Actionable Conclusions (1-10): Brokers Calculated Top Ten Healthcare “Safer” Dividend Dog Stocks to Net 1.04% to 16.2% Gains To October, 2018
Eight of ten top ‘safer’ dividend Healthcare dogs by yield (shaded in the chart above) were verified as being among the top ten gainers for the coming year. Thus, based on analyst 1 year target prices, the dog strategy for this Health group graded out as 80% accurate for October.
Ten probable profit generating trades were produced by YCharts analytics for 2018:
GlaxoSmithKline (GSK) netted $162.29 based on estimates from six analysts, plus dividends less broker fees. The Beta number showed this estimate subject to volatility 4% more than the market as a whole.
Merck & Co (MRK) netted $104.47 based on estimates from twenty-two analysts plus dividends less broker fees. The Beta number showed this estimate subject to volatility 20% less than the market as a whole.
HealthSouth (HLS) netted $101.60 based on a median target from twelve analysts, plus dividends, less broker fees. The Beta number showed this estimate subject to volatility 40% less than the market as a whole.
Pfizer (PFE) netted $63.65 based on dividends plus median target price estimate from twenty-three analysts less broker fees. The Beta number showed this estimate subject to volatility 2% over the market as a whole.
Medical Facilities (OTCPK:MFCSF) netted $54.83 based on no target price estimate from analysts , just projected annual dividend less broker fees. The Beta number showed this estimate subject to volatility 38% less than the market as a whole.
Life Healthcare Group (OTCPK:LTGHY) netted $41.91 based just on dividends less broker fees. The Beta number showed this estimate subject to volatility 16% less than the market as a whole.
National Research (NRCIB) netted $25.08 based on dividends less broker fees. The Beta number showed this estimate subject to volatility 96% less than the market as a whole.
AbbVie (ABBV) netted $18.49, based on median target estimates from ten analysts plus dividends less broker fees. The Beta number showed this estimate subject to volatility 54% more than the market as a whole
Johnson & Johnson (JNJ) netted $16.87 based on estimates from twenty-four analysts, plus dividends less broker fees. The Beta number showed this estimate subject to volatility 22% less than the market as a whole.
National Healthcare (NHC) netted $10.43 based on mean target price estimates from no analysts, just dividends less broker fees. The Beta number showed this estimate subject to volatility 63% less than the market as a whole.
Average net gain in dividend and price was 5.99% on $10k invested as $1k in each of these ten Healthcare “safer” dividend dog stocks. This gain estimate was subject to average volatility 23% less than 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. Thus, the highest yielding stocks in any collection became known as “dogs.” More specifically, these are, in fact, best called, “underdogs”.
Which Industries Put ‘Safer’ Dividend Dogs In The Healthcare Sector?
Five of ten healthcare industries composing the sector, were represented by the 16 firms whose stocks showed margins of cash to cover dividends by this screen as of October 13.
The industry representation broke-out, thus: Medical Care (4); Drug Manufacturers – Major (9); Diagnostics & Research (1); Long-Term Care Facilities (1); Medical Instruments & Supplies (1); Biotechnology (0); Drug Manufacturers – Specialty & Generic (0); Healthcare Plans (0); Medical Devices (0); Medical Distribution (0).
The first five industries listed above populated the top ten of the healthcare ‘safe’ sector by yield.
16 of 61 Healthcare Firms Offer “Safer” Dividends
Periodic Safety Inspection
A previous article discussed the attributes of the 50 Top yield Healthcare stocks culled from this master list of 61.
You see grouped below the green tinted list of 16 that passed the Healthcare dog “safer” check with positive past-year returns and cash flow yield sufficient to cover their anticipated annual dividend yield. The margin of cash excess is shown in the bold face “Safety Margin”column.
Financial guarantees, however, are easily over-ruled by boards of directors or company policies cancelling or varying the payout of dividends to shareholders. For example, Pfizer (NYSE:PFE) on the list below cut their dividend in half in 2009, due to economic conditions, despite strong cash flow.
Three additional columns of financial data, listed after the Safety Margin figures above, reveal payout ratios (lower is better), total annual returns, and dividend growth levels for each stock. This data is provided to reach beyond yield to select reliable payout stocks.
Limiting candidates to only those with positive total annual returns, for example, narrowed the 61 dogs list to 29 for this article. Positive results in all five columns after the dividend ratio is remarkable as a solid financial signal.
To quantify top dog rankings, analyst mean price target estimates provide a “market sentiment” gauge of upside potential. Added to the simple high yield “dog” metric, analyst mean price target estimates provided another tool to dig out bargains.
Actionable Conclusions: Wall St. Analysts Projected (11) A 1.38% 1 yr. Average Upside And (12) A 4.38% Net Gain For 16 September ‘Safer’ Dividend Healthcare Stocks
Top dogs on the Healthcare ‘safer’ dividend stock list were graphed above to compare relative strengths by dividend and price as of October 13, 2017 with those projected by analyst mean price target estimates to the same date in 2018.
Historic prices and actual dividends paid from $10,000 invested as $1K in each of the ten highest yielding stocks and the aggregate single share prices of those ten stocks created the data points applied to 2017. Projections based on estimated increases in dividend amounts from $1000 invested in the ten highest yielding stocks and aggregate one year analyst mean target prices as reported by Yahoo Finance created the 2018 data points in blue for dividend and green for price. Note: one year target prices from one analyst were not applied (n/a).
Analysts projected a 2.4% lower dividend from $10K invested as $1k in the top ten ‘safer’ dividend August Health dogs while aggregate single share price was projected to increase by 2.7% in the coming year.
The number of analysts contributing to the mean target price estimate for each stock was noted in the next to the last column on the above chart. Three to nine analysts were considered optimal for a valid projection estimate. Estimates provided by one analyst were usually not applied (n/a).
A beta (risk) ranking for each stock was provided in the far right column. A beta of 1 meant the stock’s price would move with the market. Less than 1 showed lower than market movement. Higher than 1 showed greater than market movement. A negative beta number indicated the degree of a stock price movement opposed to market direction.
Dog Metrics Revealed Bargains From 5 Lowest Priced Top 10 Yielding “Safe” Dividend Healthcare Dogs
Ten “Safe” dividend Healthcare firms with the biggest yields October 13 per YCharts data ranked themselves by yield as follows:
Actionable Conclusions: Analysts Predicted 5 Lowest Priced, of 10 “Safer” Dividend High Yield Healthcare Sector Dogs, Will Deliver (13) 6.56% VS. (14) 4.92% Net Gains from All Ten by October, 2018
$5000 invested as $1k in each of the five lowest priced stocks in the ten “safer” dividend Healthcare Sector pack by yield were determined by analyst 1 year targets to deliver 33.27% more gain than $5,000 invested as $.5k in all ten. The fourth lowest priced “safer” dividend Healthcare dog, GlaxoSmithKline (GSK) showed the best net gain of 16.23% per analyst targets.
Lowest priced five “safer” dividend Healthcare dogs as of October 13 were: Life Healthcare Group (OTCPK:LTGHY); Medical Facilities (OTCPK:MFCSF); Pfizer (PFE); GlaxoSmithKline (GSK); Ramsay Health Care (OTCPK:RMSYF), with prices ranging from $8.19 to $48.69.
Higher priced five “safer” dividend Healthcare dogs as of October 13 were: National Research (NRCIB); National Healthcare (NHC); Merck & Co (MRK); Ansell (OTCPK:ANSLY); AbbVie (ABBV), with prices ranging from $53.24 to $90.67. This month, the little low cost Healthcare dogs ruled this kennel.
This distinction between five low priced dividend dogs and the general field of ten reflects the “basic method” Michael B. O’Higgins employed for beating the Dow. The added scale of projected gains based on analyst targets contributed 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. Its also the work analysts got paid big bucks to do.
Caution is advised, however, as analysts are historically 20% to 80% accurate on the direction of change and about 0% to 20% accurate on the degree of the change.
The net gain estimates mentioned 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.
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
Stocks listed above were suggested only as possible starting points for your safest “Safer” Healthcare dog dividend stock research process. These were not recommendations.
Two or more of these Healthcare sector dividend pups qualified as valuable catches! They are helping make investing fun again! Find two among the 52 Dogs of the Week (DOTW)I and others among 52 DOTWII now accumulating on The Dividend Dog Catcher premium site. Also, a Dogs of the Week III (DC Safari to Success) portfolio launched September 6. Click here to subscribe or get more information.
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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.
Disclosure: I am/we are long PFE.
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.
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Only 16 Of 61 Are ‘Safer’ Dividend Healthcare Dogs For October