ET - 4 Ideal Fortune 500 Top September Dividend Dogs

2023-09-11 03:33:52 ET

Summary

• A Summer 2023 edition of Fortune Magazine revealed 500 biggest U.S. companies by revenue. The quest to sniff-out the best dividend buys focused on 68 industry leaders using YCharts 9/7/23.
• Those 68 industry leaders were segmented into 21 business sectors ranging (alphabetically) from apparel to transportation.
• 58 dividend yielding stocks highlighted those 68 industry leaders and ranged 0.15% to 9.05% in annual yield and ranged -65.47% to 45.11% in broker-estimated one-year price-target-upsides by YCharts 9/7/23 reckoning.
• Top-ten 2023 F500-IL boasted net gains from 14.87% to 39.27% per YChart data.
• $5k invested in the lowest-priced five of ten top-yield F500-IL showed 45.63% more net gain than from $5k invested in all ten. Little (lower-priced) stocks extended their lead of this F500-IL pack to over four and one-half lengths through September.

Foreword

This article is based on Fortune magazine’s 2023 survey of 500 Largest U.S. Corporations (F500-IL) (Subscription needed).

“Size matters: the 50 largest companies on this year’s list accounted for 49% of total Fortune 500 revenue and 45% of earnings.“ This article covers those 50 and 18 more as industry leaders.

Any collection of stocks is more clearly understood when subjected to yield-based (dog catcher) analysis, this collection of F500-IL for 2023 is perfect for the dogcatcher process. Below are the September 7 data for the 58 dividend stocks populating those F500-IL as parsed by YCharts.

The prices of 4 of those 58 dividend selections made the possibility of owning productive dividend shares from this collection a reality for first-time investors.

The 4 Dogcatcher ideal best to buy July stocks were: Energy Transfer LP ( ET ); Verizon Communications Inc. ( VZ ); Ford Motor Co. ( F ); Pfizer Inc. ( PFE ).

Those four 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.

Actionable Conclusions (1-10): Analysts Estimated 23.55% To 43.39% Net Gains From Ten F500-IL Dividend Stocks To September 2024

Five of ten top F500-IL 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 favorites was graded by Wall St. Wizards as 50% accurate.

Estimated dividends from $1000 invested in each of the highest yielding F500-IL stocks, added to the median of aggregate one-year target prices from analysts (as reported by YCharts), generated the following list. (Note that one-year target prices by lone-analysts were not included.) Thus, ten probable profit-generating trades projected to September 2024 were:

CVS Health Corp. ( CVS ) was projected to net $433.91 based on the median of target estimates from 24 analysts, plus dividends, less broker fees. The Beta number showed this estimate subject to risk/volatility 63% less than the market as a whole.

Energy Transfer LP was projected to net $343.27, based on the median of target price estimates from 16 analysts, plus dividends, less broker fees. The Beta number showed this estimate subject to risk/volatility 70% greater than the market as a whole.

Pfizer Inc. was projected to net $324.26 based on the median of target price estimates from 23 analysts, plus annual dividend, less broker fees. The Beta number showed this estimate subject to risk/volatility 40% less than the market as a whole.

Ford Motor Co. was projected to net $311.10, 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 15% greater than the market as a whole.

Verizon Communications Inc. was projected to net $288.73, based on dividends, plus the median of target price estimates from 23 analysts, less broker fees. The Beta number showed this estimate subject to risk/volatility 64% less than the market as a whole.

Omnicom Group ( OMC ) was projected to net $264.36, based on the median of estimates from 11 analysts, plus dividends, less broker fees. The Beta number showed this estimate subject to risk/volatility 15% less than the market as a whole.

Philip Morris International ( PM ) was projected to net $256.98 based on dividends, plus the median of target estimates from 18 brokers, less transaction fees. The Beta number showed this estimate subject to risk/volatility 39% less than the market as a whole.

Archer-Daniels-Midland Co. ( ADM ) was projected to net $246.82, based on dividends, plus median target price estimates from 15 analysts, less broker fees. The Beta number showed this estimate subject to risk/volatility 17% less than the market as a whole.

Sysco Corp. ( SYY ) was projected to net $240.70, based on dividends, plus the median of target price estimates from 13 analysts, less broker fees. The Beta number showed this estimate subject to risk/volatility 12% over the market as a whole.

MetLife Inc. (MET) was projected to net $235.46, based on dividends, plus the median of target price estimates from 14 analysts, 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 at 29.46% on $10k invested as $1k in each of these ten stocks. These gain estimates were subject to average risk/volatility 15% 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".

65 F500-IL In September Per Analyst Target Data

65 F500-IL Per September Yields

Actionable Conclusions (11-20): Ten Top F500-IL By Yield For September

Top ten F500-IL by yield for September represented nine of eleven Morningstar sectors. First place was held by the lone energy representative, Energy Transfer LP ([1]. A communication services member placed second, Verizon Communications Inc. [2].

Third place was claimed by the lone consumer defensive representative, Philip Morris International [3]. One basic materials sector member placed fourth, Dow Inc. ( DOW ) [4].

A consumer cyclical member took the fifth position, Ford Motor Co. [5]. Sixth place went to the healthcare representative, Pfizer Inc. [6].

Seventh place was claimed by the technology representative, International Business Machines Corporation ( IBM ) [7]. In eighth place was the utilities member, Southern Company ( SO ) [8].

Finally, two industrials members placed ninth and tenth, ManpowerGroup Inc. ( MAN ) [9] and United Parcel Service ( UPS ) [10], to complete the top ten F500-IL of 2023 dividend pack for September.

Actionable Conclusions: (21-30) Ten Top F500-IL For September Showed 20.4% to 44.5% Upsides While (31) One Down-sider Sagged -0.56%

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 27.66% Advantage For 5 Highest Yield, Lowest Priced, of 10 F500-IL Dividend Stocks For September

Ten top Kiplinger dividend F500-IL yield (dividend / price) results provided by YCharts produced the following ranking.

As noted above, top ten Kiplinger, F500-IL stocks for 2023 screened 9/7/23, showing the highest dividend yields, represented nine of eleven in the Morningstar sector scheme.

Actionable Conclusions: Analysts Predicted 5 Lowest-Priced Of The Top Ten Highest-Yield F500-IL for 2023 (32) Delivering 27.18% Vs. (33) 21.29% Net Gains by All Ten Come September 2024

$5000 invested as $1k in each of the five lowest-priced stocks in the top ten F500-IL for 2023 by yield were predicted by analyst 1-year targets to deliver 27.66% more gain than $5,000 invested as $.5k in all ten. The second lowest-priced selection, Energy Transfer LP, was projected to deliver the best net gain of 34.33%.

The five lowest-priced top-yield F500-IL for 2023 Dividend Dogs as of September 7 were: Ford Motor Co.; Energy Transfer LP; Verizon Communications Inc.; Pfizer Inc.; Dow Inc., with prices ranging from $11.96 to $54.10.

Five higher-priced F500-IL for 2023 Dividend Dogs as of September 7 were: Southern Co.; ManpowerGroup Inc.; Philip Morris International Inc.; International Business Machines Corporation; United Parcel Service Inc., whose prices ranged from $67.11 to $162.24.

The 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 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

This article features Forune500-Industry-Leaders for 2023 and focuses on the top 30 for September. Therefore, near half the original list of 58 dividend paying companies is neglected. To remedy this condition, the following is provided

A Complete List of 68 Fortune 500 Industry Leaders for 2023

(Stocks are grouped alphabetically by ticker, in ascending order.) The bluish-greenish tinted stocks are Sector Leaders.

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 4 of these 68 F500-IL for 2023 made the possibility of owning productive dividend shares from this collection more viable for first-time investors.

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

How All Ten Top F500-IL For 2023 Stocks Could Become Ideal Fair Priced Dogs

Four of the top ten F500-IL stocks for 2023 are recently priced less than the annual dividends paid out from a $1K investment. The dollar and percentage differences between recent and fair prices are detailed in the top chart. Four ideal fair-priced stocks plus the six at current prices are shown in the middle chart. Finally, the fair pricing of all ten top dogs conforming to that ideal are the subject of the bottom chart.

With renewed downside market pressure to 50.41%, it is possible for all ten highest-yield F500-IL for 2023 stocks, to become fair-priced with their annual yield (from $1K invested) meeting or exceeding their single share prices. This pack got a nice head-start with four 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.

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 Thomson/First Call in YahooFinance. Dog image:Open source dog art from dividenddogcatcher.com.

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