Sector Study: Materials Dividend Dogs Vs. Industrials Dividend Dogs, Which To Buy?

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Includes: ADES, ARLP, AWCMY, BGSF, CCL, CCR, CHMI, CINR, CODI, CPLP, CYD, EVA, FELP, FTAI, HMLP, IPHS, KNOP, MERC, MIC, QUAD, RISK, SFL, SXCP, TGLS, USDP, WLKP, XAN
by: Fredrik Arnold
Summary

The basic-materials sector thirteen industries all relate to mining, making, and delivering commodities: agricultural inputs; aluminum; building materials; chemicals; coal; copper; industrial metals and minerals; paper; silver; specialty chemicals; steel.

The industrials sector twenty-three industries relate to designing, fabricating and servicing useful stuff. They range from aerospace and defense to waste management with all the services, and equipment required in-between.

Top-yield ten materials dogs, IPHS; WLKP; TGLS; EVA; CINR; ARLP; CCR; FELP; SXCP; AWCMY, averaged 10.03%. Top-ten industrials, FTAI; ADES; CODI; HMLP; QUAD; MIC; KNOP; SFL; CPLP; USDP, averaged 9.87%.

These are the MAT VS. IND Dogs 4/8/2019: basic materials top five firms by broker net gains, ARLP, IPHS, SXCP, MERC, &  TGLS averaged 56.67%. Industrials top five, BGSF; CPLP; GOGL; CyD; QUAD estimated net averaged 40.34% gains.

Analyst one-year targets predicted that ten highest-yield basic materials stocks could produce 14.10% more gain from $5k invested in the lowest-priced five than from $5k in all ten. The Industrials prediction showed 51.65% more net-gain for the little dog five than from $5k invested in all ten.

Actionable Conclusions (1-5): Brokers Predicted 43.76% To 86.34% Net Gains From Top Five Basic Materials Sector Dogs By April 2020

Four of five top dividend-yielding MAT dogs were verified as being among the top ten gainers for the coming year based on analyst 1-year target prices. (They are tinted gray in the chart below.) So, our April 8 yield-based forecast for Materials dogs, as graded by Wall St. wizards, was 80% accurate.

Source: YCharts.com

Projections based on estimated dividend returns from $1000 invested in the five highest-yielding stocks and their aggregate one year analyst median target prices, as reported by YCharts, created the 2019-20 data points. Note: one year target prices by lone analysts were not applied. Top five probable profit-generating trades projected to April 4, 2020 were:

Tecnoglass Inc (TGLS) netted $863.36 based on the median of target price estimates from two analysts, plus dividends, less broker fees. The Beta number showed this estimate subject to volatility 28% more than the market as a whole.

Mercer International (MERC) was projected to net $620.55, based on the median of target estimates from six analysts, plus dividends, less broker fees. The Beta number showed this estimate subject to volatility 86% more than the market as a whole.

SunCoke Energy Partners (SXCP) was projected to net $460.32, based on dividends, plus the median of target price estimates from three analysts, less broker fees. The Beta number showed this estimate subject to volatility 60% more than the market as a whole.

Innophos Holdings Inc (IPHS) was projected to net $451.77, based on dividends, plus the median of target price estimates from three analysts, less broker fees. The Beta number showed this estimate subject to volatility 30% more than the market as a whole.

Alliance Resource Partners (ARLP) was forecast to net $437.55, based on target price estimates from four analysts, plus annual dividend, less broker fees. The Beta number showed this estimate subject to volatility 1% more than the market as a whole.

The average net gain in dividend and price was estimated at 56.67% on $5k invested as $1k in each of these five MAT stocks. This gain estimate was subject to average volatility 41% over the market as a whole.

Actionable Conclusions (6-10): Analysts Estimated 37.78% To 160.66% Net Gains For Top Five Industrials Sector Dogs To April 2020

Two of the five top Industrials Sector dividend stocks by yield were among the top ten gainers for the coming year based on analyst 1-year target prices. Thus, this yield-based forecast for S&P 500 dogs was graded by Wall St. Wizards as 40% accurate.

Source: YCharts.com

Projections were based on estimated dividends from $1000 invested in each of the highest yielding stocks and their aggregate one year analyst median target prices, as reported by YCharts. Note: one year target prices by lone analysts were not applied. Five probable profit-generating energy sector trades projected to April 4, 2020 were:

Quad/Graphics Inc (QUAD) netted $1,606.55 based on the median of target price estimates from two analysts, plus dividends, less broker fees. The Beta number showed this estimate subject to volatility 62% more than the market as a whole.

China Yuchai International (CYD) was projected to net $714.26, based on the median of target estimates from three analysts, plus dividends, less broker fees. The Beta number showed this estimate subject to volatility 80% more than the market as a whole.

Golden Ocean Group Ltd (CHMI) was projected to net $696.95, based on dividends, plus the median of target price estimates from five analysts, less broker fees. The Beta number showed this estimate subject to volatility 83% more than the market as a whole.

Capital Product Partners LP (XAN) was projected to net $638.73, based on dividends, plus the median of target price estimates from nine analysts, less broker fees. The Beta number showed this estimate subject to volatility 41% less than the market as a whole.

BG Staffing Inc (BGSF) was forecast to net $377.80, based on target price estimates from two analysts, plus annual dividend, less broker fees. The Beta number showed this estimate subject to volatility 31% less than the market as a whole.

The average net gain in dividend and price was estimated at 80.69% on $5k invested as $1k in each of these five stocks. These gain estimates were subject to average volatility 31% more than the market as a whole.

Source: dkfindout.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."

April Materials & Industrials Sector Top Dogs By Yield

Source: YCharts.com

Actionable Conclusion (11-20) 10 Top Basic Materials Dividend Stocks By Yield Range 5.96% To 15.31% & 10 Top Industrial Sector Equities Range 7.76% To 13.27% Per YCharts

Top ten basic materials dividend dogs as of 4/8/19 by YCharts represented seven of thirteen sector industries.

First place was claimed by the lone aluminum industry representative, Alumina Ltd (OTCQB:AWCMY) [1].

Second through fifth places were claimed by four coal representatives: SunCoke Energy Partners LP (SXCP) [2]; Foresight Energy LP (FELP) [3]; CONSOL Coal Resources LP (CCR) [4]; Alliance Resource Partners LP (ARLP) [5].

In sixth place was the lone industrial metals & minerals industry representative, Ciner Resources LP (CCR) [6]. Seventh place was claimed by a single lumber & wood production industry representative, Enviva Partners LP (EVA) [7].

Eighth and ninth places in the industrial top ten sector by yield went to a building materials representative and a chemicals firm, Tecnoglass Inc (TGLS) [8], and Westlake Chemical Partners LP (WLKP) [9]

Finally, in tenth place was a lone specialty chemicals industry rep, Innophos Holdings Inc (IPHS) [10]. to complete the basic materials sector top ten by yield for April.

Actionable Conclusions (21-30): 10 Top Industrial Sector Dividend Stocks By Yield

Top ten Industrials Sector stocks selected 4/8/19 by yield represented seven of twenty-three industries in the sector. Top yielding IND stock USD Partners LP (USDP) [1] was the lone railroad representatives in the top ten.

Second place went to the first of four shipping & ports representatives, Capital Product Partners LP (CPLP) [2]. The other shipping and ports stocks placed third, fourth, and seventh: Ship Finance International Ltd (SFL) [3]; KNOT Offshore Partners LP (KNOP) [4]; Hoegh LNG Partners LP (HMLP) [7].

In fifth place was the lone airports & air services stock, Macquarie Infrastructure Corp (MIC) [5]. The business services representative placed sixth, Quad/Graphics Inc (QUAD) [6]. Then eighth place went to the lone conglomerate in the top ten, Compass Diversified Holdings (CODI) [8).

Finally, a lone pollution & treatment contols firm placed ninth, and rental and leasing placed tenth, Advanced Emissions Solutions Inc (ADES) [9], and Fortress Transportation and Infrastructure Investors LLC (FTAI) [10], to compete the industrial sector top ten by yield.

Source: YCharts.com

Dividend Vs. Price Results

Graphs above show the relative strengths of the top ten Basic Materials and Industrial sector dogs by yield as of market close 4/8/2019. The two sets of charts show the variation of dividends as calculated by YCharts.com

Top ten materials dogs show none overbought. (All their aggregate single share prices of the ten exceed projected annual dividend from $10k invested as $1k in each.) A dividend dogcatcher priority is to source stocks whose dividends from $1K invested exceed their single share price. In the basic materials sector, all but three of the top thirty stocks by yield meet that goal (LYB, BBL, & UFS are overbought).

Furthermore, all but two of thirty top Industrials sector stocks by yield also meet the dogcatcher standard for dividend economics, with only PAC & SEIGY being overbought. All but those two Industrials are well-priced more than 10% below the dividend secured from $1,000.00 invested.

Actionable Conclusion (31): Basic Materials Sector Top Ten Stocks Show Less Risk With No More Dividend Output Than The Industrials Sector Top Ten

The aggregate single share price for the top ten basic materials dogs was 15% per YCharts and also 15% for the industirals top ten, while the dividend derived from $10k invested as $1k in each of the ten was 85% from both.

The only distinctive differences between basic materials and industrials were in risk, as measured by beta, and price per dollar of dividend. Basic materials top thirty by yield showed an average beta (RISK) factor of 1.14 while the top thirty industrials by yield came in at 1.74, a 60 point more risk.

As for price per dollar of dividend, the lower risk basic materials dogs top ten averaged $11.08, while the higher risk industrials dogs top ten averaged $10.31, a $0.77 spread. Plainly lower risk comes at a higher price.

Analysts Forecast A 14.10% Advantage For 5 Highest Yield Lowest Price Materials Dogs To April 8, 2020

Ten top basic materials sector dogs were culled by yield for this report. Yield (dividend / price) results as verified by YCharts did the ranking.

Source: YCharts.com

As noted above, top ten materials dogs selected 4/8/19 revealing the highest dividend yields represented seven of the thirteen industries in the sector.

Actionable Conclusions: Analysts Expected 5 Lowest-Priced of the Ten Highest-Yield Basic Materials Dogs (32) To Deliver 37.25% Vs. (33) 32.65% Net Gains by All Ten Come April 8, 2020

Source: YCharts.com

$5000 invested as $1k in each of the five lowest-priced stocks in the top ten materials sector dividend kennel by yield were predicted by analyst 1-year targets to deliver 14.10% more gain than from $5,000 invested in all ten. The second lowest priced real estate top yield dog, Tecnoglass Inc (TGLS), was projected to deliver the best net gain of 87.34%.

Source: YCharts.com

The five lowest-priced materials sector top-yield dogs for April 8 were: Foresight Energy LP (FELP); Tecnoglass Inc (TGLS); Alumina Ltd (OTCQB:AWCMY); SunCoke Energy Partners LP (SXCP); CONSOL Coal Resources LP (CCL), with prices ranging from $2.02 to $17.66.

Five higher-priced materials sector dogs for April 8 were: Alliance Resource Partners LP (ARLP); Westlake Chemical Partners LP (WLKP); Ciner Resources LP (CINR); Innophos Holdings Inc (IPHS); Enviva Partners LP (EVA), whose prices ranged from $18.95 to $32.73.

Analysts Forecast A 51.65% Advantage For 5 Highest Yield, Lowest Priced Industrials Sector Dividend Stocks To April, 2020

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

Source: YCharts.com

As noted above, top ten industrial sector dividend dogs selected 4/8/19 showing the highest dividend yields represented seven of twenty-three industries in their sector.

Actionable Conclusions: Analysts Predicted 5 Lowest-Priced Of the Top Ten Highest-Yield Energy Sector Dogs (34) Delivering 54.65% Vs. (35) 36.04% Net Gains by All Ten Come April, 2020

Source: YCharts.com

$5000 invested as $1k in each of the five lowest-priced stocks in the top ten Dividend energy sector kennel by yield were predicted by analyst 1-year targets to deliver 51.65% more gain than $5,000 invested as $.5k in all ten. The fourth lowest priced selection, Quad/Graphics Inc (QUAD), was projected to deliver the best net gain of 160.65%.

Source: YCharts.com

The five lowest-priced top-yield industrials sector dividend dogs as of April 8 were: USD Partners LP (USDP), Capital Product Partners LP (CPLP); Advanced Emissions Solutions Inc (ADES); Quad/Graphics Inc (QUAD); Ship Finance International Ltd (SFL), with prices ranging from $10.85 to $12.89.

Five higher-priced industrials sector dividend dogs as of April 8 were: Compass Diversified Holdings (CODI); Fortress Transportation and Infrastructure Investors LLC (FTAI); Hoegh LNG Partners LP (HMLP); KNOT Offshore Partners LP (KNOP); Macquarie Infrastructure Corp (SMIC), whose prices ranged from $16.35 to $42.10.

The distinction between five low-priced dividend dogs 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. (In 2017 the market somewhat followed analyst sentiment. In 2018 analysts estimates were contrarian indicators of market performance.)

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 Dow dividend 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 www.indexarb.com; YCharts.com; finance.yahoo.com; analyst mean target price by Thomson/First Call in YahooFinance. Dog photo: dkfindout.com

Disclosure: I am/we are long ADES, BGSF. 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.