Actionable Conclusions (1-10): Brokers Estimate Top Ten "Safer" Dividend S&P 500 Stocks Could Net 13.45% to 60.55% Gains By September 2019
Four of the ten tops-by-yield "safer" dividend S&P 500 (tinted in the chart above) were among the top ten gainers for the coming year based on analyst one-year targets. Thus, the dog strategy for this group, as graded by analyst estimates for this month, proved 40% accurate.
Projections based on estimated dividend returns from $1,000 invested in each of the thirty highest yielding stocks and their aggregate one-year analyst median target prices, as reported by YCharts, created the 2018-2019 data points. Note: one-year target prices by lone analysts were not applied. The ten probable profit-generating trades projected to September 21, 2019, by that reckoning were:
Western Digital Corp. (WDC) netted $605.49 based on a median target price set by thirty-one analysts plus estimated dividends less broker fees. The Beta number showed this estimate subject to volatility 11% less than the market as a whole.
Invesco Ltd. (IVZ) netted $288.10 based on estimates from seventeen analysts plus dividends less broker fees. The Beta number showed this estimate subject to volatility 65% more than the market as a whole.
AbbVie Inc. (ABBV) netted $208.48 based on a median target price estimate from twenty-one 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.
Gap, Inc. (GPS) netted $198.35 based on a mean target estimate from twenty-eight analysts plus dividends less broker fees. The Beta number showed this estimate subject to volatility 38% less than the market as a whole.
Chevron (CVX) netted $197.53 based on dividends plus a median target price estimate from twenty-two analysts less broker fees. The Beta number showed this estimate subject to volatility 7% more than the market as a whole.
Seagate Technology (STX) netted $185.76 based on a median target price estimates from twenty-eight analysts plus dividends less broker fees. The Beta number showed this estimate subject to volatility 72% more than the market as a whole.
Ford Motor (F) netted $175.94 based on estimates from twenty-one analysts plus dividends less broker fees. The Beta number showed this estimate subject to volatility 13% less than the market as a whole.
Prudential Financial (PRU) netted $149.28 based on a median target estimate from eighteen analysts plus dividends less broker fees. The Beta number showed this estimate subject to volatility 49% more than the market as a whole.
Philip Morris International (PM) netted $142.51 based on dividends plus a target price estimate from twenty analysts minus broker fees. The Beta number showed this estimate subject to volatility 18% less than the market as a whole.
Extra Space Storage (EXR) netted $134.52 based on dividends plus a median target price estimate from fifteen analysts less broker fees. The Beta number showed this estimate subject to volatility 85% less than the market as a whole.
Average net gain in dividend and price was 22.86% 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 8% more than the market as a whole.
Actionable Conclusion (11): (Bear Alert) Analysts Expect One "Safer" Dividend S&P 500 Stock To Lose 7.24% By September 2019
The probable losing trade revealed by YCharts to 2019 was:
Kimberly-Clark Corp (KMB) losing $72.43 net per the median target estimate from sixteen analysts, including dividends and broker fees. The Beta number showed this estimate subject to volatility 31% 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 forty-four "safer" members of the S&P 500 Index. Those were called "safer" because they showed positive annual returns and margins of cash to September 21.
The "safer" dividend S&P 500 Index sector representation broke-out thus: Consumer Cyclical (6), Real Estate (13), Consumer Defensive (5), Technology (4), Financial Services (8), Communication Services (1), Healthcare (3), Basic Materials (1), Energy (1), Utilities (1), Industrials (1).
The first six sectors listed above composed the top ten "safer" dividend S&P 500 Index by yield.
44 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 44 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 boldface "Safety Margin" column. The total returns column screened out twenty-nine 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 Sizeable Bargains From Lowest Priced 5 of Top 10 Yielding "Safer" Dividend S&P 500 Index Stocks
Ten "safer" dividend S&P 500 firms with the biggest yields September 21 per YCharts data ranked themselves by yield as follows:
Actionable Conclusions: Analysts Predicted 5 Lowest Priced of Ten "Safer" Dividend S&P 500 Stocks, (12) Delivering 15.12% Vs. (13) 11.49% Net Gains from All Ten by September 2019
$5,000 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 one-year targets to deliver 31.55% more gain than $5,000 invested as $.5k in all ten. The second lowest priced "safer" dividend S&P 500 equity, Invesco Ltd. showed the best analyst-augured net gain of 28.81% per target estimates.
Lowest priced five "safer" dividend S&P 500 Index stocks as of September 21 were: Ford Motor, Invesco Ltd., Seagate Technology, Verizon Communications (VZ), and Ventas (VTR), with prices ranging from $9.85 to $56.19.
Higher priced five "safer" dividend S&P 500 Index stocks as of September 21 were: Realty Income (O), Altria Group Inc. (MO), Welltower Inc. (WELL), Philip Morris International, and Simon Property Group (SPG), with prices ranging from $56.99 to $180.48. Again, the little, low-priced, S&P 500 Index stocks soundly 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% 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 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 www.ycharts. com, www.finance.yahoo.com, analyst mean target price by Thomson/First Call in Yahoo Finance. Dog photo from pinterest.com
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Disclosure: I am/we are long 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.