112 S&P High Yield Dividend Aristocrats Deliver More Dog Per Dollar

Nov. 05, 2021 4:37 PM ETABBV, AMCR, CAH, CVX, ED, IBM, LEG, NNN, O, ORI, MTB, SJI, T, TDS, UGI, XOM6 Comments13 Likes

Summary

  • "S&P High Yield Dividend Aristocrats index is designed to measure the performance of companies within the S&P Composite 1500 that have consistently increased dividends every year for at least 20 years." - spindices.com.
  • The 112 S&P High Yield Dividend (HYD) Aristocrats, screened as of November 3, 2021, represented all-eleven Morningstar Sectors. Broker targeted top-ten net-gainers ranged 15.59%-55.35% topped by TDS & T.
  • By yield, T still tops all Aristocrats. Top-ten Yields from O, PBCT, ED, NNN, CVX, ABBV, IBM, SJI, XOM, & T averaged 5.02%.
  • S&P HYD Aristos top ten by broker-estimated target price-upsides, UGI, MDT, SWK, MDU, BRC, SJI, IBM, T, ABM, and TDS averaged 26.7%.
  • $5k invested November 3 in the five top-yield lowest-priced S&P HYD Aristos showed 17.35% more net gain than from $5k invested in all top ten. Little (lower-priced) equities led these November HYD Aristocrats by nearly one and three-quarter lengths.
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Foreword

Methodology Construction

  • Universe. To be included in the S&P High Yield Dividend Aristocrats, constituents must be members of the S&P Composite 1500.
  • Constituent Selection. Constituents must have increased dividends every year for at least 20 years.
  • Market Cap. Constituents must have a float-adjusted market cap of at least USD 2 billion as of the rebalancing reference date.

Liquidity. Constituents must have an average daily value traded of at least USD 5 million for the three months prior to the rebalancing reference date. The minimum initial portfolio size that can be turned over in a single day (based on recent trading volumes) is USD 2 billion.

  • Diversification. Individual stocks are capped at 4%.
  • The above methodology summary is provided for convenience purposes only. For complete details, please view the methodology document here.

While most of this collection of 112 S&P High Yield Dividend Aristocrats is too pricey to justify their skinny dividends, six of the top-twenty by yield live up to the ideal of offering annual dividends (from a $1K investment) exceeding their single share prices.

In the current market adjustment, it is now possible for these six, AT&T Inc. (T), South Jersey Industries, Inc. (SJI), People's United Financial (PBCT), Amcor plc (AMCR), Telephone and Data Systems, Inc. (TDS), and Old Republic International Corp. (ORI), to stay fair-priced with their annual yield (from $1K invested) meeting or exceeding their single share prices at this time.

PBCT will merge with M&T Bank toward the end of 2021 and will leave the Aristocrat ranks and its generous dividend will be absorbed by the new entity. AT&T has announced a pending dividend cut near year's end and, thereafter, will be disqualified as an Aristocrat.

As we are more than one year removed from the anniversary of the 2020 Ides of March dip, the time to snap-up those four lingering top yield Aristocrat dogs is at hand... unless another big bearish drop in price looms ahead (triggered by the Fed taper transition). (At which time your strategy would be to add to your position in any of those you then hold.)

Actionable Conclusions (1-10): Analysts Predict 15.59% To 55.35% Top Ten HYD Aristocrat Net Gains To November 2022

Five of the ten top HYD Aristocrats by yield 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). Thus, this yield-based November 3 forecast for HYD Aristocrats (as graded by Brokers) was 50% 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, produced the 2021-22 data points for the projections below. Note: target prices by lone analysts were not used. Ten probable profit-generating trades projected to November 3, 2022 were:

Source: YCharts.com

Telephone and Data Systems Inc was projected to net $553.47, based on dividends, plus the median of target price estimates from four analysts, less broker fees. The Beta number showed this estimate subject to risk/volatility 6% greater than the market as a whole.

AT&T Inc was projected to net $331.54, based on dividends, plus the median of target price estimates from twenty-one analysts, less broker fees. The Beta number showed this estimate subject to risk/volatility 30% less than the market as a whole.

International Business Machines Corporation (IBM) was projected to net $278.53, based on the median of target price estimates from fourteen analysts, plus dividends, less broker fees. The Beta number showed this estimate subject to risk/volatility 11% greater than the market as a whole.

South Jersey Industries was projected to net $273.44, based on the median of target price estimates from ten analysts, plus the estimated annual dividend, less broker fees. The Beta number showed this estimate subject to risk/volatility 9% less than the market as a whole.

UGI Corp. (UGI) was projected to net $218.21 based on target-price estimates from four analysts, plus annual dividend, less broker fees. The Beta number showed this estimate is subject to risk/volatility 1% less than the market as a whole.

Leggett & Platt, Inc. (LEG) was projected to net $204.84, based on dividends, plus the median of target price estimates from four analysts, less broker fees. The Beta number showed this estimate subject to risk/volatility 45% greater than the market as a whole.

National Retail Properties (NNN) was projected to net $168.00, based on the median of target price estimates from twelve analysts, plus dividends, less broker fees. The Beta number showed this estimate subject to risk/volatility 15% less than the market as a whole.

Old Republic International netted $165.92 based on a median target price estimate from two analysts, plus dividends, less broker fees. The Beta number showed this estimate subject to risk/volatility 13% less than the market as a whole.

Cardinal Health, Inc. (CAH) was projected to net $157.97 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/volatility 4% greater than the market as a whole.

Chevron Corp. (CVX) was projected to net $155.89, based on a median of target estimates from twenty-eight analysts, plus dividends, less broker fees. The Beta number showed this estimate subject to risk/volatility 30% greater than the market as a whole.

The average net gain in dividend and price was estimated to be 25.08% on $10k invested as $1k in each of these ten stocks. The average Beta showed these estimates subject to risk/volatility 2% over the market as a whole.

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."

Top 50 HYD Aristocrats By Broker Targets

Source: us.spindices/YCharts.com

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

Top 50 HYD Aristocrats By Yield

Source: us.spindices/YCharts.com

Actionable Conclusions (11-20): Ten Top Stocks By Yield Are The November Dogs of The S&P High Yield Dividend Aristocrats

Top ten HYD Aristocrats selected 11/3/21 by yield represented seven of eleven Morningstar sectors. In first place was AT&T, Inc. [1], the lone communication services representative listed.

Two energy representatives placed second, and sixth, Exxon Mobil [2], and, Chevron [6]. Two utilities representative, and placed third and eighth, South Jersey Industries (3), and Consolidated Edison, Inc. (ED) [8].

The technology sector HYD Aristocrat placed fourth, International Business Machines Corp [4]. Following in fifth place was the lone healthcare representatives in the top ten AbbVie (ABBV) [5].

Then two real estate firms placed seventh and tenth, National Retail properties, Inc. [7]. and Realty Income Corp. (O) [10]. Finally, one financial services firm placed ninth, People's United Financial, Inc. [9], to complete these November S&P HYD Aristocrats top-ten, by yield.

Source: YCharts.com

Actionable Conclusions: (21-30) Ten HYD Aristocrats Showed 11.85% To 52.85% Upsides To November 2022; (31) On The Downside Were Seven -0.37% to 5.23% 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 17.35% Advantage For 5 Highest-Yield, Lowest-Priced, of Top Ten HYD Aristocrats To November 2022

Ten top HYD 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 HYD Aristocrats selected 11/3/21 showing the highest dividend yields represented seven of eleven in the Morningstar sector scheme.

Actionable Conclusions: Analysts Estimated The 5 Lowest-Priced Of Ten Highest-Yield Dividend Aristocrats (32) Delivering 18.48% Vs. (33) 15.75% Net Gains by All Ten by November 2022

Source: YCharts.com

$5000 invested as $1k in each of the five lowest-priced stocks in the top ten HYD Aristocrats kennel by yield were predicted by analyst 1-year targets to deliver 17.35% more gain than $5,000 invested as $.5k in all ten. The third lowest-priced HYD Aristocrats top yield stock, AT&T Inc., was projected to deliver the best net gain of 33.15%.

Source: YCharts.com

The five lowest-priced top-yield HYD Aristocrats for November 3 were: People's United Financial Inc; South Jersey Industries Inc; AT&T, Inc; National Retail Properties, Inc.; Exxon Mobil Corp. (XOM), with prices ranging from $18.58 to $63.93

The five higher-priced top-yield HYD Aristocrats for November 3 were: Realty Income Corp; Consolidated Edison, Inc.; Chevron Corp.; AbbVie, Inc.; International Business Machines Corp., whose prices ranged from $72.28 to $121.43.

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, however, since analysts are historically only 20% to 90% 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 six stocks ripe for picking at the start of the article, here is a repeat of the list at the end:

In the current market adjustment, it is now possible for these six, AT&T Inc. (T), South Jersey Industries, Inc., People's United Financial, Amcor plc, Telephone and Data Systems, Inc., and Old Republic International Corp., to stay fair-priced with their annual yield (from $1K invested) meeting or exceeding their single share prices at this time.

PBCT will merge with M&T Bank toward the end of 2021 and will leave the Aristocrat ranks and its generous dividend will be absorbed by the new entity. AT&T has announced a pending dividend cut near year's end and, thereafter, will be disqualified as an HYD Aristocrat.

As we are more than one year removed from the anniversary of the 2020 Ides of March dip, the time to snap-up those four lingering top yield Aristocrat dogs is at hand... unless another big bearish drop in price looms ahead (triggered by the Fed taper transition). (At which time your strategy would be to add to your position in any of those you then hold.)

Price Drops or Dividend Increases Could Get All Ten Top Aristocrat Dogs Back to "Fair Price" Rates For Investors

Since three of the top ten HYD Aristocrats shares are now priced less than the annual dividends paid out from a $1K investment, the following charts compare those three plus seven at current prices. Notice the three top ideal dividend Aristocrats still are ideal even if their dividend payouts are halved as shown in the top chart. Fair pricing when all ten top dogs conform to the ideal is displayed in the middle chart. Finally, the dollar and percentage differences between current and fair prices are revealed in the bottom chart.

Source: YCharts.com

S&P500 HYD Aristocrats Alphabetical by Ticker Symbol

Sources: spindices.com/ycharts.com

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 art.

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This article was written by

Fredrik Arnold profile picture
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Simple, straightforward 7-step analysis that finds lucrative income stocks.
Fredrik Arnold is my pen name. In 2012 I retired from doing quality service analysis in Boston and moved to North Carolina in 2013, thence to Central Oregon in 2018. My fascination with capital preservation, long-term investments, and trading systems keeps me blogging for Seeking Alpha. My articles focus on dividend yields, analyst median 1 yr targets, free cash flow yields, and one-year total returns as stock trading indicators. These are essential tools for catching the most valuable dividend dogs. My dividend dogcatcher premium site in the Seeking Alpha Marketplace shows annual real-time trading results since 2015.
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Disclosure: I/we have a beneficial long position in the shares of T either through stock ownership, options, or other derivatives. 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.

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