15 'Safer' Utilities WallStars To December 2019 Have Profits And Cash To Cover Dividends

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Includes: AY, BEP, BIP, CNP, CWEN, CWEN.A, CZZ, NEP, PEGI, SBS, TGS
by: Fredrik Arnold
Summary

WallStars all show positive broker target price upsides. Ten top "safer" high yield dividend Utilities WallStars showed 9.79%-41.24% net gains per 11/30/18 broker targets plus dividends.

15 of 52 of these WallStar Utilities stocks were deemed "safer" for dividends because they showed positive 1-year returns (profits) and free cash flow yields higher than their dividend yields.

Top 10 annual "safer" dividend yields ranged 3.38%-8.16% from Transportadora de Gas, NextEra Energy Partners, CenterPoint Energy, Companhia De Saneamento, Brookfield Infrastructure, Brookfield Renewable Partners, Clearway Energy (CWEN and CWEN.A), Atlantica Yield PLC, and Pattern Energy Group. Their free cash flow yields ranged 4.3%-27.85%.

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 52 to 40 by excluding firms reporting negative annual returns.

Analyst 1-year targets also revealed ten highest yield "safer" Utilities Sector stocks primed to produce 28.46% more gain from $5k invested in the lowest-priced five than from $5K invested in all ten.

Source: YCharts

Actionable Conclusions (1-10): Analysts Expect Top Ten Utilities "Safer" Dividend WallStars To Net 9.79% to 41.24% Gains To December 2019

Nine 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 90% accurate.

Projections based on estimated dividend returns from $1000 invested in the highest-yielding "safer" stocks and their aggregate 1-year analyst median target prices, as reported by YCharts, provided the data for 2019. Note: 1-year target prices from single analysts were not applied (n/a). Ten probable profit-generating trades to December, 2019 were:

Transportadora de Gas (TGS) netted $412.35 based on dividends plus a median target price estimate from four analysts, less broker fees. The Beta number showed this estimate subject to volatility 16% more than the market as a whole.

Cosan Limited (CZZ) netted $294.09 based on estimated dividends plus a median target price estimate from six analysts, less broker fees. The Beta number showed this estimate subject to volatility 60% more than the market as a whole.

Atlantica Yield PLC (AY) netted $281.73 based on dividends plus a median target price estimate from eight analysts, less broker fees. The Beta number showed this estimate subject to volatility 8% less than the market as a whole.

Companhia De Saneamento (SBS) netted $281.72 based on estimates from eight analysts plus dividends, less broker fees. The Beta number showed this estimate subject to volatility 8% under the market as a whole.

Brookfield Infrastructure Partners (BIP) netted $229.15 based on a median target price estimate from thirteen analysts plus projected annual dividends, less broker fees. The Beta number showed this estimate subject to volatility 2% less than the market as a whole.

Brookfield Renewable Partners LP (BEP) netted $177.76, based on the median of target price estimates from fourteen analysts plus estimated dividends minus broker fees. The Beta number showed this estimate subject to volatility 64% less than the market as a whole.

Clearway Energy Inc. (CWEN.A) netted 155.21 based on dividends plus a median target price estimate from eight analysts, less broker fees. The Beta number showed this estimate subject to volatility 58% more than the market as a whole.

Clearway Energy Inc. (CWEN) netted $136.85 based on dividends plus a median target price estimate from six analysts, less broker fees. The Beta number showed this estimate subject to volatility 80% more than the market as a whole.

Pattern Energy Group Inc. (PEGI) netted $124.90 based on dividends plus a median target price estimate from fourteen analysts, less broker fees. The Beta number showed this estimate subject to volatility 7% over the market as a whole.

CenterPoint Energy Inc. (CNP) netted $97.889 based on dividends plus a median target price estimate from sixteen analysts, less broker fees. The Beta number showed this estimate subject to volatility 54% below the market as a whole.

Average net gain in dividend and price was 21.9% on $10k invested as $1k in each of these ten Utilities "safer" dividend WallStars. This gain estimate was subject to average volatility 36% more than the market as a whole.

Source: cultureshisper.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".

Five of Five Utilities Industries Show WallStar "Safer" Dividends

Five industries constitute the Utilities sector, and all were represented by the 15 firms whose stocks showed positive annual returns with margins of cash to cover dividends as of November 30.

The industry representation broke out thus: Independent Power Producers (5); Regulated Electric Utilities (3); Diversified Utilities (2); Regulated Water Utilities (2); Regulated Gas Utilities (3).

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

15 of 52 Utilities WallStars Show "Safer" Dividends

Source: YCharts

Periodic Safety Inspection

A previous article discussed the attributes of 50 top yield and 50 top target gain among the 52 Utilities WallStars on this master list.

You see grouped below the tinted list documenting 15 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.

Source: YCharts

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 52 Utilities dogs list to 58 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 Good Bargains From Lowest-Priced Five of Top Ten Yielding "Safer" Dividend Utilities Sector WallStars

Ten "safer" Dividend Utilities WallStars with the biggest yields November 30 per YCharts data ranked themselves by yield as follows:

Source: YCharts

Actionable Conclusions: Analysts Predicted 5 Lowest-Priced of Ten "Safer" Dividend High Yield Utilities Sector Dogs (11) To Deliver 25.36% Vs. (12) 19.74% Net Gains from All Ten by December 2019

Source: YCharts

$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 28.46% more gain than $5,000 invested as $.5k in all ten. The second-lowest priced "safer" Dividend Utilities WallStar, Transportadora de Gas del Sur SA, showed the best analyst estimated net gain of 41.24% per their targets.

Source: YCharts

The lowest-priced five "safer" Utilities stocks as of November 30 were Companhia De Saneamento, Transportadora de Gas, Clearway Energy Inc. (CWEN.A and CWEN), and Atlantica Yield PLC, with prices ranging from $7.23 to $19.62.

Five higher-priced "safer" Dividend Utilities as of November 30 were Pattern Energy Group Inc., CenterPoint Energy Inc., Brookfield Renewable Partners LP, Brookfield Infrastructure, and NextEra Energy Partners (NEP), with prices ranging from $20.69 to $46.70. Low-priced little Utility WallStars stayed in charge for December.

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 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 YCharts; Yahoo Finance; analyst mean target price by Thomson/First Call in Yahoo Finance. Dog photo from: culturewhisper.com

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.