Actionable Conclusions (1-10): Analysts Predicted Top 10 'Safer' Dividend Industrials WallStars Could Net 12.8% To 80.92% Gains
Seven of the ten top 'safer' dividend-yielding Industrials (shaded in the chart above) were verified as being among the top ten gainers for the coming year based on analyst one-year target prices times $1,000. Thus, the dog strategy for this 'safer' dividend industrials group, as graded by analyst estimates for September, proved 70% accurate.
The following probable profit-generating trades were tagged by estimated dividend returns from $1000 invested in each highest yielding stock. That dividend and the one-year analyst median target price, as reported by YCharts, created the 2018-19 data. 10 probable profit-generating trades projected to October 9, 2019 were:
Atento S.A. (NYSE:ATTO) netted $809.20 based on dividends plus a mean target price estimate from eight analysts, less broker fees. The Beta number showed this estimate subject to volatility 86% less than the market as a whole.
Capital Product Partners (CPLP) netted $514.72 based on estimates from nine analysts, plus dividends, less broker fees. The Beta number showed this estimate subject to volatility 24% more than the market as a whole.
Costamare (CMRE) netted $327.35 based on target price estimates from seven analysts plus dividends less broker fees. The Beta number showed this estimate subject to volatility 98% more than the market as a whole.
ManpowerGroup Inc. (MAN) netted $221.02, based on dividends plus a median target price estimate from 13 analysts, less broker fees. The Beta number showed this estimate subject to volatility 22% more than the market as a whole.
Copa Holdings (CPA) netted $565.84 based on estimates from 18 analysts plus dividends less broker fees. The Beta number showed this estimate subject to volatility 70% more than the market as a whole.
Delta Air Lines (DAL) netted $298.78 based on median target price estimates from 18 analysts plus dividends less broker fees. The Beta number showed this estimate subject to volatility 6% more than the market as a whole.
Golar LNG Partners (GMLP) netted $505.41 based on a median target price estimate from 12 analysts, plus projected annual dividend less broker fees. The Beta number showed this estimate subject to volatility 4% less than the market as a whole.
Hoegh LNG Partners LP (HMLP) netted $195.27, based on dividends plus a mean target price estimate from two analysts, less broker fees. The Beta number showed this estimate subject to volatility 9% less than the market as a whole.
BG Staffing Inc. (BGSF) netted $194.73 based on median target price estimates from two analysts, plus dividends, less broker fees. The Beta number showed this estimate subject to volatility 90% under the market as a whole.
MSC Industrial Direct (CAT) netted $128.18 based on a median target price estimate from 15 analysts. plus dividends, less broker fees. The Beta number showed this estimate subject to volatility 49% less than the market as a whole.
Average net gain in dividend and price was 35% on $10k invested as $1k in each of these 10 'Safer' dividend Industrials WallStars. This gain estimate was subject to average volatility 3% 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."
Nine Industries Were Represented by 21 "Safer" Dividend Industrial WallStars
Nine industries compose the Industrials sector, and of those, 11 were represented by the 21 firms whose stocks showed positive returns and margins of cash to cover dividends by this screen as of October 9.
The industry representation broke out thus: Shipping & Ports (3), Business Services (2), Integrated Shipping & Logistics (1), Staffing & Outsourcing Services (2), Business Equipment (2), Airlines (3), Diversified Industrials (5), Industrial Distribution (2), Aerospace & Defense (1), Airports & Air Services (0), Conglomerates (0), Engineering & Construction (0), Farm & Construction Equipment (0), Infrastructure Operations (0), Metal Fabrication (0), Pollution & Treatment Controls (0), Railroads (0), Rental & Leasing (0), Security & Protection Services (0), Trucking (0), Tools & Accessories (0), Truck Manufacturing (0), Waste Management (1).
The first seven industries listed above populated the top 10 'safer' dividend industrials team by yield.
21 of 60 Industrials WallStars Showed 'Safer' Dividends
Periodic Safety Inspection
A previous article discussed the attributes of the 50 Top yield and 50 Top target gain Industrials culled from this master list of 60. You see grouped below the tinted list of 21 that passed the Industrials 'safer' dividend 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 priorities, however, are readily revised by board of directors declaring 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.
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. Total annual returns narrowed the 60 list to 40 profitable firms 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 "market sentiment" measurements of upside potential. Added to the simple high-yield metric, analyst mean price target estimates became another tool to dig out bargains.
Yield Metrics Revealed Real Bargains From Lowest Priced 10 Top-Yielding 'Safer' Dividend Industrials
10 "Safer" Dividend Industrials firms as of October 9 per YCharts data ranked themselves by yield as follows:
Actionable Conclusions: Analysts Predicted Five Lowest Priced of 10 By Yield Could (11) Deliver 43.1% Vs. (12) 30.38% Net Gains from All Ten By October 2019
$5000 invested as $1000 in each of the five lowest priced stocks in the "safer" dividend 10 Industrials WallStars by yield were estimated by analyst one-year targets to deliver 41.9% more net gain than $5,000 invested as $.5k in all 10. The third lowest priced "safer" dividend Industrials stock, Atento S.A showed the best analyst-augured net gain of 80.92% per analyst target estimates.
Lowest priced five "safer" dividend Industrials as of October 9 were: Capital Product Partners, Costamare, Atento S.A, Hoegh LNG Partners, with prices ranging from $2.88 to $18.07.
Higher priced five "Safer" Dividend Industrials as of October 9 were: Ennis Inc. (EBF), BG Staffing Inc., Canon (CAJ); Copa Holdings, Eaton Corp. PLC (ETN), with prices ranging from $19.58 to $84.93. The little low-priced industrials WallStars carried the month.
This distinction between five low-priced dividend stocks and the general field of 10 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" Industrials 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: auramakes.com
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Disclosure: I am/we are long ADES, BGSF, GE.
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.