Seeking Alpha

Kiplinger 83 For 2020: January Update

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Includes: BAYRY, CC, CSCO, CVS, CVX, HUN, KMI, O, PEAK, SITC, SLB, TAK, VLO, WELL, WPC, XOM
by: Fredrik Arnold
Fredrik Arnold
Dividend investing, Growth, momentum, research analyst
Summary

New Year stock lists are fair game for Dog Catchers. This Kiplinger's 83 For 2020 collection appeared in Kiplinger Today 12/6/19. Here's your 1/6/20 update.

Kiplinger's revealed eight trends that "lead us to a modestly bullish outlook for stocks in the year ahead." Then set loose several Kiplinger's Personal Finance editors and contributors identifying examples.

62 of 83 Kiplinger's 83 stocks for 2020 paid dividends ranging 0.27% to 5.88% in annual yield and -21.44% to 512.82% in annual price target upsides per broker estimates 1/6/20.

Top Ten of the 62 dividend-paying of 83 Kiplinger's 2020 collected stocks boasted net gains from 11.92% to 34.64%.

$5k invested in the lowest-priced five of 10 top-yield Kiplinger's 83 dividend dogs showed 4.7% more net gain than from $5k invested in all ten. Little low-price Kiplinger's 83 for 2020 dividend  62 stocks led the pack.

Foreword

"Picking the best stocks for the next decade would require psychic powers that we do not possess. However, even without a crystal ball, these firms are positioned to deliver robust returns in 2020 and beyond."

By RYAN ERMEY, Associate Editor

November 27, 2019

From Kiplinger's Personal Finance

The Kiplinger analysts surveyed all sectors and showed a distribution of 23.75% healthcare; 16.25% industrials; 12.5% energy; 12.5% real estate; 10% technology; 7.5% consumer cyclical; 5% financial services; 3.75% basic materials; 3.75% consumer defensive; 2.5% communication services; 2.5% utilities.

Here are links to Kiplinger individual analyst articles:

10 Best Stocks of the Past 10 Years;

Best Bond Funds for Retirement Savers;

12 Dividend Stocks;

Best Industrial Stocks to Buy;

Best REITs to Buy for 2020;

Aristocrats Expected to Deliver Big Gains;

Best Energy Stocks for 2020;

Best Healthcare Stocks for 2020;

Glassman's Top Stock Picks;

10 Stocks for the Next 10 Years.

Sixty two, or 77.5% of the Kiplinger 83 selections pay dividends. As with all such lists, the dogs prevail, and the underdogs show themselves for what they are.

Actionable Conclusions (1-10): Analysts Estimated 11.92% To 34.64% Net Gains For Ten Top Kiplinger 80 For 2020

Four of these ten top Kiplinger's 80 for 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 Kiplinger's dogs was graded by Wall St. Wizards as 40% accurate.

Projections were based on estimated dividends from $1,000 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. Ten probable profit-generating trades projected to January 6, 2021, were:

Source: YCharts.com

Takeda Pharmaceutical (TAK) was projected to net $346.36, based on a median of target price estimates from two analysts, plus annual dividend, less broker fees. The Beta number showed this estimate subject to risk 36% less than the market as a whole.

Bayer AG (OTCPK:BAYRY) was projected to net $297.38, based on the median of target estimates from two analysts, plus dividends, less broker fees. The Beta number showed this estimate subject to risk 4% more than the market as a whole.

Valero Energy Corp. (VLO) was projected to net $212.52, based on dividends, plus the median of target price estimates from twenty analysts, less broker fees. The Beta number showed this estimate subject to risk 46% over the market as a whole.

Realty Income (O) was projected to net $203.62, based on the median of target estimates from twenty brokers, plus dividends less transaction fees. The Beta number showed this estimate subject to risk 16% over the market as a whole.

Chevron Corp. (CVX) netted $154.71 based on the median of estimates from twenty-six analysts, plus dividends. The Beta number showed this estimate subject to risk, 2% more than the market as a whole.

Huntsman Corp. (HUN) was projected to net $141.36, based on dividends, plus median target price estimates from thirteen analysts, less broker fees. The Beta number showed this estimate subject to risk 131% more than the market as a whole.

Exxon Mobil Corp. (XOM) was projected to net $136.88, based on dividends, plus the median of target price estimates from twenty-five analysts, less broker fees. The Beta number showed this estimate subject to risk equal to the market as a whole.

W.P. Carey (WPC) was projected to net $134.27, based on dividends, plus the median of target price estimates from ten analysts, less broker fees. The Beta number showed this estimate subject to risk 62% less than the market as a whole.

Cisco Systems Inc. (CSCO) was projected to net $123.90 based on dividends, plus the median of target estimates from twenty-nine brokers, less transaction fees. The Beta number showed this estimate subject to risk 23% over the market as a whole.

CVS Health Corp. (CVS) was projected to net $119.19, based on a median of target price estimates from twenty-eight analysts, plus dividends, less broker fees. The Beta number showed this estimate subject to risk 11% less than the market as a whole.

The average net gain in dividend and price was estimated at 18.7% on $10k invested as $1k in each of these ten stocks. These gain estimates were subject to average risks 25% over the market as a whole.

Source: dogwallpapers.net

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".

Kiplinger's 83 For 2020 Stocks Per January Target Gains

Source: YCharts.com

Kiplinger's 83 For 2020 Stocks By January Yield

Source: YCharts.com

Actionable Conclusions (12-21): Ten Top Kiplinger's 83 For 2020 Dogs By Yield

Top ten Kiplinger's 83 For 2020 Stocks ranked 1/6/20 by yield represented four of eleven Morningstar sectors. The first, place was claimed the first of four real estate enterprises, SITE Centers Corp. (SITC) [1]. The others placed third, seventh and eighth: W.P. Carey Inc. (WPC) [3], Healthpeak Properties Inc. (PEAK) [7], and Takeda Pharmaceutical Co. Ltd. (TAK) [8].

In second place was a lone basic materials sector stock, The Chemours Co. (CC) [2]. Then, four energy representatives emerged in fourth, fifth, sixth, and tenth places by yield, Exxon Mobil (XOM) [4], Schlumberger Ltd. (SLB) [5], Kinder Morgan Inc. (KMI) [6], and Chevron Corp. (CVX) [10].

Finally, one healthcare representative placed ninth, Takeda Pharmaceutical Co. Ltd. (TAK) [9] to complete the Kiplinger 83 For 2020 top ten by yield in January.

Actionable Conclusions: (22-31) Top Ten Kiplinger 83 For 2020 Stocks Showed 9.8%-31.5% Upsides While (32) Two Downsiders Emerged

Source: YCharts.com

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 4.7% Advantage For 5 Highest Yield, Lowest Priced Kiplinger 83 For 2020 Dividend Dogs To January 2021

Ten top Kiplinger's 83 For 2020 dividend dogs were culled by yield for this update. Yield (dividend/price) results provided by YCharts did the ranking.

Source: YCharts.com

As noted above, top ten Kiplinger's 83 For 2020 stocks screened 1/6/20 showing the highest dividend yields represented four of eleven sectors in the Morningstar sector scheme.

Actionable Conclusions: Analysts Predicted 5 Lowest-Priced Of The Top Ten Highest-Yield Kiplinger's 83 For 2020 Stocks (33) Delivering 14.01% Vs. (34) 13.38% Net Gains by All Ten Come January 2020

Source: YCharts.com

$5,000 invested as $1k in each of the five lowest-priced stocks in the top ten Kiplinger's 80 For 2020 kennel by yield were predicted by analyst 1-year targets to deliver 25.81% more gain than $5,000 invested as $0.5k in all ten. The third lowest priced, Takeda Pharmaceutical Co. Ltd. (TAK), was projected to deliver the best net gain of 34.64%.

Source: YCharts.com

The five lowest-priced top-yield Kiplinger's 83 For 2020 stocks as of January 6 were: Site Centers Corp. (SITC); The Chemours Co. (CC); Takeda Pharmaceutical; Kinder Morgan Inc. (KMI); Healthpeak Properties Inc. (PEAK), with prices ranging from $13.60 to $34.65.

Five higher-priced Kiplinger's 83 For 2020 dogs as of January 6 were: Schlumberger Ltd. (SLB); Exxon Mobil (XOM); W.P. Carey Inc. (WPC); Welltower Inc. (WELL); Chevron corp. (CVX), whose prices ranged from $40.82 to $120.60.

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.

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 Kiplinger 83 for 2020 stock purchase or sale research process. These were not recommendations.

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: dogwallpapers.net

Disclosure: I am/we are long CSCO, INTC. 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.

Additional disclosure: 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.