99 International Aristocrats Spawn 78 'Safer' Dividend December Deals

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Includes: ABBV, BCE, BNS, CM, CNQ, CVX, EMR, ENGGY, IMBBY, NUE, PRU, RY, SNY, SU
by: Fredrik Arnold
Summary

International Dividend Aristocrat stocks have raised dividends for at least five straight years (Canadian firms), 10 years (EU-based firms), or 25 years (U.S. companies).

78 of 150 International Dividend Aristocrat stocks were deemed "safer" showing positive annual returns, and cash flow yields >dividend yields 12/27/18. Their price-target upsides ranged 1.78%-61.34%.

Aristocrat annual yields ranged 4.22% to 11.74% from CNQ, RY, SNY, PRU, ABBV, BNS, ENGGY, CM, BCE, and IMBBY. Their free cash flow yields ranged -6.48%-43.74%.

Besides safety margin, "safer" Dividend International Aristocrat stocks also reported payout ratios (lower is better), total annual returns, dividend growth, and P/E ratios to validate their dividend support. Nine International Dividend Aristocrats showing negative annual returns were disqualified in this "safer" screening process.

Analyst one-year targets revealed that $5k invested in the lowest priced five of ten top "safer" Dividend International Aristocrat stocks projected 7.04% LESS gain than from $5K invested in all ten.

Source: YCharts

Actionable Conclusions (1-10): Brokers Say 10 "Safer" Dividend International Aristocrats Could Net 21.9% to 43.58% Gains To December 2019

Six top yield "safer" dividend International Aristocrats dogs (tinted gray in the chart above) were among the top 10 gainers for the coming year based on analyst one-year target-prices. Thus, the yield-based strategy for this group, as graded by analyst estimates, for December proved 60% accurate.

The following probable profit-generating trades were distinguished by estimated dividend returns from $1,000 invested in each of the highest-yielding stocks. Those dividends 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 single analysts were not applied. Ten probable profit-generating trades projected to December 27, 2019 were:

Prudential (PRU) netted $435.77 based on target price estimates from eighteen analysts, plus dividends, less broker fees. The Beta number showed this estimate subject to volatility 41% more than the market as a whole.

Canadian Natural Resources (CNQ) netted $410.39, based on dividends, plus price estimates from twenty-seven analysts, less broker fees. The Beta number showed this estimate subject to volatility 23% more than the market as a whole.

Nucor Corp. (NUE) netted $356.29, based on target price estimates from sixteen analysts, plus dividends, less broker fees. The Beta number showed this estimate subject to volatility 54% less than the market as a whole.

Suncor Energy (SU) netted $310.60, based on a target price from twenty-seven analysts, combined with projected annual dividend, less broker fees. The Beta number showed this estimate subject to volatility equal to the market as a whole.

BCE, Inc. (BCE) netted $295.50, based on dividends, plus a median target price estimate from twenty-one analysts, less broker fees. The Beta number showed this estimate subject to volatility 66% less than the market as a whole.

Chevron Corp. (CVX) netted $290.95, based on median target price estimate from twenty-five analysts, plus dividends, less broker fees. The Beta number showed this estimate subject to volatility 13% more than the market as a whole.

Emerson Electric Co. (EMR) netted $280.52, based on dividends and the median price estimate from twenty-six analysts, less broker fees. The Beta number showed this estimate subject to volatility 20% more than the market as a whole.

Canadian Imperial Bank of Commerce (CM) netted $270.85, based on estimates from sixteen analysts, plus dividends, less broker fees. The Beta number showed this estimate subject to volatility 18% more than the market as a whole.

Royal Bank of Canada (RY) netted $235.90, based on dividends, plus upside estimates from seventeen analysts, with broker fees subtracted. The Beta number showed this estimate subject to volatility 14% more than the market as a whole.

Sanofi SA (SNY) was found to net $219.70 per the median of estimates from five analysts, plus dividends, less broker fees. The Beta number showed this estimate subject to volatility 27% less than the market as a whole.

Average net gain in dividend and price was 31.07% on $1k invested in each of these ten "safer" dividend International Aristocrats dogs. This gain estimate was subject to average volatility 1% less than the market as a whole.

Source: pamperedpetinn.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."

Safer Dividend December International Aristocrats

A list from Kiplinger published as of 10/28/18 sorted by yield (dividend/price) calculated from here 12/26/18 for ninety-nine stocks from 10 of eleven Morningstar sectors contributed to the various actionable conclusions discussed in this article.

This is a look at the "safer" most reliable long-term dividend stocks in the world. Dubbed the "Dividend Aristocrats," they have raised dividends for at least five straight years (Canadian firms), 10 years (EU-based firms) or 25 years (U.S. companies). The list as of 10/28/18 provided the subjects for this article. Numeric calculations for the list were made as of 12/27/18 from YCharts data.

Ten Of Eleven Sectors Were Represented In The 78 "Safer" Dividend International Aristocrats List

Ten Morningstar sectors were represented by the set of 78 "safer" dividend International Aristocrats dogs showing positive annual returns and whose dividends were backed by adequate cash as of December 27. The sector representation broke out as follows: Consumer Defensive (18); Communication Services (1); Financial Services (10); Utilities (2); Healthcare (11); Energy (3); Industrials (17); Technology (1); Consumer Cyclical (9); Basic Materials (6); and Real Estate (0).

Top ten International Aristocrats "safer" dividend dogs showing positive returns and the safety margin of cash to cover dividends by this screen as of December 27 included the first six sectors on the list above.

Finding International Aristocrats With "Safer" Dividends

Source: YCharts

Periodic Safety Inspection

A previous article discussed the attributes of the 99 International Aristocrats stocks master list from which these 78 with "Safer" dividend producers were derived. You see grouped below the list that passed the "safety" check with positive annual returns, plus free cash flow yield enough to cover their estimated dividend yield.

Source: YCharts

Corporate financial priorities however are easily redirected by board of directors promoting 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.

Three additional columns of financial data, listed after the Safety Margin figures above, reveal payout ratios (lower is better), total annual returns, and dividend growth 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 remarkable and 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 Uncovered Good Gains From Lowest Priced "Safer" Dividend International Aristocrats To 2019

Ten "Safer" Dividend International Aristocrats firms with the biggest yields December 27 per YCharts data lined up as follows:

Source: YCharts

Actionable Conclusions: Analysts Predicted Five Lowest Priced of Ten "Safer" Dividend High Yield International Aristocrats Dogs To (12) Deliver 22.56% Vs. (13) 24.27% 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" 10 dividend International Aristocrats pack by yield were determined by analyst one-year targets to deliver 7.04% LESS net gain than $5,000 invested as $.5k in all ten. The ninth lowest priced "safer" dividend International Aristocrats stock, Prudential Financial, Inc. showed the best net gain of 43.58% per analyst targets.

Source: YCharts

Lowest priced five "safer" dividend International Aristocrats as of December 27 were: Enagas SA (OTCPK:ENGGY); Canadian Natural Resources Ltd., Imperial Brands PLC (OTCQX:IMBBY), BCE, Inc., and Sanofi SA, with prices ranging from $13.36 to $42.64.

Higher priced five "safer" dividend International Aristocrats as of December 27 were: Bank of Nova Scotia (BNS), Royal Bank of Canada; Canadian Imperial Bank of Commerce, Prudential Financial, and AbbVie Inc. (ABBV), with prices ranging from $50.16 to $89.91.

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 Champions 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; analyst mean target price by Thomson/First Call in Yahoo Finance. Dog aristocrat photo from: pamperedpetinn.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.