ET - 500 Top Dividend Dogs

2023-06-25 09:17:48 ET

Summary

• The June/July 2023 edition of Fortune Magazine revealed 500 biggest U.S. companies by revenue. To sniff out the best dividend buys, I focused on 68 industry leaders using YCharts 6/22/23 data.
• 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 0.17% to 9.71% in annual yield and ranged -48.62% to 44.50% in broker-estimated one-year price-target-upsides by YCharts 6/22/23 reckoning.
• Top-ten 2023 F500-IL boasted net gains from 22.71% to 46.99% per YCharts data.
• $5k invested in the lowest-priced five of ten top-yield F500-IL showed 18.18% more net gain than from $5k invested in all ten. Little (lower-priced) stocks grabbed the lead of this F500-IL pack by over one and three-quarter lengths into June.

Foreword

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

“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 June 22 data for the 58 dividend stocks populating those F500-IL as parsed by YCharts.

The prices of 6 of those 58 dividend selections turned the possibility of owning productive dividend shares from this collection a reality for first-time investors.

The 6 Dogcatcher ideal best to buy June stocks were: Energy Transfer LP ( ET ); Verizon Communications Inc. ( VZ ); Dow Inc. ( DOW ); Pfizer Inc. ( PFE ); Ford Motor Co. ( F ); WestRock Co. ( WRK ).

Those six 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 22.71% To 46.99% Net Gains From Ten F500-IL Dividend Stocks To June 2024

Six 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 June favorites was graded by Wall St. Wizards as 60% 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 June 2024 were:

CVS Health Corp. ( CVS ) was projected to net $469.94 based on the median of target estimates from 23 analysts, plus dividends, less broker fees. The Beta number showed this estimate subject to risk/volatility 37% less than the market as a whole.

Energy Transfer LP was projected to net $452.56, 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 73% greater than the market as a whole.

MetLife Inc. ( MET ) was projected to net $402.53, 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 7% over the market as a whole.

WestRock Co. was projected to net $353.12, based on the median of estimates from 11 analysts, plus dividends, less broker fees. The Beta number showed this estimate subject to risk/volatility 20% greater than the market as a whole.

Archer-Daniels-Midland Co. ( ADM ) was projected to net $301.21, based on dividends, plus median target price estimates from 15 analysts, less broker fees. The Beta number showed this estimate subject to risk/volatility 19% less than the market as a whole.

Verizon Communications Inc. projected to net $295.71, 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 63% less than the market as a whole.

ConocoPhillips ( COP ) was projected to net $281.57, based on dividends, plus the median of target price estimates from 25 analysts, less broker fees. The Beta number showed this estimate subject to risk/volatility 31% over the market as a whole.

Pfizer Inc. was projected to net $238.08 based on the median of target price estimates from 22 analysts, plus annual dividend, less broker fees. The Beta number showed this estimate subject to risk/volatility 36% less than the market as a whole.

Exxon Mobil Corp. ( XOM ) was projected to net $231.40, based on dividends, plus the median of target price estimates from 24 analysts, less broker fees. The Beta number showed this estimate subject to risk/volatility 9% greater than the market as a whole.

Philip Morris International ( PM ) was projected to net $227.13 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 32% less than the market as a whole.

The average net gain in dividend and price was estimated at 32.53% on $10k invested as $1k in each of these ten stocks. These gain estimates were subject to average risk/volatility 5% 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".

58 F500-IL In June Per Analyst Target Data

58 F500-IL Per June Yields

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

Top ten F500-IL by yield for June 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].

One basic materials sector member placed third, Dow Inc. [3]. Fourth place was claimed by the lone consumer defensive representative, Philip Morris International [4]

Fifth place was claimed by the technology representative, International Business Machines Corporation ( IBM ) [5]. Sixth place went to the healthcare representative, Pfizer Inc. [6].

Two consumer cyclical members took the seventh and eighth positions: Ford Motor Co. [7], and WestRock Co. [8].

In ninth place was the utilities member, Southern Company ( SO ) [9], and finally, a financial services member placed tenth, MetLife Inc. [10] to complete the top ten F500-IL for 2023 dividend pack for June.

Actionable Conclusions: (21-30) Ten Top F500-IL For June 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 19.18% Advantage For 5 Highest Yield, Lowest Priced of 10 F500-IL Dividend Stocks For June

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 6/22/23, 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 27.32% Vs. (33) 23.12% Net Gains by All Ten Come June 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 18.18% more gain than $5,000 invested as $.5k in all ten. The very lowest-priced selection, Energy Transfer LP, was projected to deliver the best net gain of 45.25%.

The five lowest-priced top-yield F500-IL for 2023 Dividend Dogs as of June 22 were: Energy transfer LP; Ford Motor Co.; WestRock Co.; Verizon Communications Inc.; Pfizer Inc., with prices ranging from $12.67 to $38.73.

Five higher-priced F500-IL for 2023 Dividend Dogs as of June 22 were: Dow Inc.; MetLife Inc.; Southern Co.; Philip Morris International Inc.; International Business Machines Corporation, whose prices ranged from $51.39 to $131.17.

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 Kiplinger, F500-IL for 2023 and focuses on the top 30. 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 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 6 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 six 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

Six of the top ten F500-IL stocks for 2023 shares 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. Six ideal fair-priced stocks plus the four 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 38%, 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 headstart with six 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.

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