The Ben Graham Formula strategy contains ultra-stable stocks that will infrequently lose money if held over a long period of time. It was developed based on a screen in Graham's book, The Intelligent Investor. For those who have read the book, it is the "Defensive Investor" screen. It selects stocks that are large in terms of sales and total assets, have a strong track record of earnings and dividend payments, have a reasonable current ratio and level of long term debt, and have a low valuation given by PE Ratios and Price to Book Value ratios. - YCharts
While 8 out of this collection of 33 Graham Dividend stocks are too pricey to justify their skinny dividends, 25 of the 33, by yield, live up to the ideal of offering annual dividends (from a $1K investment) exceeding their price per share.
This list of November Graham-Formula-derived-stocks includes two outlandish members, namely ZIM and KEN. ZIM showed an unsustainable yield of 108.27% but is included this month. KEN also showed an unsustainable yield of 35.29% but has paid its outrageous dues. Gone, however, is the saga of QIWI an unavailable yet still-listed Russian stock on the charts. Thus QIWI is a real war casualty again this month.
In the current market bounce, the dividends from $1k investments in any of the twenty-five stocks listed above, met or exceeded their single share prices as of 11/1/22.
As we are now six eight past the second anniversary of the 2020 Ides of March dip, the time to snap up some the twenty-five top-yield Graham value 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.)
To learn which of these 25 ideally-priced opportunities are "safer" to buy (namely which have ready cash to pay their dividends). Use the last bullet in the Summary above to navigate to my dividend dogcatcher follow-up article anytime after November 10 in the SA Marketplace.
Five 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 forecast for Graham-derived dividend dogs (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, created the 2022-23 data-points. Note: target prices by lone-analysts were not used. Ten probable profit-generating trades projected to November 1, 2023 were:
ZIM Integrated Shipping Services Ltd (ZIM) was projected to net $1,267.187, based on the median of target price estimates from 7 analysts, plus dividends, less broker fees. A Beta number showed this estimate subject to was not available for ZIM.
Ternium SA (TX) was projected to net $613.55, based on a median of target estimates from 12 analysts, plus dividends, less broker fees. The Beta number showed this estimate subject to risk/volatility 40% greater than the market as a whole.
Costamare Inc (CMRE) was projected to net $582.20, based on dividends, plus the median of target price estimates from 3 analysts, less broker fees. The Beta number showed this estimate subject to risk/volatility 40% over the market as a whole.
Bancolumbia SA (CIB) was projected to net $566.59 based on dividends, plus the median of target price estimates from 10 analysts, less broker fees. The Beta number showed this estimate subject to risk/volatility 24% more than the market as a whole.
Sibanye Stillwater Ltd (SBSW) netted $558.98 based on a median target price estimate from 7 analysts, plus dividends, less broker fees. The Beta number showed this estimate subject to risk/volatility 46% greater than the market as a whole.
Rio Tinto PLC (RIO) was projected to net $442.40, based on dividends, plus the median of target price estimates from 4 analysts, less broker fees. The Beta number showed this estimate subject to risk/volatility 39% less than the market as a whole.
Himax Technologies Inc (HIMX) was projected to net $421.97, based on dividends, plus the median of target price estimates from 4 analysts, less broker fees. The Beta number showed this estimate subject to risk/volatility 91% greater than the market as a whole.
Loma Negra Via Industrial Argentina SA (LOMA) was projected to net $410.53, based on the median of target price estimates from 6 analysts, plus the estimated annual dividend, less broker fees. A Beta number was not available for LOMA.
Owl Rock Capital Corp (ORCC) was projected to net $294.02, based on dividends, plus the median of target price estimates from 11 analysts, less broker fees. The Beta number showed this estimate subject to risk/volatility 10% greater than the market as a whole.
ICL Group Ltd (ICL) was projected to net $286.04, based on a median target price estimates from 5 analysts, plus dividends, less broker fees. The Beta number showed this estimate subject to risk/volatility 10% over the market as a whole.
The average net-gain in dividend and price was estimated to be 54.44% on $10k invested as $1k in each of these ten stocks. The average Beta showed these estimates subject to risk/volatility 8% under the market as a whole.
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".
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 ten Graham stocks selected 11/1/22 by yield represented five of eleven Morningstar sectors. First place was secured by the lone industrials sector representative, Jim Integrated Shipping Services Ltd.
The first of two technology members, placed third, Himex Technologies Inc , while the other placed fifth, ChipMOS TECHNOLOGIES Inc (IMOS) .
Then, mid-pack, three basic materials representatives placed fourth, sixth and eighth, Loma Negra Via Industria Argentina SA , BHP Group Ltd (BHP) , Rio Tinto PLC .
Finally, two financial services representatives placed seventh, and ninth, FS KKR Capital Corp (FSK) ,and Owl Rock Capital Corp (ORCC)  to complete this Graham Formula top ten, by yield, for November.
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.
Ten top Graham Formula stocks were culled by yield for this monthly update. Those (dividend/price) results provided by YCharts did the ranking.
As noted above, top-ten Graham Formula Dogs selected 11/1/22, showing the highest dividend yields, represented five of eleven sectors in the Morningstar scheme.
$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 25.44% LESS gain than $5,000 invested as $.5k in all ten. The seventh lowest-priced Graham top-yield stock, ZIM Integrated Shipping Ltd , was projected to deliver the best net gain of 126.72%.
The five lowest-priced top-yield Graham Formula dividend stocks for November1 were: Himax Technologies Inc; Loma Negra Via Industrials Argentina SA; Via Renewables Inc; Owl Rock Capital Corp; FS KKR Capital Corp, with prices ranging from $5.86 to $19.35
The five higher-priced top-yield Graham Formula dividend stocks for November 1 were: ChipMOS TECHNOLOGIES Inc; ZIM integrated Shipping Service; Kenyon Holdings Ltd; BHP Group Ltd; Rio Tinto PLC, whose prices ranged from $19.90 to $54.197.
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 90% accurate on the direction of change and just 0% to 15% accurate on the degree of change.
If somehow you missed the suggestion of the twenty-five stocks ripe for picking at the start of the article, here is a repeat of the list at the end:
In the current market bounce, dividends from $1K invested in the twenty-three stocks listed above met or exceeded their single share prices as of 11/1/22.
As we are eight months past the second anniversary of the 2020 Ides of March dip, the time to snap up those twenty-five 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.)
To learn which of these 25 ideally-priced opportunities are "safer" to buy (namely which have ready cash to pay their dividends). Use the last bullet in the Summary above to navigate to my dividend dogcatcher follow-up article after November 10 in the SA Marketplace.
Since all of the top-ten Graham Value Dividend shares are now priced less than the annual dividends paid out from a $1K investment, the following top chart shows the dollar and percent variants to all ten top dogs conforming to (but not exceeding) the dogcatcher ideal.
Those at recent prices are the subject of the middle chart with the break-even pricing of all ten delivered in the bottom chart.
You could look at the top 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 Graham Value Dividend dog stock purchase or sale research process. These were not recommendations.
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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.
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.
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 silhouette: Open source dog art from dividenddogcatcher.com