S&P Dividend Aristocrats Advance In August

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Includes: ABBV, ADM, BEN, CAH, CAT, CLX, CVX, EMR, LEG, LOW, NUE, PBCT, T, UTX, WBA, XOM
by: Fredrik Arnold
Summary

"S&P 500 Dividend Aristocrats measure the performance S&P 500 companies that have increased dividends every year for the last 25 consecutive years." - us.spindices.com.

The 57 Aristocrat stocks for August 2019 represent all eleven Morningstar sectors. Broker target-top-ten net gains ranged 19.69%-38.65% topped by ABBV 8/16/19.

By yield, ABBV topped all Aristocrats again. Top ten yields from WBA, ADM, BEN, CVX, LEG, CAH, PBCT, XOM, T, and ABBV averaged 4.63%.

Aristocrats top ten by broker target price upsides, WBA, CVX, LOW, XOM,  EMR, NUE ,CAT, UTX,  ADM, and ABBV averaged 22.47% estimated gains. Three downsiders averaged -2.84%.

$5k invested August 16 in the five top-yield lowest priced Aristocrats showed 15.42% LESS net gain than from $5k invested in the top ten. High price big dogs led the Dividend Aristocrats.

Actionable Conclusions (1-10): Analysts Expect 19.69% To 38.65% Aristocrat Net Gains By August 2020

Five of the ten top Aristocrats by yield were verified as being among these top ten gainers for the coming year based on analyst 1-year target prices. (They are tinted gray in the chart below). Thus, this yield-based forecast for Aristocrats graded by brokers was 50% accurate.

Projections based on estimated dividend returns from $1,000 invested in each of the 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. Ten probable profit-generating trades projected to August 16, 2020 were:

Source: YCharts.com

AbbVie Inc (ABBV) was projected to net $386.53 based on dividends, plus the median of target price estimates from thirteen analysts, less broker fees. The Beta number showed this estimate subject to risk 4% less than the market as a whole.

Archer-Daniels-Midland Co. (ADM) was projected to net $290.21, based on the median of target price estimates from fifteen analysts, plus the estimated annual dividend, less broker fees. The Beta number showed this estimate subject to risk 5% more than the market as a whole.

United Technologies Corp. (UTX) was projected to net $252.20 based on dividends, plus the median of target estimates from eighteen brokers, less transaction fees. The Beta number showed this estimate subject to risk 20% more than the market as a whole.

Caterpillar Inc. (CAT) was projected to net $251.89, based on dividends, plus a mean target price estimate from twenty-eight analysts, less broker fees. The Beta number showed this estimate subject to risk 50% more than the market as a whole.

Nucor Corp. (NUE) was projected to net $247.16, based on a median target price estimate from fifteen analysts, plus dividends, less broker fees. The Beta number showed this estimate subject to risk 61% more than the market as a whole.

Exxon Mobil Corp. (XOM) was projected to net $240.12, based on a median target price estimate from twenty-one analysts, plus dividends, less broker fees. The Beta number showed this estimate subject to risk 3% less than the market as a whole.

Emerson Electric Co. (EMR) was projected to net $235.82, based on a median of target estimates from twenty-three analysts, plus dividends, less broker fees. The Beta number showed this estimate subject to risk 32% more than the market as a whole.

Chevron (CVX) was projected to net $221.84, based on target price estimates from twenty-three analysts, plus annual dividend, less broker fees. The Beta number showed this estimate subject to risk equal to the market as a whole.

Lowe's Companies Inc. (LOW) netted $212.29 based on a median target price estimate from thirty-three analysts, plus dividends, less broker fees. The Beta number showed this estimate subject to risk 36% more than the market as a whole.

Cardinal Health Inc. (CAH) was projected to net $196.91, based on dividends, plus a mean target price estimate from nineteen analysts, less broker fees. The Beta number showed this estimate subject to risk 28% more than the market as a whole.

The average net gain in dividend and price was estimated to be 25.35% on $10k invested as $1k in each of these ten stocks. The average Beta showed these estimates subject to risk 23% more than the market as a whole.

Actionable Conclusion (11): (Bear Alert) Analysts Predicted One Dividend Aristocrat Dog To Lose 4.76% By August 2020

The probable losing trade revealed by YCharts for August 2019-20 was:

Source: YCharts.com

Clorox Co. (CLX) projected a $47.61 loss based on dividend plus a median target price estimate from seventeen analysts including $10 of broker fees. The Beta number showed this estimate subject to risk 64% less than the market as a whole.

Source: yourpurebredpuppy.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", even if they are "Aristocrats."

57 Dividend Aristocrats By Broker Targets

Source: us.spindices/YCharts.com

This scale of broker-estimated upside (or downside) for stock prices provides a scale of market popularity. Note: No broker coverage or 1 broker coverage produced a zero score on the above scale. This scale can be taken as an emotional component as opposed to the strictly monetary and objective dividend/price yield-driven report below. As noted above, these scores may be taken as contrarian.

57 Dividend Aristocrats By Yield

Source: us.spindices/YCharts.com

Actionable Conclusions (12-21): Ten Top Stocks By Yield Are The Dogs of The Dividend Aristocrats

Top ten Aristocrats selected 8/16/19 by yield represented six of eleven Morningstar sectors. Top yielding stock, the first of two healthcare representatives was, AbbVie [1], while the second health issue in the top ten placed fifth, Cardinal Health [5].

In second place was AT&T, Inc. (T) [2], the lone communication services representative in the top ten. Two energy representatives placed third and seventh, Exxon Mobil [3] and Chevron [7], while two financial services firms placed fourth and eighth, People's United Financial Inc (PBCT) [4], and Franklin Resources Inc (BEN) [8].

A lone consumer cyclical firm took the sixth slot, Leggett & Platt Inc. (LEG) [6]. Then two consumer defensive sector representatives placed ninth and tenth, Archer-Daniels-Midland Co. [9], and Walgreens Boots Alliance Inc (WBA) [10], to complete these S&P Aristocrats top ten by yield for August.

Source: YCharts.com

Actionable Conclusions: (22-31) Ten Aristocrats Showed 16.28% To 33.01% Upsides To August 16, 2020; (32) Downsides Projected From Three Losers Ranged -0.41% To -6.4%.

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

Analysts Estimated A 15.42% Disadvantage For 5 Highest Yield, Lowest Priced Dividend Aristocrats To August 2020

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

Source: YCharts.com

As noted above, top ten Aristocrats selected 8/16/19 showing the highest dividend yields represented six of eleven in the Morningstar sector scheme.

Actionable Conclusions: Analysts Estimated The 5 Lowest-Priced Of Ten Highest-Yield Dividend Aristocrats (33) Delivering 18.09% Vs. (34) 21.39% Net Gains by All Ten by August 2020

Source: YCharts.com

$5,000 invested as $1k in each of the five lowest-priced stocks in the top ten Dividend Aristocrats kennel by yield were predicted by analyst 1-year targets to deliver 1.10% more gain than $5,000 invested as $.5k in all ten. The eighth lowest priced Aristocrat top yield stock, AbbVie Inc., was projected to deliver the best net gain of 38.65%.

Source: YCharts.com

The five lowest-priced top yield Aristocrats for August 16 were: People's United Financial Inc.; Franklin Resources Inc.; AT&T, Inc.; Archer-Daniels-Midland Co.; Leggett & Platt Inc., with prices ranging from $14.50 to $38.51.

Five higher-priced Aristocrats as of August 16 were: Cardinal Health; Walgreens Boots Alliance Inc.; AbbVie; Exxon Mobil Corp.; Chevron Corp., whose prices ranged from $43.19 to $115.81.

This 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.

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 Dividend Aristocrats 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 Yahoo Finance. Dog photo: yourpurebredpuppy.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.