NAVI - 12 Ideal Inflation-Busting October Dividend Dogs

2023-10-12 04:00:36 ET

Summary

• March-April, 2022, UBS, Kiplinger, and Barron's analysts/reporters listed five-sets of stocks sorted as: “Inflation Busters.” Those five articles revealed 48 equities, with 43 paying dividends. This 1.5-year-old-list continues to beat-back the inflation-zombie.
• Article titles were, ’24 Pricing Power Performers’ [UBS]; ‘12 REITs with Rising Dividends’ [KIP]…; 'Best Stocks for Rising Interest-Rates’ [KIP]…; ‘5 Stocks to Stave-off Sizzling Inflation”[KIP]…; ‘6 Dividend Stocks Whip Inflation…[Barron’s].’.
• October, 2023, those 48 top inflation busting-stocks ranged 0.04% to 12.12% in annual-yield and ranged -1.19% to 91.43% in one-year price-target-upsides per broker-analysts.
• Top-ten Inflation-Busting Dividend stocks boasted net-gains from 31.45% to 95.87% per YCharts forward-looking data 10/9/23.
• $5k invested in the October lowest-priced five of ten top-yield Inflation-Busters showed 6.27% more net-gain than from $5k invested in all ten. Little (lower-priced) stocks led the field by over two lengths in this inflation zombie-busting October pack.

Foreword

This article is based on five UBS, Kiplinger, and Barron's articles, aimed at finding “Inflation Busting”, stocks since 2022. The author believes these stock suggestions are prescient into the year 2024 as banks, lenders, and crypto exchanges succumb to rising Fed interest rates. The title and links to the articles follow:

24 Pricing Power Performers

"With inflation pressures surging, pricing power relative to cost exposures will be a key theme and source of [absolute outperformance] for global equity markets," writes the UBS Equity Strategy team.—by: Dan Burrows April 14, 2022

12 REITS with Rising Dividends

REIT dividends are expected to post double-digit percentage growth this year, making the yield-friendly sector all the more attractive.—by: Lisa Springer April 13, 2022

Best Stocks for Rising Interest Rates

The Federal Reserve has signaled in no uncertain terms that interest rates will head higher in 2022. Here are 8 of the best stocks for this environment. —by: Jeff Reeves April 4, 2022

5 Stocks To Stave Off Sizzling inflation

Income investors like utility stocks for their stability and generous dividends. Here are 12 top-rated ones to watch in the new year. —by: Dan Burrows February 10, 2022

6 Dividend Stocks Whip Inflation

The hot new investment theme isn’t socially nuanced crypto space finance or metaverse charging networks for virtual vehicles. It’s dividends—cash payments to shareholders.

To find more dividend growers, Barron’s used an approach inspired by the Federal Reserve’s so-called dot plot, or path of expected interest rate hikes . They screened the S&P 500 for companies that analysts predict will increase payments nicely in the years ahead. The came up with six. —By Jack Hough Updated April 24, 2022 / Original April 22, 2022

Any collection of stocks is more clearly understood when subjected to yield-based (dogcatcher) analysis, this collection of UBS, Kiplinger, and Barron's articles, aimed at identifying “Inflation-Busting”, stocks is perfect for the dogcatcher process. Below are the 48 October 9, 2023 “Zombie-Inflation-Busters” as parsed by YCharts.

The prices of 12 of these 48 made the possibility of owning productive dividend shares from this collection more viable for first-time investors.

Those 12 Dogcatcher Ideal “Inflation Busting” stocks for October are: Arbor Realty Trust Inc ( ABR ); Ares Capital Corp ( ARCC ); British American Tobacco PLC ( BTI ); AllianceBernstein Holding ( AB ); BHP Group Ltd ( BHP ); Fifth Third Bancorp ( FITB ); VICI Properties Inc ( VICI ); NexPoint Residential Trust Inc ( NXRT ); The AES Group ( AES ); Pfizer Inc ( PFE ); HP Inc ( HPQ ); Navient Corp ( NAVI ).

Those twelve all live up to the ideal of annual dividends from $1K invested exceeding their single share prices. Many investors see this condition as "look closer to maybe buy" opportunity.

In a ranking of three-year price gains of the top 30 Inflation busters by yield, four of the Ideal selections stood out: BHP Group, NexPoint Residential Trust; Pfizer Inc; British American Tobacco.

Actionable Conclusions (1-10): Analysts Estimated 31.45% To 95.87% ‘ Inflation Busting’ Dividend Top 10 Net Gains By October, 2024

Five of ten top “Inflation Buster” dividend stocks by yield were also 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, the yield-based forecast for these September dogs was graded by Wall St. Wizards as 50% accurate.

Estimated dividends from $1000 invested in each of the highest yielding ”Inflation Buster” stocks, added to the median of aggregate one-year target prices from analysts (as reported by YCharts), generated the following results. Note: one-year target prices by lone analysts were not included. Ten probable profit-generating trades projected to October 2024 were:

The AES Corp was projected to net $958.70, 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 2% greater than the market as a whole.

NexPoint Residential Trust was projected to net $586.60, based on dividends, plus the median of target price estimates from 6 analysts, less broker fees. The Beta number showed this estimate subject to risk/volatility 11% over the market as a whole.

British American Tobacco was projected to net $535.33 based on dividends, plus the median of target estimates from 2 brokers, less transaction fees. The Beta number showed this estimate subject to risk/volatility 43% less than the market as a whole.

Alexandria Real Estate Equities Inc ( ARE ) was projected to net $514.56, 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 3% under the market as a whole.

American Tower Corp ( AMT ) was projected to net $432.91, based on the median of target estimates from 16 analysts, plus dividends, less broker fees. The Beta number showed this estimate subject to risk/volatility 40% less than the market as a whole.

Hasbro Inc ( HAS ) was projected to net $421.77, based on the median of target price estimates from 11 analysts, plus dividends, less broker fees. The Beta number showed this estimate subject to risk/volatility 26% less than the market as a whole.

Pfizer Inc was projected to net $367.71, based on dividends, plus the median of target price estimates from 22 analysts, less broker fees. The Beta number showed this estimate subject to risk/volatility 39% under the market as a whole.

Fifth Third Bancorp was projected to net $341.67 based on the median of target price estimates from 21 analysts, plus annual dividend, less broker fees. The Beta number showed this estimate subject to risk/volatility 20% greater than the market as a whole.

Taiwan Semiconductor Manufacturing Co Ltd ( TSM ) was projected to net $329.86, based on dividends, plus median target price estimates from 10 analysts, less broker fees. The Beta number showed this estimate subject to risk/volatility 8% over the market as a whole.

VICI Properties Inc was projected to net $314.46, based on the median of estimates from 22 analysts, plus dividends, less broker fees. The Beta number showed this estimate subject to risk/volatility 6% less than the market as a whole.

The average net gain in dividend and price was estimated at 48.04% on $10k invested as $1k in each of these ten stocks. These gain estimates were subject to average risk/volatility 12% under 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".

48 Inflation Busters For 2023-24 Per October Analyst Target Data

48 Inflation Busters 2023-24 By October Yields

Actionable Conclusions (11-20): Ten Top Inflation Busters By Yield For October 2023-24

Top ten 2023-24 “Inflation Busting” stocks by yield in October represented five of eleven Morningstar sectors. First place went to the first of three real estate sector representatives, Arbor Realty Trust Inc [1]. The other two placed seventh, and ninth, VICI Properties Inc [7], and NexPoint Residential Trust [9].

Three slots were claimed by financial services sector members: Ares Capital Corp [2]; AllianceBernstein Holding LP [4]; Fifth Third Bancorp [6].

Two consumer defensive stocks took the third and eighth slots on this list, British America Tobacco PLC [3], and Philip Morris International Inc ( PM ) [8].

Fifth place was claimed by the single basic materials rep in the top ten,

BHP Group Ltd [5].

Finally, one utilities member placed tenth, The AES Corp [10] to complete the top ten “Inflation Busters” for 2023-24 dividend pack as of October 9.

Actionable Conclusions: (21-30) Ten Top “Inflation Buster” Dividend Payer s For 2023-24 Showed 28.70%-91.64% Upsides While (31) No Down-siders Were Recorded For October

To quantify top dog rankings, analyst median price target estimates provided a "market sentiment" gauge of upside potential. Added to the simple high-yield metrics, median analyst target price estimates became another tool to dig out bargains.

Analysts Forecast A 6.27% Advantage For 5 Highest Yield, Lowest Priced, of 10 Inflation Busting Stocks for October 2023-24

Ten top UBS, Kiplinger, and Barron's dividend selections, aimed at finding the “Inflation Busters” for 2023-24 were culled by yield 10/9/23 for this update. Yield (dividend / price) results provided by YCharts did the ranking.

As noted above, top ten UBS, Kiplinger, and Barron's dividend selections, aimed at finding the best Inflation Buster stocks, as screened 10/9/23, showing the highest dividend yields, represented five of eleven in the Morningstar sector scheme.

Actionable Conclusions: Analysts Predicted 5 Lowest-Priced Of The Top Ten Highest-Yield Inflation Buster Dividend Stocks for 2023-24 (32) Delivering 41.5% Vs. (33) 39.05% Net Gains by All Ten Come October 2024

$5000 invested as $1k in each of the five lowest-priced stocks in the top ten UBS, Kiplinger, and Barron's dividend selections, aimed at finding the “Inflation Busters” for 2022-23 by yield, were predicted, by analyst 1-year targets, to deliver 6.27% more gain than $5,000 invested as $.5k in all ten. The very lowest-priced selection, The AES Corp, was projected to deliver the best net gain of 95.87%.

The five lowest-priced top-yield UBS, Kiplinger, and Barron's dividend selections, aimed at finding “Inflation Busters” as of October 9 were: The AES Corp; Arbor Realty Trust Inc; Ares Capital Corp; Fifth Third Bancorp; VICI Properties Inc, with prices ranging from $12.68 to $29.19.

Five higher-priced UBS, Kiplinger, and Barron's dividend selections, aimed at finding “Inflation Busters” as of October 9 were: British American Tobacco PLC; AllianceBernstein Holding LP; NexPoint Residential Trust; BHP Group Ltd; Philip Morris International Inc, whose prices ranged from $30.74 to $92.31.

The distinction between five low-priced dividend dogs and the general field of ten projected Michael B. O'Higgins' "basic method" for beating the Dow. The scale of expected 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 15% to 85% accurate on the direction of change and just 0% to 15% accurate on the degree of change.

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.

Afterword

If somehow you missed the suggestion of which stocks are ripe for picking at the start of this article, here is a reprise of the list at the end:

The prices of 12 of these 48 Kiplinger, and Barron's dividend selections, as “Inflation Buster”, stocks for 2023-24 made the possibility of owning productive dividend shares from this collection more viable for first-time investors.

Those 12 Dogcatcher ideal “inflation Busting” dividend stocks for October are:

Those 12 all live up to the ideal of having their annual dividends from a $1K investment exceed their single share prices. Many investors see this condition as "look closer to maybe buy" opportunity.

In a ranking of three-year price gains of the top 30 Inflation busters by yield, four of the Ideal selections stood out: BHP Group, NexPoint Residential Trust; Pfizer Inc; British American Tobacco.

How Ten Top “Inflation Buster” 2023-24 Stocks Could Become Ideal Fair Priced Dogs

Since nine of the top-ten Kiplinger, and Barron's “Inflation Buster”, stocks for 2023 shares are now priced less than the annual dividends paid out from a $1K investment, the above charts compare those nine plus one at recent prices.

The dollar and percentage differences between recent and fair prices are detailed in the top chart. The recent prices are shown in the middle chart with the fair pricing of all ten top dogs conforming to the dogcatcher ideal are detailed in the bottom chart.

With renewed downside market pressure to 22%, it is possible for all ten highest-yield UBS, Kiplinger & Barron's Inflation Busting Dividend stocks, to become fair-priced with their annual yield (from $1K invested) meeting or exceeding their single share prices. This pack got a huge head-start with nine of ten already fair priced.

Stocks listed above were suggested only as possible reference points for your 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; Yahoo Finance - Stock Market Live, Quotes, Business & Finance News; analyst mean target price by YCharts. Dog image: Open source dog art from dividenddogcatcher.com.

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