My Readers Round Up 4 'Safer' Dividend Dogs For January

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Includes: ABBV, AVGO, BA, BCE, DAL, JNJ, RY, UNH, VLO, VZ
by: Fredrik Arnold
Summary

4 of 48 most-mentioned equities achieved 'safer' dividend status by showing positive annual returns, and free cash flow yields greater than their dividend yields.

Fortunate four "safer" dividend broker target augured top net gain ReFa/Ro's - VZ, AVGO, UNH - were led by BA to an average 14.9% net.

Top-ten 'LoRisk/Safer' dividend yields from the ReFaRo list ranged from 1.4% to 5.53%. Their free cash flow yields ranged from 5.23% to 20.88%.

Payout ratios (lower is better), total annual returns, dividend growth, and P/E ratios further quantified the four 'safer' ReFa/Ro financial dividend cushions.

44 of the 48 ReFa/Ro equities were disqualified due to negative one-year returns. Six such losers were "rescued" as lower risk by showing negative returns under -16%.

The ReFa/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 Reader Favorites & Rogues per closing YChart data January 14, 2018.

Source: YCharts

Actionable Conclusions (1-4): Brokers Detected 5.2% To 19.38% Net Gains From Four "Safer" Dividend Reader References To 2020

Four 'Safer' dividend-yielding ReFa/Ro stocks were the only gainers for the coming year based on analyst 1-year target prices. So, this yield-based forecast for the "Safer" dividend ReFa/Ro's was too small to gauged by Wall Street stockbroker summations.

The following four probable profit-generating trades were identified by estimated dividend returns from $1000 invested in each 'safer' dividend stock. The dividend along with aggregate one year analyst median target prices, as reported by YCharts, created the 2019-20 data. The four probable profit-generating trades projected to January 14, 2020 were:

Boeing Co (BA) was projected to net $193.78, based on dividends, plus the median of target upside estimates from twenty-two analysts, less broker fees. The Beta number showed this estimate subject to volatility 24% above the market as a whole.

UnitedHealth Group Inc (UNH) was projected to net $175.81, 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 12% less than the market as a whole.

Broadcom Inc (AVGO) was projected to net $175.23, based on dividends, plus a mean target price estimate from twenty-five analysts, less broker fees. The Beta number showed this estimate subject to volatility 12% less than the market as a whole.

Verizon Communications Inc (VZ) was projected to net $52.13 based on the median of target price estimates from thirty analysts plus dividends, less broker fees. The Beta number showed this estimate subject to volatility 46% under the market as a whole.

The average net gain in dividend and price was estimated at 14.9% on $4k invested as $1k in each of these four 'safer' dividend stocks. This gain estimate was subject to volatility 15% less than the market as a whole.

Source: myams.org

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."

Four Sectors Were Represented By "Safer" January Dividend ReFa/Ro Stocks

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

Source: YCharts

Periodic Safety Check

A previous article discussed the attributes of the 48 ReFa/Ro stocks and funds from which these four were sorted. You see below the tinted green list that passed the dividend "stress" test. These 4 ReFa/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. 44 of the 48 ReFa/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.

Just as corporate boards decide the fate of dividend outflows to stockholders, the author chose to supplement the four 'safer' dividend dogs with six losers 'rescued' and classified 'lower risk' by virtue of negative returns under -16%.

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 those six stocks exhibiting tumbling prices.

Yield Metrics Uncovered Substantial Price Advantages For 5 Low-Price ReFa/Ro "LoRisk/Safer" Dividend Stocks To January 2020

Ten "LoRisk/Safer" dividend top ReFa/Ro for January 14 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 ReFa/Ro "LoRisk/Safer" Dividend Stocks Would Deliver (5) 25.69% VS. (6) 21.61% Net Gains for All Tenby January 2020

Source: YCharts

$5000 invested as $1k in each of the five Lowest priced stocks in the top ten reader favorite January 'LoRisk/Safer' kennel by yield were predicted by analyst 1 year targets to deliver 18.91% more net gain than $5,000 invested as $.5k in each of all ten.

The fifth lowest priced Valero Energy Corp (VLO), was projected to deliver the best net gain of 44.36%.

10 ReFa/Ro 'LoRisk/Safer' Dividend Picks Saw 18.91% More Gain From 5 Highest Yield, Lowest Priced Stocks

Source: YCharts

Lowest priced five ReFa/Ro 'LoRisk/Safer' dividend stocks as of January 14 were: BCE Inc (BCE); Delta Air Lines Inc (DAL); Verizon Communications Inc (VZ); Royal Bank of Canada (RY); Valero Energy Corp (VLO), with prices ranging from $41.93 to $78.77.

Higher priced five follower favorite "safer" dividend dogs for January 14 were: AbbVie Inc (ABBV); Johnson & Johnson (JNJ); Broadcom Inc (AVGO); UnitedHealth Group Inc (UNH); Boeing Co (BA), whose prices ranged from $85.50 to $352.24.

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 stocks listed above were suggested only as decent starting points for a reader favorite "safer" dividend dog stock purchase/sale research process in mid-January, 2019. 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 ReFa/Ro '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.

Graphs and charts were compiled by Rydlun & Co., LLC from data derived from YCharts, Yahoo Finance; analyst mean target price by YCharts. Dog photo from myams.org.

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.