72% more than the market as a whole.

Pattern Energy Group Inc. (NASDAQ:PEGI) netted $147.98 based on dividends plus a median target price estimate from fourteen analysts, less broker fees. The Beta number showed this estimate subject to volatility 3% under the market as a whole.

Huaneng Power International (NYSE:HNP) netted $138.83 based on dividends plus a median target price estimate from two analysts, less broker fees. The Beta number showed this estimate subject to volatility 38% less than the market as a whole.

NextEra Energy Partners (NYSE:NEP) netted $35.32 based on dividends plus a median target price estimate from fourteen analysts, less broker fees. The Beta number showed this estimate subject to volatility 20% above the market as a whole.

Black Hills Corp. (NYSE:BKH) netted $30.77 based on dividends plus a median target price estimate from seven analysts, less broker fees. The Beta number showed this estimate subject to volatility 63% less than the market as a whole.

UGI Corporation (NYSE:UGI) netted $8.45 based on dividends plus a median target price estimate from five analysts, less broker fees. The Beta number showed this estimate subject to volatility 51% less than the market as a whole.

The average net gain in dividend and price was 27.73% on $10k invested as $1k in each of these ten Utilities "safer" dividend WallStars. This gain estimate was subject to average volatility 43% 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 the (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".

Four of Five Utilities Industries Show WallStar "Safer" Dividends

Five industries constitute the Utilities sector, and four of them were represented by the 11 firms whose stocks showed positive annual returns with margins of cash to cover dividends September 11.

The industry representation broke out thus: Regulated Independent Power Producers (4), Regulated Water Utilities (2), Diversified Utilities (3), Regulated Gas Utilities (2), and Regulated Electric Utilities (0).

Four of five industries listed above populated the top ten Utilities "safer" dividend team by yield.

11 of 54 Utilities WallStars Show "Safer" Dividends

Periodic Safety Inspection

A previous article discussed the attributes of 50 top yield and 50 top target gain among the 54 Utilities WallStars on this master list.

You see grouped below the tinted list documenting 11 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-faced "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 53 Utilities dogs list to 39 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 Large Bargains From the Lowest-Priced Five of Top Ten Yielding "Safer" Dividend Utilities Sector WallStars

Ten "safer" Dividend Utilities WallStars with the biggest yields as on September 11 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 61.74% Vs. (12) 39.81% Net Gains from All Ten by September 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 55.09% more gain than $5,000 invested as $.5k in all ten. The second-lowest priced "safer" Dividend Utilities WallStar, Just Energy Group Inc. (NYSE:JE), showed the best analyst-estimated net gain of 123.55% per their targets.

The lowest-priced five "safer" Utilities stocks as of September 11 were Companhia de Saneamento, Cosan Limited, Transportadora de Gas del Sur, Pattern Energy Group Inc., and Huaneng Power International Inc., with prices ranging from $5.78 to $25.14.

Five higher-priced "safer" Dividend Utilities as of September 11 were Brookfield Renewable Partners LP, Brookfield Infrastructure Partners, NextEra Energy Partners, UGI Corporation, and Black Hills Corp., with prices ranging from $30.62 to $59.29. Low-priced little Utility WallStars took charge for September.

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'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 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" Utilities dividend 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 YCharts.com; Yahoo Finance; analyst mean target price by Thomson/First Call in Yahoo Finance. Dog photo from: telegraph.co.uk

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.