10 'Safer' Dividend Champions, Contenders, And Challengers Gain 18.5-44% By October 2019

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Includes: BIP, CWEN, DGICA, GEO, GLOP, HEP, HMLP, HPT, IVZ, LAZ, LVS, PEGI, SIR, SUN, SWM, VLP, WLKP, WPC
by: Fredrik Arnold

Summary

Champion stocks report 25+ annual-dividend increases; Contenders show 10-24; Challengers have 5-9. WallStars show >.5% price-target upsides.

68 of 152 CCC WallStars were deemed 'safer' showing positive annual returns, and cash-flow yields >dividend yields 10/1/18. Their price target-upsides ranged 0.73-42.30%.

Top 10 'Safer' Dividend CCC WallStar annual yields ranged 6.44% to 11.09% from WPC, WLKP, CWEN, HPT, GEO, GLOP, PEGI, SIR, HMLP, SUN. Their free cash-flow yields ranged 7-59.23%.

Besides safety margin, 'safer' dividend CCC stocks also reported payout ratios (lower is better), total annual returns, dividend growth, and P/E ratios to further document their dividend support. Forty-six CCC WallStars showing negative annual returns were disqualified in this "safer" screening process.

Analyst one-year targets revealed that $5k invested in the lowest-priced five of ten top "safer" CCC WallStar stocks projected 18.29% more gain than from $5K invested in all ten.

Actionable Conclusions (1-10): Brokers Say Ten WallStar CCC 'Safer' Dividend Stocks Could Net 18.5% to 43.98% Gains To October 2019

Three top yield "safer" dividend CCC dogs (tinted gray in the chart above) were among these top ten gainers for the coming year based on analyst one-year target prices. Thus the yield-based strategy for this group, as graded by analyst estimates, for August proved 30% accurate.

The following probable profit-generating trades were tagged by estimated dividend returns from $1000 invested in each of the thirty highest yielding stocks. Those dividends 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 October 1, 2019, were:

Schweitzer-Mauduit Int'l (SWM) netted $439.78, based on target price estimates from two analysts plus dividends less broker fees. The Beta number showed this estimate subject to volatility 32% more than the market as a whole.

Invesco Ltd. (IVZ) netted $366.35, based on dividends and the median price estimate from seventeen analysts less broker fees. The Beta number showed this estimate subject to volatility 65% more than the market as a whole.

Las Vegas Sands Corp. (LVS) netted $347.87, based on estimates from twenty analysts plus dividends less broker fees. The Beta number showed this estimate subject to volatility 56% more than the market as a whole.

Lazard (LAZ) netted $312.53, based on median target price estimate from nine analysts plus dividends less broker fees. The Beta number showed this estimate subject to volatility 80% more than the market as a whole.

Donegal Group, Inc. (DGICA) netted $295.16, based on dividends plus a median target price estimate from two analysts less broker fees. The Beta number showed this estimate subject to volatility 54% less than the market as a whole.

Select Income REIT (SIR) netted $267.52, based on target price estimates from four analysts plus dividends less broker fees. The Beta number showed this estimate subject to volatility 25% less than the market as a whole.

The GEO Group, Inc. (GEO) netted $225.21, based on dividends plus price estimates from three analysts less broker fees. The Beta number showed this estimate subject to volatility 28% more than the market as a whole.

Westlake Chemical Partners (WLKP) netted $213.75, based on a target price from six analysts combined with projected annual dividend less broker fees. The Beta number showed this estimate subject to volatility 6% more than the market as a whole.

Valero Energy Partners (VLP) netted $190.38, based on dividends plus upside estimates from 13 analysts, with broker fees subtracted. The Beta number showed this estimate subject to volatility 23% less than the market as a whole.

Brookfield Infrastructure (BIP) was found to net $185.19 per the median of estimates from twelve analysts, plus dividends less broker fees. The Beta number showed this estimate subject to volatility 5% less than the market as a whole.

Average net gain in dividend and price was 28.7% on $1k invested in each of these ten "Safer" WallStar CCC Stocks. This gain estimate was subject to average volatility 15% 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."

Safer Dividend October CCC WallStars

The late David Fish's Dividend Champion, Dividend Challenger, and Dividend Contender Index members listed as of 9/28/18 were paired with annual dividends and prices posted as of 10/1/18 on YCharts. Results from that data are charted below and screened for "safer" supporting annual returns and cash flow yields to produce the actionable conclusions in this article.

All Eleven Sectors Were Represented In The 68 "Safer" WallStar Dividend CCC List

The Morningstar sectors were all represented by the set of 68 CCC firms showing positive annual returns and whose dividends were backed by adequate cash as of October 1. The sector representation broke out as follows: Energy (4); Industrials (7); Real Estate (13); Utilities (6); Basic Materials (6); Consumer Defensive (7); Consumer Cyclical (5); Communication Services (1); Financial Services (14); Technology (2); Healthcare (2).

Top ten Champion "safer" dogs showing positive returns and the safety margin of cash to cover dividends by this screen as of October 1 included the first five sectors on the list above.

Finding CCC WallStars With "Safer" Dividends

Periodic Safety Inspection

A previous article discussed the attributes of 90 of these 152 WallStar CCC stocks master list from which these 68 with "Safer" dividends were derived. You see grouped below the list that passed the "safety" check with positive annual returns plus free cash flow yield enough to cover their estimated dividend yield.

Corporate financial priorities, however, are easily redirected by a board of directors promoting 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.

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 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 Uncovered Nice Gains From Lowest-Priced "Safer" Dividend High Yield CCC WallStars To 2019

Ten "Safer" Dividend CCC WallStar firms with the biggest yields October 1 per YCharts data lined up as follows:

Actionable Conclusions: Analysts Predicted 5 Lowest Priced of Ten "Safer" Dividend High Yield CCC WallStar Dogs, To (12) Deliver 18.44% Vs. (13) 15.59% Net Gains from All Ten by October 2019

$5000 invested as $1k in each of the five lowest-priced stocks in the 'safer' ten dividend CCC WallStar pack by yield were determined by analyst 1-year targets to deliver 18.29% more net gain than $5,000 invested as $.5k in all ten. The fourth lowest-priced 'safer' dividend CCC WallStar, Select Income REIT, showed the best net gain of 26.75% per analyst targets.

Lowest-priced five "safer" dividend CCC WallStars as of October 1 were: Hoegh LNG Partners (HMLP); Clearway Energy Inc. (CWEN); Pattern Energy Group Inc. (PEGI); Select Income REIT; The GEO Group Inc., with prices ranging from $18.33 to $24.52.

Higher priced five "safer" dividend CCC WallStars as of October 1 were: Westlake Chemical Partners; Sunoco LP (SUN); GasLog Partners LP (GLOP); Hospitality Props Trust (HPT); Holly Energy Partners (HEP); W.P. Carey Inc., (WPC) with prices ranging from $24.75 to $63.67.

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% 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 "safer" dividend Champions 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 www.ycharts. com; www.finance.yahoo.com; analyst mean target price by Thomson/First Call in Yahoo Finance. Dog show photo from zimbio.com

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.