Utilities Gains Led The Market For First Week In March, What's Up?

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Includes: APU, AQN, AY, BEP, BIP, EDPFY, ELP, EOCCY, JE, NGG, NGGTF, PEGI, SPH, SPKE, TGS
by: Fredrik Arnold
Summary

Last week, Utilities were the one positive-performing DJ Industrial sector. NGGTF, EDPFY, SPKE, NGG, BEP, PEGI, AY, SPH, APU, and JE, the top-ten, averaged 24.95% projected annual net gains 3/11/19.

50 Top Utilities stocks ranged in estimated annual yields from 0.79% to 13.63%. Top ten, NGG, NGGTF, EDPFY, BEP, AY, SPKE, PEGI, JE, SPH, and APU averaged 8.24%.

Utilities top ten by price upsides, AQN, BIP, ELP, EONGY, AY, SPH, EDPFY, APU, TGS, and leader JE averaged 24.71%.

$5k invested in the lowest-priced five top-yield Utilities showed 24.94% more net gain than from $5k invested in all ten. Low priced little dogs led March Utilities.

Actionable Conclusions (1-10): Brokers Projected 9.6% To 87.42% Net Gains For Top Ten Utilities

Five of ten top dividend high yield Utilities were verified as being among the top ten net gainers for the coming year based on analyst 1-year target prices. (They're tinted gray in the chart below). Thus, the yield-based forecast for Utilities as graded by Wall St. wizards was 50% accurate.

Source: YCharts

Projections based on estimated dividend returns from $1,000 invested in the thirty highest yielding stocks and aggregate 1-year analyst mean target prices as reported by YCharts produced the 2019 data. Note: one-year target prices from one analyst were not applied (n/a). Ten probable profit-generating trades to March 2020 were:

Just Energy Group Inc. (JE) was projected to net $874.21 based on dividends, plus a median target price estimate from six analysts, less broker fees. The Beta number showed this estimate subject to volatility 46% below the market as a whole.

Transportadora de Gas del Sur SA (TGS) was projected to net $477.37, based on a median target price estimate from four analysts, plus dividends, less broker fees. The Beta number showed this estimate subject to volatility 7% below the market as a whole.

AmeriGas Partners LP (APU) netted $335.81 based on dividends, plus a median target price estimate from eight analysts, less broker fees. The Beta number showed this estimate subject to volatility 8% more than the market as a whole.

Suburban Propane Partners (SPH) was projected to net $276.04 based on dividends, plus a median target price estimate from six analysts, less broker fees. The Beta number showed this estimate subject to volatility 37% less than the market as a whole.

Atlantica Yield PLC (AY) was projected to net $213.67, based on a median target price estimate from nine analysts, plus the estimated annual dividend, less broker fees. The Beta number showed this estimate subject to volatility 8% below the market as a whole.

Energy Company of Parana (ELP) was projected to net $139.73, based on target price estimates from two analysts, plus annual dividend, less broker fees. The Beta number showed this estimate subject to volatility 28% less than the market as a whole.

Brookfield Infrastructure (BIP) was projected to net $130.92, based on dividends, plus upside estimates from thirteen analysts, less broker fees. The Beta number showed this estimate subject to volatility 5% more than the market as a whole.

Algonquin Power & Utilities (AQN) was projected to net $114.66, based on dividends, plus upside estimates from fourteen analysts, less broker fees. The Beta number showed this estimate subject to volatility 25% less than the market as a whole.

Enel Generacion Chile (OTCPK:EOCCY) was projected to net $104.96, based on dividends, plus median target price estimates from two analysts, less broker fees. The Beta number showed this estimate subject to volatility 3% above the market as a whole.

Pattern Energy Group Inc. (PEGI) netted $96.00 based on dividends, plus a median target price estimate from thirteen analysts, less broker fees. The Beta number showed this estimate subject to volatility 4% over the market as a whole.

The average net gain (dividend and price less broker fees) was estimated at 27.64% on $10k invested as $1k in each of these ten stocks. This gain estimate was subject to average volatility equal to the market as a whole.

Source: pethelpful.com

The Dividend Dogs Rule

Stocks earned the "dog" moniker by exhibiting three traits: (1) paying reliable, repeating dividends, (2) their prices fell to where (3) yield (dividend/price) grew higher than their peers. Thus, the highest yielding stocks in any collection became known as "dogs." More precisely, these are, in fact, best called, "underdogs".

50 Top Utilities By Target Gains

Source: YCharts

50 Top Utilities By Dividend Yield

Source: YCharts

Actionable Conclusions (11-20) Ten Top Dividend Utilities Ranked By Yield

Top ten Utilities Sector Dogs selected 3/11/19 by yield represented four of five constituent industries. The two top yielding represented regulated gas companies, AmeriGas Partners LP (APU) [1], and Suburban Propane Partners LP (SPH) [2].

In third place was the first of four diversified utility representatives, Just Energy Group Inc. (JE) [3]. The other three placed eighth to tenth, EDP - Energias de Portugal SA (OTCPK:EDPFY) [8], National Grid PLC (OTCPK:NGGTF) [9], and (NGG) [10].

Two independent power producer representatives placed fourth and seventh, Pattern Energy Group (PEGI) [4] and Brookfield Renewable (BEP) [7].

Two regulated electric utility industry firm placed fifth and sixth: Spark Energy Inc. (SPKE) [5], Atlantica Yield PLC (AY) [6], to complete the top ten March Utilities by yield.

Actionable Conclusions: (21) Ten Utilities Showed 8.87% To 79.06% Price Upsides To March 2020; (22) Three Showed Downsides

Source: YCharts

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

Analysts Estimated A 24.94% Advantage For 5 Highest Yield, Lowest Priced Utilities WallStars To March 2020

Ten top Utilities were culled by yield for this update. Yield (dividend/price) results verified by YCharts did the ranking.

Source: YCharts

As noted above, top ten Utilities dogs selected 3/11/19 showing the highest dividend yields represented four of five industries constituting the sector.

Actionable Conclusions: Analysts Estimated 5 Lowest-Priced Of Top Ten Highest-Yield Utilities (23) Delivering 26.03% Vs. (24) 20.84% Net Gains by All Ten by March 2020

Source: YCharts

$5,000 invested as $1k in each of the five lowest-priced stocks in the top ten Dividend Utilities kennel by yield were predicted by analyst 1-year targets to deliver 24.94% more gain than $5,000 invested as $.5k in all ten. The very lowest priced, Just Energy Group Inc., was projected to deliver the best net gain of 87.42%.

Source: YCharts

The five lowest-priced utilities as of March 11 were: Just Energy Group Inc., Spark Energy Inc. (SPKE); National Grid PLC (OTCPK:NGGTF); Atlantica Yield PLC (AY); Pattern Energy Group Inc. (PEGI), with prices ranging from $363 to $21.19.

Five higher-priced Utilities for March 11 were: Suburban Propane Partners LP (SPH); AmeriGas Partners (APU); Brookfield Renewable (BEP); EDP - Energias de Portugal SA (OTCPK:EDPFY); National Grid PLC (NGG), whose prices ranged from $21.45 to $57.35.

The distinction between five low-priced dividend stocks and the general field of ten reflected Michael B. O'Higgins' "basic method" for beating the Dow. The scale of projected gains based on analyst targets added 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. Caution is advised, since analysts are historically only 20% to 80% accurate on the direction of change and just 0% to 20% accurate on the degree of change.

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 Utilities dog 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 IndexArb; YCharts; Yahoo Finance; analyst mean target price by Thomson/First Call in Yahoo Finance. Dog photo: pethelpful.com

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.