27 Ideal Dividends To Buy Now Per Ben Graham's Formula
Summary
- "Benjamin Graham Value Stocks match the criteria Benjamin Graham followed." - YCharts Value Screener.
- These 35 Graham formula picks were screened by YCharts as of August 5, 2021 based on Graham's established criteria. 27 matched the dogcatcher ideal of dividend from $1k invested exceeding share price.
- The 35, representing eight of eleven Morningstar sectors, pay regular dividends. Broker-targeted-top-ten Graham dividend-paying net-gainers ranged 17.86%-43.55% topped by QIWI and TAK as of 8/5/21.
- By yield, FSK still leads the top-ten Graham formula yields from BDN, NWBI, UVV, GBDC, OCSL, RIO, ORCC, QIWI, KEN, and FSK. The ten averaged 7.99% yield. Graham top-ten by broker target price upsides from UBSI, UVV, BUSE, NTB, VALE, DGICA, BCC, FNB, TAK, and QIWI averaged 21.98%, per analyst estimates.
- $5k invested August 5 in the five top-yield lowest-priced Graham formula stocks showed 16.64% more net-gain than from $5k invested all the top ten. Little (lower-priced) equities led the top ten August Graham formula dividend stocks.
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Foreword
While just about 20% of this collection of 35 Graham dividend stocks are too pricey to justify their skinny dividends, twenty-seven of the thirty-four by yield live up to the ideal of offering annual dividends (from a $1k investment) exceeding their price per share.
Source: YCharts.com
In the current market advance, the dividends from $1k investments in any of the twenty-seven stocks listed above met or exceeded their single share prices as of 8/5/21.
As we've passed the anniversary of the 2020 Ides of March dip, the time to snap up those twenty-seven top yield Graham dogs is now... unless another big bearish drop in price looms ahead. (At which time your strategy would be to add to your position in any of these you then hold.)
Actionable Conclusions (1-10): Analysts Estimate 17.89% To 43.55% Top Ten Graham Net Gains To August 2022
Three of the ten top Graham formula picks by yield were verified as also 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). Thus, this yield-based July forecast for Graham-derived dividend dogs (as graded by Brokers) was 30% accurate.
Estimated dividend returns from $1000 invested in each of the highest yielding stocks and their aggregate one year analyst median target prices, as reported by YCharts, created the 2020-21 data points. Note: target prices by lone analysts were not applied. Ten probable profit-generating trades projected to August 5, 2022 were:
Source: YCharts.com
QIWI PLC (QIWI) was projected to net $435.46 based on dividends, plus the median of target price estimates from eight analysts, less broker fees. The Beta number showed this estimate subject to risk/volatility 33% less than the market as a whole.
Takeda Pharmaceutical Co. Ltd. (TAK) was projected to net $300.30, based on a median of target estimates from three analysts, plus dividends, less broker fees. The Beta number showed this estimate subject to risk/volatility 4% greater than the market as a whole.
F.N.B. Corp. (FNB) was projected to net $257.75, 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/volatility 35% greater than the market as a whole.
Donegal Group Inc. (DGICA) was projected to net $238.48, based on the median of target price estimates from two analysts, plus the estimated annual dividend, less broker fees. The Beta number showed this estimate subject to risk/volatility 93% less than the market as a whole.
Vale S.A. (VALE) was projected to net $237.61, based on the median of target price estimates from twenty-three analysts, plus dividends, less broker fees. The Beta number showed this estimate subject to risk/volatility equal the market as a whole.
Bank of N.T. Butterfield & Son (NTB) was projected to net $234.99, based on dividends, plus the median of target price estimates from five analysts, less broker fees. A Beta number was not available for NTB.
Rio Tinto Group (RIO) was projected to net $224.92, based on a median target price estimate from six analysts, plus dividends, less broker fees. The Beta number showed this estimate subject to risk/volatility 37% less than the market as a whole.
United Bankshares Inc. (UBSI) was projected to net $205.19, based on dividends, plus the median of target price estimates from six analysts, less broker fees. The Beta number showed this estimate subject to risk/volatility 35% greater than the market as a whole.
People's United Financial Inc. (PBCT) netted $188.10 based on a median target price estimate from thirteen analysts, plus dividends, less broker fees. The Beta number showed this estimate subject to risk/volatility 21% more than the market as a whole.
FS KKR Capital Corp. (FSK) was projected to net $178.66, based on dividends, plus the median of target price estimates from eight analysts, less broker fees. The Beta number showed this estimate subject to risk/volatility 59% greater than the market as a whole.
The average net gain in dividend and price was estimated to be 25.02% on $10k invested as $1k in each of these ten stocks. The average Beta showed these estimates subject to risk/volatility 11% less than the market as a whole.
Source: Open source dog art from dividenddogcatcher.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".
Top 35 Graham Value Formula Picks By Broker Targets
Source: 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 also be taken as contrarian.
Top 35 Graham Value Formula Picks By Yield
Source: YCharts.com
Actionable Conclusions (12-21): Ten Top Stocks By Yield Are The August Dogs of The Graham Formula Pack
Top ten Graham stocks selected 8/5/21 by yield represented six of eleven Morningstar sectors. In first place was FS KKR Capital Corp. [1], the first of five financial services representatives listed. The others placed fourth, sixth, seventh, and ninth: Owl Rock Capital Corp. (ORCC) [4], Oaktree Specialty Lending Corp. (OCSL) [6], Golub Capital BDC Inc. (GBDC) [7], and Northwest Bancshares Inc. (NWBI) [9].
One utilities representatives placed second, Kenon Holdings Ltd. (KEN) [2]. One technology representative placed third, QIWI PLC [3]. Also one basic materials representatives placed fifth, Rio Tinto [5],
Then one consumer defensive member placed eighth, Universal Corp. (UVV) [8]. Finally, one real estate stock placed tenth, Brandywine Realty Trust (BDN) [10], to complete this Graham Formula top ten, by yield, for August.
Source: YCharts.com
Actionable Conclusions: (22-31) Ten Graham Value Dividend Stocks Showed 13.36% To 35.58% Upsides To August 2022, With No Losers
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 16.64% Advantage For 5 Highest Yield, Lowest Priced of Top-Ten Graham Value Formula Dividend Stocks To August 2022
Ten top Graham formula stocks were culled by yield for this monthly update. Yield (dividend/price) results verified by YCharts did the ranking.
Source: YCharts.com
As noted above, top ten Graham Formula Dogs selected 8/5/21 showing the highest dividend yields represented six of eleven sectors in the Morningstar scheme.
Actionable Conclusions: Analysts Estimated The 5 Lowest-Priced Of Ten Highest-Yield Graham Formula Dividend Stocks (33) Delivering 18.27% Vs. (34) 15.67% Net Gains by All Ten by August 2022
Source: YCharts.com
$5000 invested as $1k in each of the five lowest-priced stocks in the top ten Graham Formula dividend pack by yield were predicted by analyst 1-year targets to deliver 8.85% LESS gain than $5,000 invested as $.5k in all ten. The second lowest priced Graham top yield stock, QIWI PLC, was projected to deliver the best net gain of 29.87%.
Source: YCharts.com
The five lowest-priced top-yield Graham formula dividend stocks for August 5 were: Oaktree Special Lending Co., QIWI PLC, Northwest Bancshares Inc., Brandywine Realty Trust, Owl Rock Capital Corp., with prices ranging from $7.09 to $14.45
The five higher-priced top-yield Graham dividend stocks for August 5 were: Golub Capital BDC Inc., FS KKR Capital Corp., Kenon Holdings Ltd., Universal Corp., Rio Tinto, whose prices ranged from $15.86 to $84.74.
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.
Afterword
If somehow you missed the suggestion of the twenty seven stocks ripe for picking at the start of the article, here is a repeat of the list at the end:
Source: YCharts.com
In the current market advance, dividends from $1k invested in the twenty-seven stocks listed above met or exceeded their single share prices as of 8/5/21.
As we are well-past the anniversary of the 2020 Ides of March dip, the time to snap up those twenty seven top yield Graham dogs is now... unless another big bearish drop in price looms ahead. (At which time your strategy would be to add to your holdings.)
Since all but one of the top Graham Value Dividend shares are now priced less than the annual dividends paid out from a $1k investment, the following charts compare those at current prices (top chart) with the break-even pricing of all ten top dogs conforming to the dogcatcher ideal (bottom chart). The one non-conformist shows negative numbers since it has to come down in price to conform.
Source: YCharts.com
You could look at the bottom chart as an indicator of how high each stock might rise in the coming year or two. However, it also shows how much the price must rise (in either dollars or percentage) before it no longer conforms the standard of dividends from $1k invested exceeding the current single share price.
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 YCharts. Dog picture: Open source dog art from dividenddogcatcher.com
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This article was written by
Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such 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.