At year end, Bloomberg Business Week features a list of 50 to 100 news and noteworthy stocks for the upcoming year. The 2019 list caught my dogcatcher eye because so many were dividend payers. Yet Bloomberg editors failed to include dividends as significant data in that article.
Lately readers and other contributors have questioned the intent, purpose, validity, and usefulness of my various stock lists. Here’s a case where a grevious omission in a current business publication can be noted and called out in this plucky and audacious on-line format.
Best, however are my articles such as this that are able to note significant dividend investment opportunities ignored by the mainstream media. While Bloomberg cites foreign exchange tickers in their article, I have taken the liberty of applying only the ticker symbols compatible with those available from Seeking Alpha.
Below are the top ten best gainers now revealed among 50 tangible results found in the November 19-January 6 special Issue “2019, The Year Ahead” by Bloomberg Businessweek.
Actionable Conclusions (1-10): Analysts Predicted 28.78% To 61.75% Net Gains For 10 Watchlist 2019 Stocks
Five of 10 top dividend-yielding Bloomberg watchlist stocks were verified as being among the top 10 gainers for the coming year based on analyst one-year targets. (They are tinted gray in the chart above). Thus, the yield-based forecast for the watchlist stocks, as graded by Wall St. wizards, was 50% accurate.
The following probable profit-generating trades were identified by projections based on estimated dividend returns from $1k invested in each of the 30 highest yielding stocks. That dividend and their aggregate one-year analyst median target prices, as reported by YCharts, created the 2018-19 data points.
Note: one-year target prices by a lone analyst were not applied. Ten probable profit-generating trades projected to November 22, 2019 were:
Marathon Petroleum Corp (MPC) netted $617.49 based on dividends plus a median target price estimate from seventeen analysts less broker fees. The Beta number showed this estimate subject to volatility 50% more than the market as a whole.
Energy Transfer LP (ET) was projected to net $605.80, based on a median of target estimates from seventeen analysts, plus annual dividend, less broker fees. The Beta number showed this estimate subject to volatility 90% more than the market as a whole.
Synchrony Financial (SYF) was projected to net $483.11, based on dividends plus the median target price estimate from twenty-four analysts, less broker fees. The Beta number showed this estimate subject to volatility 5% above the market as a whole.
Vodafone Group PLC (VOD) was projected to net $472.59, based on target price estimates from three analysts, plus annual dividends, less broker fees. The Beta number showed this estimate subject to volatility 11% less than the market as a whole.
WPP Plc (WPP) was projected to net $418.21, based on dividends, plus a median target price estimate from two analysts, less broker fees. The Beta number showed this estimate subject to volatility 32% over the market as a whole.
Prudential PLC (PRU) was projected to net $327.73, based on a median target price estimate from eighteen analysts, plus dividends, less broker fees. The Beta number showed this estimate subject to volatility 40% above the market as a whole.
Gilead Sciences Inc. (GILD) was projected to net $324.73, based on a median of target price estimates from twenty-six analysts, plus the projected annual dividend, less broker fees. The Beta number showed this estimate subject to volatility 1% more than the market as a whole.
L Brands, Inc. Inc (LB) netted $297.46 based on the median target price estimate from twenty-nine analysts, plus dividends, less broker fees. The Beta number showed this estimate subject to volatility 67% under the market as a whole.
Barclays PLC [BCS] was projected to net $295.48, based on a median target price from two analysts plus next year’s dividends, less broker fees. The Beta number showed this estimate subject to volatility 93% under the market as a whole.
Osram Licht AG (OTCPK:OSAGF) was projected to net $287.84, based on an estimated target price based on past performance, plus dividends, less broker fees. The Beta number showed this estimate subject to volatility 10% less than the market as a whole.
Average net gain in dividend and price was estimated at 41.3% on $10k invested as $1k in each of these ten stocks. This gain estimate was subject to average volatility 4% over the market as a whole.
Actionable Conclusions (11-12): (Bear Alerts) Analysts Anticipated Two 2019 Watchlist Dogs To Lose 23.8% & 25.7% By November, 2019
The two probable losing trades revealed by YCharts were:
Hammerson PLC (OTCPK:HMSNF) projected a loss of $238.18 based on dividend and a projected target price estimate based on the past year decline, including $10 of broker fees. The Beta number showed this estimate subject to volatility 87% less than the market as a whole
Centrica PLC (OTCPK:CPYYY) cast a loss of $256.78.35 based on dividend and a projected target price estimate based on the past year decline, including $10 of broker fees. No Beta number was available for CPYYY.
Average net loss in dividend and price was estimated at 24.75% on $2k invested as $1k in each of these two stocks. This gain estimate was subject to average volatility 87% under the market as a whole.
The Dividend Dogs Rule
The “dog” moniker was earned by stocks exhibiting three traits: (1) paying reliable, repeating dividends, (2) their prices fell to where (3) yield (dividend/price) grew higher than their peers. So, the highest yielding stocks in any collection have become affectionately known as “dogs.” More precisely, these are, in fact, best called, “underdogs.”
50 For the Money
Yield (dividend/price) results from YCharts.com verified by Yahoo Finance for Bloomberg 2019 Watchlist stocks as of market closing prices 11/22/18 for 50 equities revealed the actionable conclusions discussed below.
See any Dow 30 article for an explanation of the term “dogs” for stocks reported based on Michael B. O’Higgins book “Beating The Dow” (HarperCollins, 1991), now named Dogs of the Dow. O’Higgins’ system works to find bargains in any collection of dividend paying stocks. Utilizing analysts’ price upside estimates expanded the stock universe to include popular growth equities, as desired.
Actionable Conclusions (13-22): Bloomberg 2019 Watchlist Top Equity, By Yield, Vodafone Group PLC (VOD), Led 50 For 2019
The Bloomberg 2019 Watchlist 50 sorted by yield calculated as of market close 11/22/18 included 10 of 11 Morningstar sectors. Basic materials was not included.
Of the leading ten by yield, the top follower mention was a Communication Services firm, Vodafone Group PLC (VOD) , followed by a Utilities firm, Centrica PLC (OTCPK:CPYYY) . An Energy firm placed third by yield, Energy Transfer (ET) .
In fourth though eighth and tenth places were a bevy of five consumer cyclical representative firms, L Brands, Inc. (LB) , WPP Plc (WPP) , Ford Motor Co (F) , ITV Plc (OTCPK:ITVPY) , and Harley-Davidson Inc. (HOG) 10]. (Truly a consumer cyclical!)
Actionable Conclusions: (23-32) Top 10 2019 Watchlist Stocks By Price Upsides Showed 25.26% To 59.88% Gains To November 2019; (33) Three Downsiders Dropped -5.56% To -33.02%.
To quantify top dog rankings, analysts’ mean price target estimates provided a “market sentiment” gauge of upside potential. Added to the simple high-yield metrics, analysts’ median price target estimates became another tool to dig out bargains.
Analyst Targets Predicted A 35.46% Disdvantage For 5 Highest Yield, Lowest Priced 2019 Watchlist Stocks To November 2019
10 top 2019 Watchlist stocks were culled by yield. Dividend/price results verified by YCharts did the ranking.
As noted above, top 10 Watchlist 2019 Stocks selected 11/22/18 showing the highest dividend yields represented the communication services (1), utilities (2), energy (3), financial services (4), and consumer cyclical (5) sectors.
Actionable Conclusions: Analysts Expected 5 Lowest-Priced of the Top 10 Highest-Yield 2019 Bloomberg Watchlist Dogs To (34) Deliver 15.53% Vs. (35) 29.03% Net Gains by All 10 To November 2019
$5k invested as $1k in each of the five lowest-priced stocks in the top 10 Bloomberg 2019 Watchlist kennel by yield were predicted by analyst one-year targets to deliver 35.46% more net gain than $5k invested in all 10. The third lowest priced Watchlist top yield stock, Energy Transfer LP (ET), was projected to deliver the best net gain of 60.58%.
The five lowest-priced Bloomberg 2019 Watchlist top yield dogs for November 22 were: Centrica PLC (OTCPK:CPYYY); Ford Motor Co (F), Energy Transfer LP (ET), Manulife Financial Corporation (MFC); ITV Plc (OTCPK:ITVPY), with prices ranging from $7.47 to $19.06 per share.
Five higher-priced Bloomberg 2019 Watchlist for November 22 were: Vodafone Group PLC (VOD), L Brands, Inc. (LB), Harley-Davidson Inc. (HOG), WPP Plc (WPP), and Prudential PLC (PRU), whose prices ranged from $19.79 to $90.00.
The distinction between five low-priced dividend dogs and the general field of 10 reflected Michael B. O’Higgins’ “basic method” for beating the Dow. The scale of projected gains based on analysts’ 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.
See my instablog for specific instructions about how to best apply the dividend dog data featured in this article, this glossary instablog to interpret my abbreviated headings, and this instablog to aid your safe investing. – Fredrik Arnold
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 FoFave 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 Thomson/First Call in YahooFinance. Dog photo: invoiceberry.com
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Disclosure: I am/we are long GE.
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.
Editor’s Note: This article discusses one or more securities that do not trade on a major U.S. exchange. Please be aware of the risks associated with these stocks.