The December issue of Fortune included featured 30 companies poised to "ride out the storm" in 2019. Of those, 21 pay dividends, with 16 tagged "safer.'
16 of 30 equities "strong enough to control their own destiny" in 2019 achieved "safer" dividend status by showing positive annual returns and FCF yields greater than their dividend yields.
Ten "safer" dividend broker target augured top net gain Fortune Investor Guide 2019 picks were led by ATVI to an average 29.7% net gain.
Top 10 "safer" dividend yields ranged from 1.58% to 3.69%. Their free cash flow yields ranged from 4.35% to 9.96%.
Payout ratios (lower is better), total annual returns, dividend growth, and P/E ratios further quantified the 16 "safer" financial dividend cushions.
Fortune Investor Guide 2019 "Safer" Dividend Selections
The December 2018 Issue of Fortune featured a list of 30 companies to "ride out the storm" in 2019. The 2019 Guide caught my dogcatcher eye because so many were dividend payers. Yet Fortune editors failed to include dividends as significant in that article.
Here's a case where a grievous omission in a current business publication can be noted, called out and corrected from a dividend investor perspective.
Fortune cites only one foreign exchange ticker in their article, all other tickers are compatible with those available from Seeking Alpha.
Below are the top ten best 'safer' dividend gainers now revealed among 16 out of 30 "companies strong enough to control their own destiny" found in the Fortune December 2018, "Investors Guide 2019."
Actionable Conclusions (1-10): Brokers Predicted 16.99% To 50.3% Net Gains From Top Ten "Safer" Dividend Fortune Investment Guide Dogs To December 2019
Nine of ten top 'Safer' dividend-yielding Fortune Guide stocks were among the top ten gainers for the coming year based on analyst 1-year target prices. (The nine are tinted in the chart above). So, this yield-based forecast for the "Safer" dividend Bloomberg watchlist was graded 90% accurate as gauged by Wall Street stockbroker summations.
The following probable profit-generating trades were identified by estimated dividend returns from $1000 invested in each highest yielding stock. The dividend along with aggregate one year analyst median target prices, as reported by YCharts, created the 2018-19 data. Ten probable profit-generating trades projected to December 10, 2019 were:
Activision Blizzard Inc (ATVI) was projected to net $502.95 based on dividends, and median target price from twenty-nine analysts, less broker fees. The Beta number showed this estimate subject to volatility 5% more than the market as a whole.
Melco Resorts and Entertainment Ltd (MLCO) was projected to net $468.58, based on dividends, plus a median target upside estimate from seventeen analysts, less broker fees. The Beta number showed this estimate subject to volatility 98% under the market as a whole.
Tiffany & Co (TIF) was projected to net $398.77, based on a median target price estimate from twenty-nine analysts plus annual dividend, less broker fees. The Beta number showed this estimate subject to volatility 72% over the market as a whole.
Constellation Brands Inc (STZ) netted $313.87 per the median of twenty-four analysts estimates, plus dividends, less broker fees. The Beta number showed this estimate subject to volatility 5% over the market as a whole.
TD Ameritrade Holding Corp (AMTD) was projected to net $309.37, based on dividends, plus a mean target price estimate from twenty analysts, less broker fees. The Beta number showed this estimate subject to volatility 22% more than the market as a whole.
Taiwan Semiconductor (TSM) netted $327.74 based on a median target price estimate from six analysts, plus dividends, less broker fees. The Beta number showed this estimate subject to volatility 17% more than the market as a whole.
The Home Depot Inc (HD) was projected to net $203.93 based on the median of target price estimates from thirty-three analysts plus dividends, less broker fees. The Beta number showed this estimate subject to volatility 26% over the market as a whole.
Texas Instruments Inc (TXN) was projected to net $203.01, based on a median target price estimate from tthirty-two brokers plus the projected annual dividend, less broker fees. The Beta number showed this estimate subject to volatility 29% over the market as a whole.
TJX Companies Inc (TJX) was projected to net $184.11 based on dividends plus a median target estimate from twenty-nine brokers, less broker fees. The Beta number showed this estimate subject to volatility 61% more than the market as a whole.
US Bancorp (USB) was projected to net $169.91, based on a median of target price estimates from twenty-seven brokers plus the projected annual dividend, less broker fees. The Beta number showed this estimate subject to volatility 10% less than the market as a whole.
The average net gain in dividend and price was estimated at 29.7% on $10k invested as $1k in each of these ten stocks. This gain estimate was subject to volatility 14% more than the market as a whole.
The Dividend Dogs Rule
The "dog" distinction 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. So, the highest yielding stocks in any collection have become affectionately known as "dogs." More precisely, these are, in fact, best called, "underdogs".
Five Sectors Were Represented By December Fortune Investor Guide 'Safer' Dividend Stocks
Of eleven five, eight were represented by the 16 stocks with past year positive returns and current cash margins greater than their announced annual dividends. The count of 16 'safer' dividend Fortune mentions by sector showed: technology (3); consumer cyclical (5); financial services (5); consumer defensive (2); healthcare (1); basic materials (0); communication services (0); energy (0); industrials (0); real estate (0); utilities (0).
Periodic Safety Check
A previous article discussed the attributes of the 30 Fortune Investor Guide 2019 picks from which the sixteen were sorted.
You see below the tinted green list that passed the dividend "stress" test. These 16 Fortune Investor Guide 2019 stocks report positive annual returns and sufficient cash flow yield to cover their anticipated dividend yield, the margin of cash flow excess being shown in the bold face "Safety Margin" column.
Just one of the 30 Fortune Investor Guide 2019 picks was disqualified by negative 1-year returns; nine other Fortune Investor Guide 2019 socks paid no dividend. Only four were discarded with free cashflow yields less than their dividend yields.
Corporate financial cash flow, however, is easily re-directed by any board of directors managing company policy cancelling or varying the payout of dividends to shareholders. For example, Melco Resorts and Entertainment Ltd (MLCO), runner-up dog on the list above, paid one dividend of $1.65 in the first quarter of 2017, then piddly dividends of $0.02 to $0.04 in the following three quarters of last year. Only this year did the MLCO the Board declare higher quarterly dividends for all four quarters. The unanswered question is whether or not the MLCO new liberal dividend policy will continue.
Three additional columns of reported cash data listed after the Safety Margin figures on the charts 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. The one year total returns column above showed one stocks exhibiting a tumbling return.
Yield Metrics Uncovered No Price Advantages For 5 Low-Price Fortune Investor Guide"Safer" Dividend Stocks
Ten "Safer" dividend top Fortune Investor Guide stocks as of December 10 per YCharts data ranked themselves by yield as follows:
Ten top "Safer" Fortune Investor Guide 2019 dividend paying stocks were culled by Yield (dividend / price). Results were verified by Yahoo Finance.
Actionable Conclusions: Analysts Alleged 5 Lowest Priced of Top Ten High Yield Fortune Investor Guide "Safer" Dividend Stocks Would Deliver (11) 24.08% VS. (12) 24.94% Net Gains for All Tenby December, 2019
$5000 invested as $1k in each of the five Lowest priced stocks in the top ten Fortune Investor Guide 2019 kennel by yield were predicted by analyst 1 year targets to deliver 3.42% LESS net gain than $5,000 invested as $.5k in each of all ten.
The very lowest priced Melco Resorts and Entertainment Ltd (MLCO), was projected to deliver the best net gain of 46.86%.
Ten Fortune Investor Guide 'Safer' Dividend Picks Saw 3.42% Less Gain From 5 Highest Yield, Lowest Priced Stocks
Lowest priced five Fortune Investor Guide 2019 'safer' dividend stocks as of December 10 were: Melco Resorts and Entertainment Ltd (MLCO); Essity AB (OTCPK:ESSYY); Taiwan Semiconductor Manufacturing Co Ltd (TSM); TJX Companies Inc (TJX); TD Ameritrade Holding Corp (AMTD), with prices ranging from $17.03 to $49.19.
Higher priced five Fortune Investor Guide 2019 'safer' dividend stocks as of December 10 were: US Bancorp (USB); Tiffany & Co (TIF); Texas Instruments Inc (TXN); The Home Depot Inc (HD); Constellation Brands Inc (STZ), whose prices ranged from $50.58 to $187.30.
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 stocks listed above were suggested only as decent starting points for a Bloomberg 2019 Watchlist "safer" dividend dog stock purchase/sale research process in late-November, 2018. These were not recommendations.
The net gain/loss estimates 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.
Stocks listed above were suggested only as possible reference points for your Bloomberg 2019 Watchlist 'safer' dividend stock purchase or sale 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.
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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.
Editor's Note: This article discusses one or more securities that do not trade on a major U.S. exchange. Please be aware of the risks associated with these stocks.