50 'Safer' Dividend Achievers Cast Substantial Gains Per December Top 10 Broker Targets

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Includes: AMP, BBY, CAT, CNP, CVX, DLR, HAS, HUBB, IVZ, LAZ, LEG, MO, MXIM, NUE, ORI, PBCT, PII
by: Fredrik Arnold
Summary

50 of 100 Dividend Achievers (10 or more years of higher dividends) were tagged "safer" because they showed positive annual returns, and free cash flow yields greater than dividend yields 12/11/18.

Broker target-estimated December top 10 gained 26.45-49.49% from HAS, BBY, EMR, NUE, PII, CAT, HUBB, ANP, LAZ, and IVZ.

Top 10 "safer" Dividend Achievers' annual yields ranged 3.46-6.9% from DLR, MXIM, ORI, CNP, CVX, LEG, PBCT, LAZ, MO, and IVZ. Their free cash flow yields ranged 4.16-16.94%.

Besides safety margin, "safer" Dividend Achiever stocks also reported payout ratios, total annual returns, dividend growth, and P/E ratios to verify their financial strength. Thirty-four December Dividend Achievers were cast aside for negative annual returns.

Analyst one-year targets revealed that $5k invested in the lowest-priced five of ten top "safe" dividend achiever stocks projected 23.94% more gain than from $5K invested in all 10. Low-priced, small Achiever stocks commandeered this "safer" dividend index.

December "Safer" Dividend Achievers

Yield (dividend/price) results from here (December 11) supplemented by one-year total returns (verified by YCharts for 50 stocks representing all 11 Morningstar sectors) revealed the actionable conclusions discussed below.

"The NASDAQ Dividend Achievers Index is made up of 266 stocks with 10+ consecutive years of dividend increases that meet certain minimum size and liquidity requirements. It is one of the best sources to find high quality dividend growth stocks." - Suredividend.com

Source: YCharts

Actionable Conclusions (1-10): Brokers Expected Top 10 "Safer" Dividend Achiever Stocks To Net 26.45% To 49.49% Gains By December 2019

Two of the ten top yield "safer" dividend Achiever stocks (tinted gray in the chart above) were among the top ten gainers for the coming year based on analyst one-year target prices. Thus, the yield strategy for this group, as graded by analyst estimates, proved 20% accurate.

The following probable profit-generating trades were singled out based on estimated dividend returns from $1,000 invested in each stock and its aggregate one-year analyst median target price, as reported by YCharts. Note: One-year target prices by lone analysts were not applied. Ten probable profit-generating trades projected to December 11, 2019, were:

Invesco (IVZ) netted $494.94 per estimates from 17 analysts, plus dividends, less broker fees. The Beta number showed this estimate subject to volatility 50% more than the market as a whole. Beware this falling knife; let it come to rest before attempting to pick it up.

Lazard (LAZ) netted $472.05, based on target price estimates from nine analysts, plus dividends, less broker fees. The Beta number showed this estimate subject to volatility 85% more than the market as a whole.

Ameriprise Financial, Inc. (AMP) netted $432.70, based on dividends, plus a median target price estimate from 12 analysts, less broker fees. The Beta number showed this estimate subject to volatility 77% more than the market as a whole.

Hubbell, Inc. (HUBB) netted $321.59, based on a target price from seven analysts, combined with projected annual dividends, less broker fees. The Beta number showed this estimate subject to volatility 38% more than the market as a whole.

Caterpillar, Inc. (CAT) netted $319.99, based on estimates from 26 analysts, plus dividends, less broker fees. The Beta number showed this estimate subject to volatility 60% more than the market as a whole.

Polaris Industries, Inc. (PII) netted $285.02, based on dividends and the median price estimate from 19 analysts, less broker fees. The Beta number showed this estimate subject to volatility 3% more than the market as a whole.

Nucor Corp. (NUE) netted $281.81, based on dividends, plus the median target from 16 analysts, with broker fees subtracted. The Beta number showed this estimate subject to volatility 47% more than the market as a whole.

Emerson Electric Co. (NYSE:EMR) netted $273.51, based on dividends, plus price estimates from 26 analysts, less broker fees. The Beta number showed this estimate subject to volatility 20% more than the market as a whole.

Best Buy Co. (BBY) netted $269.38 based on target price estimates from 26 analysts, plus dividends, less broker fees. The Beta number showed this estimate subject to volatility 82% less than the market as a whole.

Hasbro, Inc. (HAS) netted $264.52, based on a target price from 17 analysts, combined with projected annual dividend, less broker fees. The Beta number showed this estimate subject to volatility 5% less than the market as a whole. It may be toy season, so it's a good time to buy a toy maker.

Average net gain in dividend and price was 34.16% on $1k invested in each of these 10 "Safer" Dividend Achievers. This gain estimate was subject to average volatility 38% over the market as a whole.

Source: Goodfon.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, and (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."

50 Achievers With "Safer" Dividends From 100 Top Yield Achievers

Source: YCharts

Periodic Safety Inspection

A previous article discussed the attributes of these 100 top yield dividend Achiever stocks which these 50 "Safer" dividend stocks were sorted. Below is that list of 50 resulting from the "safety" check, noting positive annual returns and free annual cash flow yield sufficient to cover estimated annual dividend yield.

Source: YCharts

10 Of 11 Sectors Were Represented By 50 "Safer" Dividend Achievers

Ten of eleven Morningstar sectors were represented by 50 firms showing positive annual returns and whose dividends were backed by adequate cash as of December 11. The sector representation broke-out thus: Financial Services (13); Consumer Defensive (3); Consumer Cyclical (12); Energy (1); Utilities (2); Technology (3); Real Estate (1); Industrials (12); Basic Materials (2); Healthcare (1); and Communication Services (0).

Top ten "safer" dividend Achiever stocks showing positive returns and the safety margin of cash to cover dividends as of December 11 belonged to the first eight sectors on the above list.

Corporate financial priorities, however, are easily readjusted by any board of directors choosing to promote company policies canceling 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.

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 stocks. Positive results in all five columns after the dividend ratio are solid financial signals.

To quantify top stock rankings, analyst median target price estimates provided a "market sentiment" gauge of upside potential. Added to the simple high yield metric, analyst median target price estimates became another tool to dig out bargains.

Yield Metrics Revealed Sweet Gains From Lowest Priced "Safer" Dividend Achievers

Ten "Safer" Dividend Achiever firms with the biggest yields December 11 per YCharts data ranked themselves by yield as follows:

Source: YCharts

Actionable Conclusions: Analysts Predicted Five Lowest Priced Of Ten "Safer" High Yield Dividend Achiever Dogs (12) To Deliver 27.07% Vs. (13) 21.84% Net Gains From All Ten By December 2019

Source: YCharts

$5,000 invested as $1k in each of the five lowest-priced stocks in the "safer" ten Achiever pack by yield were determined by analyst one-year targets to deliver 23.94% more net gain than $5,000 invested as $.5k in all 10. The second lowest-priced "safer" dividend Achiever, Invesco Ltd. showed the best net gain of 49.49%, per analyst targets.

Source: YCharts

Lowest-priced five "safer" dividend Achiever dogs as of December 11 were: People's United Financial, Inc. (PBCT), Invesco, Old Republic International Corp. (ORI), CenterPoint Energy, Inc. (CNP), and Lazard Ltd., with prices ranging from $15.71 to $35.83.

Higher-priced five "Safer" Dividend Achiever dogs as of December 11 were: Leggett & Platt, Inc. (LEG), Maxim Integrated Products, Inc. (MXIM), Altria Group, Inc. (MO), Chevron Corp. (CVX), and Digital Realty Trust, Inc. (DLR), with prices ranging from $37.56 to $116.79.

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% 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.

Stocks listed above were suggested only as possible starting points for your "Safer" Dividend Achiever 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; suredividend.com; analyst mean target price by Thomson/First Call in Yahoo Finance. Dog photo from: goodfon.com

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.