Top 'Safer' Dividend Aristocrats Are G. Dynamics; Chevron; Nucor; VF; Lowe's; Per December Targets

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Includes: ABBV, APD, BEN, CINF, CLX, CVX, EMR, GD, GPC, ITW, KMB, LEG, LOW, NUE, PEP, PG, SWK, TROW
by: Fredrik Arnold
Summary

44 of 53 S&P 500 Dividend Aristocrats stocks were deemed "safer" for dividends because they showed positive one-year returns and free cash flow yields greater than their dividend yields 12/5/18.

Broker 1-yr.-estimated December top-ten 'safer' dividend gains in price and dividends, less broker fees, ranged 14.46%-24.87% and were topped by General Dynamics.

Top 10 'safer' Dividend Aristocrats yields ranged 2.79%-4.73% from GPC; TROW; EMR; PG; ITW; PG; PEP; KMB; CVX; LEG; ABBV. Their free cash flow yields ranged 3.31%-8.37%.

Besides safety margin, Dividend Aristocrats  also reported payout ratios (lower is better), total annual returns, dividend growth, and p/e ratios to better document their dividend support. Total annual returns narrowed the "Safer"  Dividend Aristocrats  list of 53 to 46 by eliminating those with negative returns.

Analyst one-year target estimates revealed that ten highest yield 'safer' Dividend Aristocrats stocks could produce 30.46% more gain from $5k invested in the lowest priced five than from $5K invested in all ten. Low priced little dogs continued to rule the 'Safer' Aristocrats in December.

Actionable Conclusions (1-10): Brokers Expect Top Ten 'Safer' Dividend Aristocrats to Net 14.46% to 24.87% Gains To December, 2019

Four of ten biggest yield "safer" Dividend Aristocrats (tinted in the chart above) showed up in the Top ten gainers for the coming year based on analyst 1 year target prices. Thus the yield selection strategy for this group as graded by analyst estimates proved 40% accurate.

Projections based on estimated dividend returns from $1000 invested in the highest yielding stocks, 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 December 5, 2019 were:

General Dynamics (GD) netted $248.74 based on a median target estimate from nineteen analysts, plus dividends, less broker fees. The Beta number showed this estimate subject to volatility 2% less than the market as a whole.

Chevron (CVX) netted $230.26 based on estimates from twenty-four analysts, plus dividends less broker fees. The Beta number showed this estimate subject to volatility 13% less than the market as a whole.

Nucor Corp (NUE) netted $227.07 based on the median target price estimate from sixteen analysts plus dividends less broker fees. The Beta number showed this estimate subject to volatility 47% more than the market as a whole.

VF Corporation (VF) netted $226.45 based on estimates from twenty-five analysts plus dividends less broker fees. The Beta number showed this estimate subject to volatility 2% less than the market as a whole.

Lowe's Companies Inc (LOW) netted $224.55, based on dividends plus a median target price estimate from thirty-two analysts, less broker fees. The Beta number showed this estimate subject to volatility 55% more than the market as a whole.

Emerson Electric Co (EMR) netted $222.35, based on dividends plus a median target price estimate from twenty-six analysts, less broker fees. The Beta number showed this estimate subject to volatility 21% more than the market as a whole.

Stanley Black & Decker (SWK) netted $193.61 based on a median target price set by twenty analysts, plus estimated dividends less broker fees. The Beta number showed this estimate subject to volatility 35% over the market as a whole.

Air Products & Chemicals Inc. (APD) netted $158.00, based on dividends plus a target price estimate from twenty-two analysts, minus broker fees. The Beta number showed this estimate subject to volatility 10% more than the market as a whole.

AbbVie (ABBV) netted $144.88 based on a median target price estimate from twenty- analysts , plus projected annual dividends less broker fees. The Beta number showed this estimate subject to volatility 64% more than the market as a whole.

Leggett & Platt (LEG) netted $144.58 based on the median of target estimates from seven analysts, plus dividends less broker fees. The Beta number showed this estimate subject to volatility 7% more than the market as a whole.

Average net gain in dividend and price was 20.21% on $10k invested as $1k in each of these ten "safer" Dividend Aristocrats stocks. This gain estimate was subject to average volatility 25% more than the market as a whole.

Source: YCharts.com

Actionable Conclusions (11): (Bear Alert) Analysts Predicted Four 'Safer' Dividend Aristocrat To Show A 3.2%-10.98% Losses By December, 2019

The probable losing trade revealed by Y-Charts for 2019 was:

Procter & Gamble Co (PG) projecting a loss of $32.23 based on dividend and a median target price estimate from twenty-four analysts including $20 of broker fees. The Beta number showed this estimate subject to volatility 63% less than the market as a whole.

Cincinnati Financial Corp (CINF) projecting a loss of $43.19 based on dividend and a median target price estimate from seven analysts including $20 of broker fees. The Beta number showed this estimate subject to volatility 31% less than the market as a whole.

Franklin Resources Inc (BEN) projecting a loss of $87.63 based on dividend and a median target price estimate from fourteen analysts including $20 of broker fees. The Beta number showed this estimate subject to volatility 30% more than the market as a whole.

Clorox Co (CLX) projecting a loss of $109.78 based on dividend and a median target price estimate from nineteen analysts including $20 of broker fees. The Beta number showed this estimate subject to volatility 70% less than the market as a whole.

Average net loss in dividend and price was 6.82% on $10k invested as $1k in each of these ten "safer" Dividend Aristocrats stocks. This loss estimate was subject to average volatility 33% less than the market as a whole.

Source: downloadhdwallpapers.in

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".

Seven of Eleven Sectors Showed "Safer" Dividends In The S&P Aristocrats Index

Seven sectors were represented by the 44 "Safer" members of the S&P 500 Dividend Aristocrats Index. Those 44 showed positive annual returns and margins of cash to cover dividends by this screen as of December 5.

The "safer" Aristocrats sector representation broke-out, thus: Healthcare (5); Consumer Cyclical (5); Energy (1); Consumer Defensive (8); Industrials (12); Financial Services (5); Basic Materials (4); Communication Services (0); Real Estate (0); Technology (0); Utilities (0).

Six of the seven sectors on the above list composed the top ten Aristocrats 'safer' dividend group by yield.

44 of 53 Aristocrats Firms With "Safer" Dividends

Source: YCharts.com

Periodic Safety Inspection

A previous article discussed the attributes of the 53 constituents of S&P 500 Dividend Aristocrats Index.

You see grouped below the tinted list documenting 44 that passed the dividend dog "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 bold face "Safety Margin" column. The total returns column screened out seven with negative returns.

Source: YCharts.com

Financial choices, however, are easily adjusted by boards of directors or company policy 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 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, and p/e ratio 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 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 metric, analyst mean price target estimates became another tool to dig out bargains.

Yield Metrics Revealed Substantial Bargains From Lowest Priced Top Ten Yielding "Safer" December Aristocrats

Ten "Safer" S&P 500 Dividend Aristocrats firms with the biggest yields December 5 per YCharts data ranked themselves by yield as follows:

Source: YCharts.com

Actionable Conclusions: Analysts Predicted 5 Lowest Priced, of Ten 'Safer' Dividend Aristocrats, To (12) Deliver 12.37% VS. (13) 9.48% Net Gains from All Tenby December, 2019

Source: YCharts.com

$5000 invested as $1k in each of the five lowest priced stocks in the "safer" Dividend Aristocrats Top Ten by yield were determined by analyst 1 year targets to deliver 30.46% more gain than $5,000 invested as $.5k in all ten. The eighth lowest priced "safer" Dividend Aristocrat, Chevron (CVX) showed the best analyst-augured net gain of 23.03% per the median of twenty-four estimates.

Source: YCharts.com

Lowest priced five "safer" Dividend Aristocrats as of December 5 were: Leggett & Platt (LEG); Emerson Electric Co (EMR); AbbVie, Inc. (ABBV); Procter & Gamble (PG); T. Rowe Price Group Inc (TROW), with prices ranging from $38.40 to $95.27.

Higher priced five "Safer" Dividend Aristocrats dogs as of December 5 were: Genuine Parts Co (GPC); Kimberly-Clark (KMB); Chevron (CVX); PepsiCo (PEP); Illinois Tool Works Inc (ITW), with prices ranging from $103.24 to $132.76. The little, low-priced 'safer' dividend Aristocrats were tops 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. Its 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 Aristocrats 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: downloadhdwallpapers.in

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.