25 'Safer' Dividend Dogs Discovered By Discerning Readers For December

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Includes: ABBV, APO, CAT, CLNY, CPLP, DWDP, GD, GEO, MO, NLY, ORC, VFC, VLO, VZ, WDC
by: Fredrik Arnold
Summary

From 11/17/18-12/14/18, Fredrik Arnold dividend "followers" commented on 43 equities. Some comments were bad news, so some rogues mixed in to create a FollowerFavorite/Rogue (FoFa/Ro) list.

25 of 43 most-mentioned equities achieved 'safer' dividend status by showing positive annual-returns, and free cash-flow yields greater than their dividend yields.

Ten "safer" dividend broker-target-augured top-net-gain FoFa/Ro's, CAT, GD, VFC, GEO, DWDP, WDC, APO, VLO, & CLNY, were led by CPLP to an average 54% net.

Top-ten 'safer' dividend yields ranged 4.33%-15.36% from VZ, VLO, ABBV, WDC, MO, APO, GEO, CLNY, CPLP, and led by ORC.  Their free cash flow yields ranged 6.83%-42.37%.

Payout-ratios (lower is better), total annual returns, dividend growth, and p/e ratios further quantified the 25 'safer' fofa/ro financial dividend cushions. Ten of the 43 FoFa/Ro equities were disqualified due to their negative 1-year returns.

The FoFa/Ro Selection Process

Any dividend paying stock mentioned in a message, e-mail or comment to the author is fair game for a listing in this article. Thus, It is possible that only rogues and discontinued or dreadful dividend issues may appear. Lately amid mostly favored commentary, readers and other contributors have questioned the intent, purpose, and validity of my daily stock lists. Some readers get upset and know more or better. Best of all. readers catch shortfalls in my data or calculations and warn of pending mergers and acquisitions, Yes, it's all a friendly effort to find more money in safer stocks.

Here are the top gain 'Safer' Dividend Follower Favorites & Rogues per closing YChart data December 18, 2018.

source: YCharts

Actionable Conclusions (1-10): Brokers Detected 31.7% To 90.8% Net Gains From Top Ten "Safer" Dividend Reader December Discernments To 2019

Six of ten top 'Safer' dividend-yielding FoFa/Ro stocks were among the top ten gainers for the coming year based on analyst 1-year target prices. (The six are tinted in the chart above). So, this yield-based forecast for the "Safer" dividend FoFa/Ro's was graded 60% 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 December18, 2019 were:

Capital Product Partners (CPLP) was projected to net $908.18, based on dividends, plus a median target upside estimate from three analysts, less broker fees. The Beta number showed this estimate subject to volatility 7% above the market as a whole.

Colony Capital Inc (CLNY) was projected to net $753.31, based on a median target price estimate from four brokers plus the projected annual dividend, less broker fees. The Beta number showed this estimate subject to volatility 25% more than the market as a whole.

Valero Energy Corp (VLO) was projected to net $695.60, based on dividends, plus a mean target price estimate from nineteen analysts, less broker fees. The Beta number showed this estimate subject to volatility 8% more than the market as a whole.

Apollo Global Management (APO) was projected to net $670.42 based on the median of target price estimates from thirteen analysts plus dividends, less broker fees. The Beta number showed this estimate subject to volatility 25% over the market as a whole.

Western Digital Corp (WDC) netted $604.15 per the median of thirty-one analysts estimates, plus dividends, less broker fees. The Beta number showed this estimate subject to volatility 15% over the market as a whole.

DowDuPont Inc (DWDP) was projected to net $447.64, based on a median target price estimate from twenty-three analysts plus annual dividend, less broker fees. The Beta number showed this estimate subject to volatility 51% over the market as a whole.

The GEO Group Inc (GEO) was projected to net $363.18 based on dividends, and median target price from three analysts, less broker fees. The Beta number showed this estimate subject to volatility 27% more than the market as a whole.

VF Corp (VFC) was projected to net $335.22, based on a median target price estimate from twenty-five brokers plus the projected annual dividend, less broker fees. The Beta number showed this estimate subject to volatility 2% less than the market as a whole.

General Dynamics Corp (GD) netted $328.49 based on a median target price 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.

Caterpillar Inc (CAT) was projected to net $317.27 based on dividends plus a median target estimate from twenty-seven brokers, less broker fees. The Beta number showed this estimate subject to volatility 61% mpre than the market as a whole.

The average net gain in dividend and price was estimated at 54.24% on $10k invested as $1k in each of these ten stocks. This gain estimate was subject to volatility 35% more than the market as a whole.

source: huffingtonpost

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".

Ten Sectors Were Represented By "Safer" December Dividend FoFa/Ro Stocks

Of eleven sectors, ten were represented by the 25 stocks with past year positive returns and current cash margins greater than their announced annual dividends. The count of 25 'safer' dividend FoFa/Ro by sector showed: real estate (3); industrials (5); financial services (3); consumer defensive (2); technology (4) healthcare (3); energy (1); communication services (1); basic materials (1); consumer cyclical (2); utilities (0).

source: YCharts

Periodic Safety Check

A previous article discussed the attributes of the 43 FoFa/Ro stocks and funds from which these twenty-two were sorted. You see below the tinted green list that passed the dividend "stress" test. These 25 FoFa/Ro 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. Ten of the 43 FoFa/Ro equities were disqualified by negative 1-year returns.

source: YCharts

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.

Three additional columns of reported cash data listed after the Safety Margin figures 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 ten stocks exhibiting tumbling prices.

Yield Metrics Uncovered Substantial Price Advantages For 5 Low-Price FoFa/Ro "Safer" Dividend Stocks To December, 2019

Ten "Safer" dividend top FoFa/Ro for December 19 per YCharts data ranked themselves by yield as follows:

source: YCharts

Ten top "Safer" FoFa/Ro dividend paying stocks were culled by Yield (dividend / price). Results were verified by Yahoo Finance.

Actionable Conclusions: Analysts Concluded 5 Lowest Priced of Top Ten High Yield FoFa/Ro "Safer" Dividend Stocks Would Deliver (11) 56.77% VS. (12) 48.08% Net Gains for All Tenby December, 2019

source: YCharts

$5000 invested as $1k in each of the five Lowest priced stocks in the top ten "follower favorite" November kennel by yield were predicted by analyst 1 year targets to deliver 18.09% more net gain than $5,000 invested as $.5k in each of all ten.

The very lowest priced Capital Product Partners LP (CPLP), was projected to deliver the best net gain of 90.82%.

Ten FoFa/Ro 'Safer' Dividend Picks Saw 18.09% More Gain From 5 Highest Yield, Lowest Priced Stocks

source: YCharts

Lowest priced five FoFa/Ro safer dividend stocks as of December 18 were: Capital Product Partners LP (CPLP); Colony Capital Inc (CLNY); Orchid Island Capital Inc (ORC); The GEO Group Inc (GEO); Annaly Capital Management Inc. (NLY); Apollo Global Management LLC (APO), with prices ranging from 2.20 to $24.00.

Higher priced five follower favorite "safer" dividend dogs for December 18 were: Western Digital Corp (WDC); Altria Group Inc (MO); Verizon Communications Inc (VZ); Valero Energy Corp (VLO); AbbVie Inc (ABBV), whose prices ranged from $38.72 to $83.58.

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 follower favorite "safer" dividend dog stock purchase/sale research process in late-October, 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.

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.com; www.indexarb.com; finance.yahoo.com; analyst mean target price by Thomson/First Call in Yahoo Finance. Dog photo from: huffingtonpost.com

Disclosure: I am/we are long T, PFE, 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.