Foreword
In a special double issue, December 2019, Fortune published its Investor's Guide 2020 featuring 40 stocks for the new decade: “The companies that are going to outperform the market aren’t big enough to offset the companies that are going to underperform.”
The issue featured yellow light portfolio of twenty-eight stocks that identified companies likely to pay off for prudent investors even though overall prospects for economic growth seem iffy.
Also featured were selections from an Investor Roundtable of advisors that picked thirteen stocks with great opportunities for 2020 in a feature heralding a changing of the guard among the market winners, titled “The Smart Money Gets Choosey.”
As with all such lists, the dogs prevail and the underdogs show themselves for what they are.
Actionable Conclusions (1-10): Brokers Estimated 9.24%-20.72% Net Gains For Ten Top Fortune 40 4 2020 Stocks
Five of these ten top Fortune 40 4 2020 stocks by yield were among the top ten gainers for the coming year based on analyst 1-year target prices. (They are tinted gray in the chart below.) Thus, the yield-based forecast for these December dogs was graded by Wall St. Wizards as 50% accurate.
Projections were based on estimated dividends from $1000 invested in each of the highest-yielding stocks and their aggregate 1-year analyst median target prices, as reported by YCharts. Note: 1-year target prices by lone analysts were not applied. Ten probable profit-generating trades projected to December 3, 2020, were:
Source: YCharts
Cisco Systems (CSCO) was projected to net $207.24 based on a median of target price estimates from thirty analysts plus dividends, less broker fees. The Beta number showed this estimate subject to risk 22% more than the market as a whole.
HDFC Bank Ltd. (HDB) was projected to net $160.60 based on the median of target estimates from two analysts plus dividends, less broker fees. The Beta number showed this estimate subject to risk 59% less than the market as a whole.
Merck & Co. (MRK) was projected to net $141.73 based on a median of target price estimates from eighteen analysts plus annual dividend, less broker fees. The Beta number showed this estimate subject to risk 48% less than the market as a whole.
The Home Depot Inc. (HD) was projected to net $132.22 based on dividends plus the median of target estimates from thirty-five brokers, less transaction fees. The Beta number showed this estimate subject to risk equal to the market as a whole.
Prudential Financial Inc. (PRU) was projected to net $130.78 based on projected dividends plus the median of target estimates from twenty brokers, less broker fees. The Beta number showed this estimate subject to risk 59% above to the market as a whole.
Citizens Financial Group (CFG) was projected to net $116.55 based on dividends plus median target price estimates from twenty-two analysts, less broker fees. The Beta number showed this estimate subject to risk 49% more than the market as a whole.
United Parcel Service (UPS) was projected to net $103.79 based on dividends plus the median of target price estimates from twenty-nine analysts, less broker fees. The Beta number showed this estimate subject to risk 22% more than the market as a whole.
Zoetis Inc. (ZTS) was projected to net $99.59 based on dividends plus the median of target price estimates from nineteen analysts, less broker fees. The Beta number showed this estimate subject to risk 20% under the market as a whole.
Intuit Inc. (INTU) netted $97.03 based on the median of estimates from twenty-three analysts plus dividends. The Beta number showed this estimate subject to risk, 7% more than the market as a whole.
Union Pacific Corp. (UNP) was projected to net $92.36 based on dividends plus the median of target price estimates from twenty-nine analysts, less broker fees. The Beta number showed this estimate subject to risk 7% more than the market as a whole.
The average net gain in dividend and price was estimated at 12.82% on $10k invested as $1k in each of these ten stocks. These gain estimates were subject to average risks 15% above the market as a whole.
Source: dogsmonthly.co.uk
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".
Fortune 40 4 2020 Stocks Per December Target Gains
Source: YCharts
Fortune 40 4 2020 Stocks By December Yield
Source: YCharts
Actionable Conclusions (11-20): Ten Top Fortune 40 4 2020 By Yield
Top ten Fortune 2020 picks ranked 12/3/19 by yield represented five of eleven Morningstar sectors plus two ETFs. The first three places were claimed by financial services representatives, Prudential Financial Inc. [1]; Wells Fargo & Co. (WFC) [2]; Citizens Financial Group [3].
Two consumer defensive sector representatives placed fourth and eighth, General Mills Inc. (GIS) [4] and Clorox Co. (CLX) [8], respectively. Then, a lone industrials representative placed fifth, United Parcel Service [5].
The sixth place on this list went to a technology enterprise, Cisco Systems [6]. Then, two funds placed seventh and tenth, Vanguard FTSE All-World ex-US ETF (VEU) [7] and iShares Core MSCI Total International Stock ETF (IXUS) [10], respectively.
After that, one healthcare representative placed ninth, Merck & Co. [9], to complete the Fortune 40 4 2020 top ten by yield for December.
Actionable Conclusions: (21-30) Top Ten Fortune 40 4 2020 Showed 8.33%-51.1% Upsides, While (31) No Downsiders Emerged
Source: YCharts
To quantify top dog rankings, analyst mean price target estimates provided a "market sentiment" gauge of upside potential. Added to the simple high-yield metrics, analyst median target price estimates became another tool to dig out bargains.
Analysts Forecast A 2.81% Advantage For 5 Highest-Yield, Lowest-Priced Fortune 40 4 2020
Ten top Fortune 40 4 2020 dividend dogs were culled by yield for this update. Yield (dividend / price) results provided by YCharts did the ranking.
Source: YCharts
As noted above, top ten Fortune 40 4 2020 screened 12/3/19 showing the highest dividend yields represented five of eleven in the Morningstar sector scheme.
Actionable Conclusions: Analysts Predicted 5 Lowest-Priced Of The Top 10 Highest-Yield Fortune 40 4 2020 (32) Delivering 7.77% Vs. (33) 7.56% Net Gains by All 10 Come December 2020
Source: YCharts
$5000 invested as $1k in each of the five lowest-priced stocks in the top ten Fortune 40 4 2020 kennel by yield were predicted by analyst 1-year targets to deliver 2.81% more gain than $5,000 invested as $.5k in all ten. The second lowest-priced, Cisco Systems, was projected to deliver the best net gain of 20.72%.
Source: YCharts
The five lowest-priced top-yield Fortune 40 4 2020 as of December 3 were Citizens Financial Group Inc., Cisco Systems, Vanguard FTSE All-World ex-US ETF, Wells Fargo & Co., and General Mills Inc., with prices ranging from $37.76 to $53.65.
Five higher-priced Fortune 40 4 2020 as of December 3 were iShares Core MSCI Total International Stock ETF (IXUS), Merck & Co., Prudential Financial Inc., United Parcel Service Inc., and Clorox Co., whose prices ranged from $59.83 to $147.95.
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 20-80% accurate on the direction of change and just 0-20% 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.
The stocks listed above were suggested only as possible reference points for your Fortune 40 4 2020 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: dogsmonthly.co.uk
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