ZIM - 48 Ideal Ben Graham Gift Dogs: March Value Buys

2023-03-14 09:50:13 ET

Summary

• “Value ranking looks at the price of a stock relative to intrinsic firm value. Graham Value Stocks match the criteria. Benjamin Graham followed. “ - YCharts Value Screener.
• 68 March Value Rank and Graham Formula results reflect established value-stock detection criteria. Of those, 48 met the dogcatcher ideal of dividends from $1K invested exceeding single-share-stock-prices.
• Representing nine-of-eleven Morningstar Sectors, all 48 pay regular dividends. Broker-target-top-ten All-Star-Value dividend-paying net gains ranged 36.74%-154.87%, topped by PACW & JOYY, as of 3/10/23.
• By yield, ZIM leads the top-ten All-Star-Value field of CIB, BSMX ORCC, PBR, ICL, PXD, HIMX, KEN, LPG & ZIM. The ten averaged 20.61% yield. All-Star-Value top-ten, by broker-target-price upsides, were CIB, IIIN, EQNR, HT, NTB, SBSW, BSET, YY, PACW, and BNRE, averaging 76.54%.
• $5k invested March 10 in the five top-yield, lowest-priced, All-Star Value stocks projected 22.29% LESS net gain than from $5k invested all top ten. Big (higher-priced) equities led the top-ten March All-Star Value-derived dividend dogs by near two and one-quarter lengths, per analyst estimates.

Foreword

About Large Cap Value

A Value ranking for large cap stocks from YCharts puts together complementary strategies found during their stock research. As a value ranking, it looks at the price of a stock relative to a number of measurements that determine intrinsic firm value. Only the largest 10% of companies based on market cap are allowed in this portfolio.

What it is: The Value Score is a composite score. It tells you how much you are getting in terms of profits, cash flows, assets, sales, etc. for the stock price that you pay. It is a relative measurement, so it says nothing about the overall level of the market. Rather, it answers the question: "Given the current market level, which stocks give you the most current value for your dollar of investment?" Tens are the most value, and 1s are the least.

How to use it: Use it to find companies that are selling at a low price relative to their assets and profits.

Limitations of the Value Score: Watch out for companies with a lot of uncertainty or bad prospects for the future (e.g., Pharma companies with expiring patents, industries on the decline, etc.).

About the Ben Graham Formula

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 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 20 out of this collection of 68 All-Star-Value Dividend stocks are too pricey to justify their skinny dividends, 48 of the 68, by yield, live up to the ideal of offering annual dividends (from a $1K investment) exceeding their price per share.

This list of March All-Star-Value stocks did NOT discard three stocks showing outlandish yield numbers, namely ZIM, KEN and PBR. Their yields were scaled back based on future performance estimates by the author.

48 Ideal Value Dogs for March

In the current market swing, the dividends from $1k investments in 48 of the 68 stocks listed above, met or exceeded their single share prices as of 3/10/23.

As we are now about at the third anniversary of the 2020 Ides of March dip, the time to snap up some the 48 top-yield All-Star-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 48 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 sometime after March 17 in the Seeking Alpha Marketplace.

Actionable Conclusions (1-10): Analysts Estimate 36.74% To 154.87% Top Ten All-Star-Value Net Gains To March 2024

Four of the ten top 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 All-Star-Value derived dividend dogs (as graded by Brokers) was 40% 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 2023-24 data-points. (Note: target prices by lone-analysts were not used. Ten probable profit-generating trades projected to March 10, 2024 were:

PacWest Bancorp ( PACW ) was projected to net $1,548.73, based on a median of target estimates from 9 analysts, plus dividends, less broker fees. The Beta number showed this estimate subject to risk/volatility 46% greater than the market as a whole.

JOYY Inc ( YY ) was projected to net $861.98, based on the median of target price estimates from 18 analysts, plus dividends, less broker fees. The Beta number showed this estimate subject to risk/volatility 46% less than the market as a whole.

Sibanye Stillwater Ltd ( SBSW ) was projected to net $655.48, based on the median of target price estimates from 6 analysts, plus the estimated annual dividend, less broker fees. The Beta number showed this estimate subject to risk/volatility 50% greater than the market as a whole.

Petróleo Brasileiro S.A. - Petrobras ( PBR ) was projected to net $465.29, based on dividends, plus the median of target price estimates from 16 analysts, less broker fees. The Beta number showed this estimate subject to risk/volatility 36% over the market as a whole.

Bancolumbia S.A. ( CIB ) was projected to net $457.52 based on dividends, plus the median of target price estimates from 12 analysts, less broker fees. The Beta number showed this estimate subject to risk/volatility 15% more than the market as a whole.

Pioneer Natural Resources ( PXD ) was projected to net $445.54, based on dividends, plus the median of target price estimates from 30 analysts, less broker fees. The Beta number showed this estimate subject to risk/volatility 41% greater than the market as a whole.

Energy Transfer LP ( ET ) netted $428.07 based on a median target price estimate from 18 analysts, plus dividends, less broker fees. The Beta number showed this estimate subject to risk/volatility 75% greater than the market as a whole.

Devon Energy Corp ( DVN ) was projected to net $399.60, based on dividends, plus the median of target price estimates from 27 analysts, less broker fees. The Beta number showed this estimate subject to risk/volatility 134% greater than the market as a whole.

ICL Group Ltd ( ICL ) was projected to net $377.01, based on dividends, plus the median of target price estimates from 5 analysts, less broker fees. The Beta number showed this estimate subject to risk/volatility 14% greater than the market as a whole.

Diamondback Energy Inc ( FANG ) was projected to net $367.44, based on a median target price estimates from 30 analysts, plus dividends, less broker fees. The Beta number showed this estimate subject to risk/volatility 104% over the market as a whole.

The average net-gain in dividend and price was estimated to be 60.07% on $10k invested as $1k in each of these ten stocks. The average Beta showed these estimates subject to risk/volatility 47% greater than 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."

Top 50 All-Star-Value Picks By Broker Targets

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 50 All-Star-Value Picks By Yield

Actionable Conclusions (11-20): Ten Top Stocks By Yield Are The March Dogs of The All-Star-Value Pack

Top ten All-Star-Value stocks selected 3/10/23 by yield represented six of eleven Morningstar sectors. First place was secured by the lone industrial member in the top ten, ZIM Integrated Shipping Services Ltd ( ZIM ).

The first of three energy sector representatives placed second, Dorian LPG Ltd ( LPG ) [2] and the others placed fifth and seventh, Pioneer Natural Resources Co [5], Petroleo Brasileiro SA Petrobras [7].

The lone technology member, placed fourth, Himax Technologies Inc ( HIMX ) [4]. Then, one basic materials representative placed sixth, ICL Group Ltd [6].

Finally, three financial services representatives placed eighth, through tenth, Owl Rock Capital Corp ( ORCC ) [8], Banco Santander Mexico SA ( BSMX ) [9], and BanColumbia SA [10], to complete this All-Star-Value top ten, by yield, for March.

Actionable Conclusions: (21-30) Ten All-Star-Value Dividend Stocks Showed 25.54% To 147.77% Upsides To March, 2024, With (31) One -5.49% Loser

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.

Analysts Estimated A 22.29% Disadvantage For 5 Highest Yield, Lowest Priced of Top-Ten All-Star-Value Dogs To March 2024

Ten top All-Star-Value stocks were culled by yield for this monthly update. Those (dividend/price) results provided by YCharts did the ranking.

As noted above, top-ten All-Star-Value Dogs selected 3/10/23, showing the highest dividend yields, represented six of eleven sectors in the Morningstar scheme.

Actionable Conclusions: Analysts Estimated The 5 Lowest-Priced Of Ten Highest-Yield All-Star-Value Dividend Stocks (33) Delivering 28.14% Vs. (34) 36.21% Net Gains by All Ten by March, 2024

$5000 invested as $1k in each of the five lowest-priced stocks in the top ten All-Star-Value dividend pack, by yield, were predicted by analyst 1-year targets to deliver 22.29% LESS gain than $5,000 invested as $.5k in all ten. The sixth lowest-priced All-Star-Value top-yield stock, ZIM Integrated Shipping Service Ltd, was projected to deliver the best net gain of 78.31%.

The five lowest-priced top-yield All-Star-Value dividend stocks for March 10 were: Banco Santander Mexico SA; ICL Group Ltd; Himax Technologies Inc; Petrol Brasileiro SA; Owl Rock Capital Corp, with prices ranging from $6.56 to $12.18

The five higher-priced top-yield All-Star-Value dividend stocks for January 9 were: ZIM Integrated Shipping Service Ltd; Dorian LPG Ltd; BanColumbia SA; Kenon Holdings Ltd ( KEN ); Pioneer Natural Resources Co, whose prices ranged from $19.57 to $198.78.

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 85% accurate on the direction of change and just 0% to 15% accurate on the degree of change.

Afterword

If somehow you missed the suggestion of the forty-eight 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 forty-eight stocks listed above met or exceeded their single share prices as of 3/10/23.

As we are nearly three years past the 2020 Ides of March dip, the time to snap up some top-yield All-Star-Value 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 48 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 sometime after March 17 in the SA Marketplace.

Recent vs Break-Even Top Ten All-Star-Value Stock Prices

Since nine of the top-ten All-Star-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 is delivered in the bottom chart.

You could look at the top chart as an indicator of how high each stock might rise or fall in the coming year or two. However, it also shows how much the price must rise or fall (in either dollars or percentage) before it exactly conforms the standard of dividends from $1K invested equaling the current single share price.

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 All-Star-Value Dividend dog stock 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; finance.yahoo.com; analyst mean target price by YCharts. Dog silhouette: O pen source dog art from dividenddogcatcher.com

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