Editors' Note: This article covers one or more micro-cap stocks. Please be aware of the risks associated with these stocks.
Results from David Fish's Dividend Contenders Index constituents listed as of market closing prices November 22 were compared to analyst mean target price projections one year hence. The resulting chart from that data shown below revealed Plains All American Pipeline LP (PAA) the Houston based oil & gas pipeline firm from the basic materials sector displayed a near 18% price upside to lead the index. Nine additional contender dogs showed 7.5% to 15% upsides.
The chart above used one year mean target price set by brokerage analysts multiplied by the number of shares in a $1k investment to compare nine Contenders Index stocks showing the highest upside price potential into 2014 out of 20 selected by yield. The number of analysts providing price estimates was noted after the name for each stock. Three to nine analysts were considered optimal for a valid mean target price estimate.
This article reported results for the Contenders Index as one in a series of index-specific articles devoted to dividend yield and price upside results. Seeking Alpha reader requests prompted this series reporting dividend yield plus price upside results for these stock indices: Dow 30; Russell 2000; S&P 500; S&P Aristocrats; Russell 1000; NASDAQ 100; Champions; Contenders; Challengers; Carnevale's Power 25 & Super 29 lists combined as his Solid 40.
Yield (dividend/price) dividend dog methodology was applied to this index and compared side by side with results from the Dow and analyst one year meat target price estimates. Below, the Arnold Dividend Contenders Index top dog selections for November were disclosed step by step.
Dog Metrics Ranked Dividend Contenders Index Stocks by Yield
David Fish's September Contenders list (from here) contained stocks distinguished by having paid increasing dividends for 10 to 24 years. Contenders stocks listed below were ranked by yields calculated as of November 22 to reveal the top ten. Price and dividend data was sourced from Yahoo.com.
Four of nine Yahoo Finance market sectors were represented in the top ten contenders dog list below. Top dog was the lone consumer goods stock, Vector Group Ltd. (VGR). Second dog was one of four financials firms, Senior Housing Properties Trust (SNH). The remaining financials placed seventh, ninth, & tenth: Omega Healthcare Investors (OHI); Realty Income Corp. (O); W.P. Carey Inc. (WPC). One technology firm, Communications Systems Inc. (JCS) placed eighth.
The balance of the top ten contenders were four basic materials firms: TC Pipelines LP (TCP); Kinder Morgan Energy Partners (KMP); Alliance Resource Partners LP (ARLP); Buckeye Partners LP (BPL) placed third through sixth to complete the top yielding ten contenders dog show.
Dividend vs. Price Results Compared to Dow Dogs
The graph below shows relative strengths of the top ten Dividend Contender dogs by yield as of market close 11/22/2013 compared to those of the Dow. Historic projected annual dividend history from $1000 invested in each of the ten highest yielding stocks and the total single share prices of those ten stocks created the data points shown in green for price and blue for dividend.
(click to enlarge)
Actionable Conclusion (1): Contenders Dithered & Dow Dogs Turned Bullish
Contenders top November dividend payers went one direction (down) in both dividends and price. In the past month the contenders top ten dog dividend from $10k invested as $1k in each dog dropped over 9.4% while aggregate single share price for those ten fell over 3.5%.
For the Dow dogs, meanwhile, projected annual dividend from $10k invested as $1K in each of the top ten Dow dogs dropped over 1.1% since October, while aggregate single share price jumped up nearly 5.3%. The Dow dogs overbought condition in which aggregate single share price of the ten exceeded projected annual dividend from $1k invested in each of the ten grew some. The overhang was $125 or 33% in August, and expanded to $161 or 43% for September, shrank down to $111 or 30% for October, and expanded again to $140 or 38'% as of November 14. Most of this bull rally was triggered by JPMorgan Chase & Co. (JPM) replacing Microsoft (MSFT) in the top ten Dow dogs this past month.
To quantify the top dog rankings, analyst mean price target estimates provide a "market sentiment" gauge of upside potential and was added to the simple high yield "dog" metric used to sniff out bargains.
Actionable Conclusion Too (2): Wall St. Wizards Wonk 10.8% Net Gain from Top 20 Dividend Contenders Index Dogs In 2014
Top twenty dogs from David Fish's Dividend Contenders index were graphed below to show relative strengths by dividend and price as of November 22, 2013 and those projected by analyst mean price target estimates to the same date in 2014.
A hypothetical $1000 investment in each equity was divided by the current share price to find the number of shares purchased. The shares number was then multiplied by projected annual per share dividend amounts to find the dividend return. Thereafter the analyst mean target price was used to gauge the stock price upsides and net gains including dividends less broker fees as of 2014.
Historic prices and actual dividends paid from $1000 invested in the ten highest yielding stocks and the aggregate single share prices of those twenty stocks divided by 2 created data points for 2013. Projections based on estimated increases in dividend amounts from $1000 invested in the twenty highest yielding stocks and aggregate one year analyst target share prices from Yahoo Finance divided by 2 created the 2014 data points green for price and blue for dividends.
(click to enlarge)
Yahoo projected over 6.1% lower dividend from $10K invested in this group while aggregate single share price was projected to increase over 9% in the coming year. The number of analysts contributing to the mean target price estimate for each stock was noted in the next to the last column on the charts. Three to nine analysts was considered optimal for a valid estimate.
A beta (risk) ranking for each analyst rated stock was provided in the far right column on the above chart. A beta of 1 meant the stock's price would move with the market. Less than 1 showed lower than market movement. Higher than 1 showed greater than market movement. A negative beta number indicated the degree of a stocks movement opposite of market direction.
Actionable Conclusion (3): Analysts Forecast 10 Dividend Contender Dogs to Net 10% to 21% By November 2014
Four of the top dividend yielding Contender dogs were verified as being among the ten gainers for the coming year based on analyst 1 year target prices. So this month the dog strategy as graded by Wall St. wizards is 40% accurate.
The ten probable profit generating trades revealed by Yahoo Finance for 2014 were:
(click to enlarge)
Plains All American Pipeline netted $205.02 based on dividends plus mean target price estimate from twenty-three analysts less broker fees. The Beta number showed this estimate subject to volatility 32% less than the market as a whole.
National Retail Properties (NNN) netted $182.45 based on dividends plus mean target price estimate from ten analysts less broker fees. The Beta number showed this estimate subject to volatility 64% less than the market as a whole.
W.P. Carey Inc. netted $181.02 based on dividends plus the mean of annual price estimates from three analysts less broker fees. The Beta number showed this estimate subject to volatility 29% less than the market as a whole.
Urstadt Biddle Properties (UBA) netted $173.57 based on a mean target price estimate from three analysts combined with projected annual dividend less broker fees. The Beta number showed this estimate subject to volatility 7% more than the market as a whole.
Alliance Resource Partners netted $158.49 based on dividends plus mean target price estimate from seven analysts less broker fees. The Beta number showed this estimate subject to volatility 2% less than the market as a whole.
Kinder Morgan Energy Partners netted $155.38 based on a mean target price estimate from fourteen analysts combined with projected annual dividend less broker fees. The Beta number showed this estimate subject to volatility 49% less than the market as a whole.
Enterprise Products Partners (EPD) netted $148.13 based on dividends plus the mean of annual price estimates from twenty-one analysts less broker fees. The Beta number showed this estimate subject to volatility 28% less than the market as a whole.
Realty Income Corp. netted $136.52 based on dividends plus mean target price estimate from nine analysts less broker fees. The Beta number showed this estimate subject to volatility 38% less than the market as a whole.
National Health Investors (NHI) netted $126.90 based on dividends plus mean target price estimate from three analysts less broker fees. The Beta number showed this estimate subject to volatility 16% less than the market as a whole.
PPL Corp. (PPL) netted $102.48 based on dividends plus the mean of annual price estimates from eighteen analysts less broker fees. The Beta number showed this estimate subject to volatility 81% less than the market as a whole.
The average net gain in dividend and price was over 17% on $10k invested as $1k in each of these ten dogs. This gain estimate was subject to average volatility 36% less than the market as a whole.
The above net gain estimates did not factor-in any tax problems resulting from distributions. Consult your tax advisor regarding the source and consequences of "dividends" from any investment.
The stocks listed above were suggested only as decent starting points for your index dog dividend stock purchase 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.
Disclosure: I am long GE, INTC, MCD, MSFT, PFE, T, VZ. 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. (More...)
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