Actionable Conclusions (1-10): Analysts Allege Ten "Safer" Dividend Energy Equities To Net 15.5% to 92.42% Gains By October 2019
Seven of the ten top-gain "safer" dividend energy equities, based on analyst one-year target prices (tinted gray in the chart above), were verified as being among the top ten yielders for the coming year. Thus the dog strategy for this group, as graded by analyst estimates, proved 70% accurate.
The following probable profit-generating trades were triggered by estimated dividend returns from $1,000 invested in each highest-yielding stock. That dividend and the aggregate one-year analyst median target price, as reported by YCharts, created the 2018-19 data. Ten probable profit-generating trades projected to October 8, 2019, were:
Sanchez Midstream Partners (SNMP) netted $924.16, per estimates from four analysts, plus dividends, less broker fees. The Beta number showed this estimate subject to volatility 10% opposite the market as a whole.
Green Plains Partners (GPP) netted $365.67, based on a median price estimated by six analysts, combined with projected annual dividend, less broker fees. The Beta number showed this estimate subject to volatility 43% less than the market as a whole.
China Petroleum (SNP) netted $336.56, based on the median of estimates from three analysts, plus dividends, less broker fees. The Beta number showed this estimate subject to volatility 31% more than the market as a whole.
Shell Midstream Partners (SHLX) netted $284.11, based on dividends, plus a median target price estimate from nine analysts, less broker fees. The Beta number showed this estimate subject to volatility 23% more than the market as a whole.
Royal Dutch Shell Plc (RDS.A) netted $282.60, based on "safer" dividends, plus price estimates from twelve analysts, less broker fees. The Beta number showed this estimate subject to volatility equal to the market as a whole.
Canadian Natural (CNQ) netted $257.02, based on target price estimates from seventeen analysts, plus dividends, less broker fees. The Beta number showed this estimate subject to volatility 23% more than the market as a whole.
Marathon Petroleum Corp. (MPC) netted $243.30, based on a median target price estimate from seventeen analysts, plus dividends, less broker fees. The Beta number showed this estimate subject to volatility 50% more than the market as a whole.
Chevron Corp. (CVX) netted $163.76, based on mean target price estimates from twenty-three analysts, plus dividends, less broker fees. The Beta number showed this estimate subject to volatility 7% more than the market as a whole.
Valero Energy Partners (VLP) netted $157.60, based on the median of estimates from thirteen analysts, plus dividends, less broker fees. The Beta number showed this estimate subject to volatility 23% less than the market as a whole.
Valero Energy Corp (VLO) netted $155.07, based on dividends, plus the median of estimates from eighteen analysts, with broker fees subtracted. The Beta number showed this estimate subject to volatility 3% more than the market as a whole.
Average net gain in dividend and price was 31.7% on $10k invested as $1k each of these ten "Safer" dividend Energy WallStars. This gain estimate was subject to average volatility 20% over the market as a whole.
ENWSA (2) SAFEDOG OC18 doglivingmagazine.com
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 Energy WallStars
Yield (dividend/price) results from here October 8 supplemented by one-year total returns (Annual) verified by YCharts for eighteen stocks in the energy sector projected the actionable conclusions discussed herein.
Four Of Six Component Industries Were Represented By The 18 "Safer" Dividend Energy WallStars For October
The set of 18 firms showing positive annual returns and whose dividends were backed by adequate cash as of October 8 data broke out thus by industry: midstream (5); integrated (7); E&P (2); refining & marketing (4); equipment & services (0); and drilling (0).
Top ten "safer" dividend energy dogs showing positive returns and the safety margin of cash to cover dividends compose the first three industries on the list above.
Energy Sector WallStars With "Safer" Dividends
Periodic Safety Inspection
A previous article discussed the attributes of the 50 top yield and 50 top price target upside energy sector stocks carved out of this master list of 84. Below is the list of 18 resulting from the "safety" check noting positive annual returns and free annual cash flow yield sufficient to cover their estimated annual dividend yield.
Corporate income and cash flow, however, are subject to any board of directors choosing to promote company policies canceling or varying the payout of dividends to shareholders. The frequent cuts and cancellations of dividends in the energy sector need not be listed because they happen so frequently. This article contends that adequate cash flow is a 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 show additional methods to reach beyond yield to select reliable payout stocks. Positive results in all five columns after the dividend ratio is a remarkable financial accomplishment.
To quantify top gain rankings, analyst mean price target estimates provided a "market sentiment" gauge of upside potential. Added to the simple high-yield metric, analyst mean price target estimates became another tool to dig out bargains.
Yield Metrics Identified Substantial Gains From Lowest-Priced "Safer" Dividend Energy Sector WallStars
Ten "Safer" dividend energy WallStars with the biggest yields October 8 per YCharts data ranked themselves by yield as follows:
Actionable Conclusions: Analysts Predicted Five Lowest Priced Of Ten "Safer" High-Yield Dividend EnergyWallStars (11) To Deliver 37.46% Vs. (12) 27.86% Net Gains From All Ten To October 2019
$5,000 invested as $1k in each of the five lowest priced stocks in the "safer" ten energy pack by yield were determined by analyst one-year targets to deliver 34.47% more net gain than $5,000 invested as $.5k in all ten. The very lowest priced "safer" dividend energy stock, Sanchez Midstream Partners, showed the best net gain of 92.42% per analyst targets.
The lowest priced five "safer" dividend energy WallStars as of October 8 were: Sanchez Midstream Partners; Green Plains Partners LP; Shell Midstream Partners; GasLog Partners (GLOP); and Valero Energy Partners (VLP), with prices ranging from $8.18 to $40.00.
Higher priced five "Safer" Dividend energy WallStars as of October 8 were: Royal Dutch Shell Plc (NYSE:RDS.A) (NYSE:RDS.B); China Petroleum & Chemical Corp.; Chevron Corp. (CVX); and CNOOC Limited (CEO), with prices ranging from $67.68 to $185.33.
This distinction between five low-priced dividend stocks 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 energy 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 photo from: doglivingmagazine.com.
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Disclosure: I am/we are long CVI.
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.