3 September Dividend Kings To Buy

Sep. 27, 2022 4:40 PM ETABM, BKH, CINF, EMR, FRT, KMB, LEG, LOW, MMM, MO, NFG, NWN, PH, PPG, SWK, SWT, UVV2 Comments

Summary

  • "There is only one criterion to be included among the Dividend Kings: a publicly-traded company must increase its total fiscal-year dividend-payout for a minimum of 50 consecutive-years."--Dogs of the Dow.
  • The 38 Dividend Kings and 5 Princes (next in line for kingship) (K&P) screened as of September 23, 2022, represented ten of eleven Morningstar Sectors. Broker targeted-top-ten net-gainers ranged 27.98%-52.63%.
  • By yield, MO tops-all. Top-ten K&P September Yields from CINF, BKH, SWK, KMB, NWN, FRT, MMM, LEG, UVV, & MO averaged 4.92%.
  • K&P top ten, by broker estimated target-price upsides, NFG, LOW, MSA, FRT, PH, SCL, EMR, SWK, TNC, and ABM, averaged 39.44%.
  • $5k invested September 23 in the five top-yield, lowest-priced, K&P's showed 23.61% LESS net-gain than from $5k invested in all top ten. Bigger (higher-priced) equities led these Dividend K&Ps by over two and one third lengths.
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Lovely smiling welsh corgi Pembroke dog in crown decorated with precious stones and in red royal mantle with fur, front view, isolated on white background. Noble breed for kings

Ирина Мещерякова/iStock via Getty Images

Foreword

As supplement to this article, please note that Dogs of the Dow has published a 2022 list detailing the latest 38 Dividend Kings and 5 Princes. The article, entitled 2022 Dividend Kings List, is online now.

While most of this collection of 43 K&Ps is too pricey to justify their skinny dividends, three of the top-ten, by yield, live up to the ideal of offering annual dividends (from a $1K investment) exceeding their single share prices, and this month there is one more to watch.

In the current market adjustment, it is now possible for Altria Group Inc (MO), Universal Corp (UVV), and Leggett & Platt Inc (LEG), to stay fair-priced with their annual yield (from $1K invested) meeting or exceeding their single share prices at this time. The one to watch is Northwest Natural Holding Co (NWN), which needs to drop less than $3 in price, or 6.27%, to join the ideal trio and make it a quartet.

As we are over two-years and six months removed from the anniversary of the 2020 Ides of March dip, the time to snap-up those three lingering top yield Royal dogs is at hand... unless another big bearish drop in price looms ahead. (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 27.98% To 52.63% Top-Ten K&P Net Gains To September, 2023

Four of the ten top K&Ps 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 July 22 forecast for K&Ps (as graded by Brokers) was 40% accurate.

Estimated dividend returns from $1000 invested in each of these highest-yielding stocks and their aggregate one-year analyst median target prices, as reported by YCharts, produced the 2022-23 data points for the projections below. Note: target prices from lone-analysts were not used. Ten probable profit-generating trades projected to September 23, 2023 were:

K&P (1A) 10GAINERS SEP22-23

Source: YCharts.com

ABM Industries (ABM) was projected to net $526.34, based on a median of target estimates from 5 analysts, plus dividends, less broker fees. The Beta number showed this estimate subject to risk/volatility 4% greater than the market as a whole.

Stanley Black & Decker Inc (SWK) netted $520.75 based on a median target price estimate from 15 analysts, plus dividends, less broker fees. The Beta number showed this estimate subject to risk/volatility 28% more than the market as a whole.

Emerson Electric Co (EMR) was projected to net $419.58 based on dividends, plus the median of target price estimates from 24 analysts, less broker fees. The Beta number showed this estimate subject to risk/volatility 42% greater than the market as a whole.

Parker Hannifin Corp (PH) was projected to net $390.98, based on the median of target price estimates from 17 analysts, plus dividends, less broker fees. The Beta number showed this estimate subject to risk/volatility 57% more than the market as a whole.

Federal Realty Investment Trust (FRT) was projected to net $382.64, based on dividends, plus the median of target price estimates from 19 analysts, less broker fees. The Beta number showed this estimate subject to risk/volatility 13% greater than the market as a whole.

National Fuel Gas Co (NFG) was projected to net $320.72, based on dividends, plus the median of target price estimates from 5 analysts, less broker fees. The Beta number showed this estimate subject to risk/volatility 32% less than the market as a whole.

Lowe's Companies Inc (LOW) was projected to net $315.65, based on the median of target price estimates from 26 analysts, plus the estimated annual dividend, less broker fees. The Beta number showed this estimate subject to risk/volatility 23% more than the market as a whole.

3M Co (MMM) was projected to net $312.72, based on the median of target price estimates from 19 analysts, plus dividends, less broker fees. The Beta number showed this estimate subject to risk/volatility equal to the market as a whole.

PPG Industries Inc (PPG) was projected to net $310.18, based on dividends, plus the median of target price estimates from 21 analysts, less broker fees. The Beta number showed this estimate subject to risk/volatility 18% greater than the market as a whole.

Altria Group Inc was projected to net $279.82 based on target price estimates from 17 analysts, plus annual dividend, less broker fees. The Beta number showed this estimate is subject to risk/volatility 41% less than the market as a whole.

The average net gain in dividend and price was estimated to be 37.79% on $10k invested as $1k in each of these ten stocks. The average Beta ranking showed these estimates subject to risk/volatility 11% greater than the market as a whole.

K&P (2) KPDOG SEP/22 Open source dog art (5) from dividenddogcatcher.com

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," even if they are "Kings" and "Princes."

Top 50 Dividend K&Ps By Broker Targets

K&P (3A) 43BYTGT 1-43SEP22-23

Source: dogsofthedow.com/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 Dividend K&Ps By Yield

K&P (3B) 43BYYIELD 1-43 SEP, 22-23

Source: dogsofthedow.com/YCharts.com

Actionable Conclusions (11-20): Ten Top Stocks By Yield Are The September Dogs of The Kings & Princes

Top ten K&Ps selected 9/23/22 by yield represented six of eleven Morningstar sectors. In first place was Altria Group Inc. [1], the tops of three consumer defensive representatives listed. The other two placed second, and eighth, Universal Corp [2], Kimberly-Clark Corp (KMB) [8].

Then the first of two industrials sector representatives placed third, 3M Co [3]. The other industrial placed seventh, Stanley Black & Decker [7].

The lone consumer cyclical representative took the fourth place, Leggett & Platt Inc [4]. In fifth place, was the lone real estate representative, Federal Realty Investment Trust [5].

Then. sixth place was claimed by the first of two utilities, Northwest Natural Holding Co [6], and ninth place went to, Black Hills Corp (BKH) [9].

Finally, to complete these September K&P top-ten, by yield, was the tenth pace finisher from the financial services sector, Cincinnati Financial Corp (CINF) [10].

K&P (4) UP/DNSIDES SEP 22-23

Source: YCharts.com

Actionable Conclusions: (21-30) Ten K&P's Showed 24.5% To 51.6% Upsides Into September 2023; (31) On The Downside Were Two -0.42% & -2.71% 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 An 23.6% Disadvantage For 5 Highest Yield, Lowest Priced, of Top-Ten Dividend K&Ps To September , 2023

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

K&P (5)10LIST SEP22-23

Source: YCharts.com

As noted above, top ten K&Ps selected 9/23/22 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 K&Ps (32) Delivering 19.2% Vs. (33) 25.13% Net Gains by All Ten by September, 2023

K&P (6) 10GAINS SEP, 22-23

Source: YCharts.com

$5000 invested as $1k in each of the five lowest-priced stocks in the top ten Dividend K&Ps kennel by yield were predicted by analyst 1-year targets to deliver 23.6% LESS gain than $5,000 invested as $.5k in all ten. The sixth lowest-priced K&Ps top-yield stock, Stanley Black & Decker Inc was projected to deliver the best net gain of 52.08%.

K&P (7)10BYPRICE SEP, 22-23

Source: YCharts.com

The five lowest-priced top-yield Dividend Kings and Princes as of September 23 were: Leggett & Platt Inc; Altria Group Inc; Northwest Natural Holding Co; Universal Corp; Black Hills Corp, with prices ranging from $34.08 to $73.28

The five higher-priced top-yield Dividend Kings and Princes for September 23 were: Stanley Black & Decker Inc; Federal Realty Investment Trust; Cincinnati Financial Corp; 3M Co; Kimberly-Clark Corp, whose prices ranged from $78.98 to $120.29.

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 15% accurate on the degree of change.

Afterword

If somehow you missed the suggestion of the three stocks ripe for picking at the start of the article, here is a repeat of the list at the end:

The following 3 (as of 9/23/22) realized the dogcatcher ideal of offering annual dividends from a $1K investment exceeding their single share prices: Altria Group Inc, Universal Corp, and Leggett & Platt Inc. A fourth bears watching, Northwest Natural Holding Co, whose price is less than $3 away from being ideal.

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

K&P (8)RecentVSFairPrices SEP22-23

Source: YCharts.com

Since three of the top ten Dividend K&P shares are now priced less than the annual dividends paid out from a $1K investment, the top chart below shows the dollar and percentage differences between recent and fair prices. Note that NWN was just $2.94 over the mark, and SWK, FRT, & BKH, are all within $30 of being there. The middle chart compares the three ideals with seven at recent prices. Fair pricing (when all ten top dogs conform to the ideal) is displayed in the bottom chart.

Dividend Kings and Princes Alphabetical by Ticker Symbol

K&P (9) AlphaListByTicker SEP, 22-23

Source: 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: Open-source dog art from dividenddogcatcher.com.

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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.

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.

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