James Brumley says in Kiplinger Investing:
Rich people often get perpetually richer for a reason, so it could be worthwhile to study what billionaires and high-asset hedge funds are plowing their long-term capital into.”
As any collection of stocks is more clearly understood when subjected to yield-based (dog catcher) analysis, this billionaire-choice list is perfect for the dogcatcher process. Here is the October 7 data for 32 dividend-paying stocks and funds in the Kiplinger collection of 49 stocks owned and loved by billionaires.
Actionable Conclusions (1-10): Analysts Estimated 19.02% To 61.74% Net Gains For Ten Top Billionaire Chosen Stocks Come October 2020
Six of ten top billionaire class dividend stocks by yield were 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 these Billionaire dogs was graded by Wall St. Wizards as 60% accurate.
Projections were based on estimated dividends from $1000 invested in each of the highest yielding stocks and the median of their one-year analyst target prices, as reported by YCharts. Note: one-year target prices by lone analysts were not applied. Ten probable profit-generating trades projected to October 7, 2020, were:
Fiat Chrysler Automobiles (FCAU) was projected to net $617.39, based on the median of target price estimates from five analysts, plus dividends, less broker fees. The Beta number showed this estimate subject to risks 81% more than the market as a whole.
General Motors Co. (GM) was projected to net $409.24, based on the median of target price estimates from twenty-one analysts plus annual dividend, less broker fees. The Beta number showed this estimate subject to risk 40% more than the market as a whole.
Royal Caribbean Cruises (RCL) was projected to net $382.00 based on dividends, plus the median of target estimates from twenty-three brokers, less transaction fees. The Beta number showed this estimate subject to risk 40% more than the market as a whole.
The Brink’s Co. (BCO) was projected to net $293.38, based on dividends, plus the median of target price estimates from five analysts, less broker fees. The Beta number showed this estimate subject to volatility 50% more than the market as a whole.
Extended Stay America (STAY) was projected to net $212.92, based on dividends, plus the median of target price estimates from thirteen analysts, less broker fees. The Beta number showed this estimate subject to risk 12% above the market as a whole.
America Movil, SAB de C.V. (AMX) was projected to net $208.51, based on dividends, plus the median of target price estimates from seventeen analysts, less broker fees. The Beta number showed this estimate subject to risk 53% below the market as a whole.
Citigroup (C) was projected to net $208.45, based on the median of target estimates from 27 analysts, plus dividends, less broker fees. The Beta number showed this estimate subject to risks 80% more than the market as a whole.
Restaurant Brands International Inc. (QSR) netted $192.92 based on a median of estimates from twenty-nine analysts, plus dividends. The Beta number showed this estimate subject to volatility 22% more than the market as a whole.
Broadcom Inc. (AVGO) was projected to net $230.44, based on dividends, plus the median of target price estimates from thirty-two analysts, less broker fees. The Beta number showed this estimate subject to risk 11% less than the market as a whole.
CVS Health Corp. (CVS) was projected to net $190.23, based on the median of target price estimates from twenty-nine analysts, plus annual dividend, less broker fees. The Beta number showed this estimate subject to risks 14% less than the market as a whole.
The average net gain in dividend and price was estimated at 29.13% on $10k invested as $1k in each of these ten stocks. These gain estimates were subject to average risks 25% more 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.”
49 Billionaire Picks By Broker Target Gains
49 Billionaire Picks By Yield
Actionable Conclusions (11-20): 10 Top Billionaire Choice Stocks By Yield
Top ten Billionaire-Loved stocks selected 10/7/19 by yield represented six of eleven Morningstar sectors. One from the energy sector placed first, CVR Energy, Inc. (CVI) .
Second, third, fifth and tenth places went to consumer cyclical representatives: Extended Stay America Inc. , Fiat Chrysler Automobiles NV , General Motors Co. , and Royal Caribbean Cruises Ltd. .
The fourth slot was claimed by the lone real estate sector representative in the top ten, VICI Properties Inc. (VICI) .
In sixth and seventh places were two technology firms, Broadcom Inc. , and Qualcomm Inc (QCOM) .
A single healthcare representative emerged in eighth place, CVS Health Corp. . Finally, the lone financial services representative claimed the ninth spot, JPMorgan Chase & Co. (JPM), to complete the October billionaire choice top yield ten.
Actionable Conclusions: (21-30) Top Ten October Billionaire-Loved Dividend Dogs Showed 16.45-56.88% Upsides While (31) Two Lowly Downsiders Showed -1% And -6.6%.
To quantify top dog rankings, analyst mean price target estimates provide a “market sentiment” gauge of upside potential. Added to the simple high-yield metrics, analyst mean price target estimates became another tool to dig out bargains.
Analysts Forecast A 19.69% Advantage For 5 Highest Yield, Lowest Priced Billionaire-Loved Dividend Stocks To October 2020
Ten top billionaire-held dividend dogs were culled by yield for this update. Yield (dividend/price) results provided by YCharts did the ranking.
As noted above, top ten Kiplinger billionaire choice dividend dogs selected 10/7/19 showing the highest dividend yields represented six of eleven Morningstar sectors.
Actionable Conclusions: Analysts Predicted 5 Lowest-Priced Of The Top Ten Highest-Yield Billionaire Chosen Dogs (32) Delivering 27.39% Vs. (33) 22.89% Net Gains by All Ten Come October 2020
$5000 invested as $1k in each of the five lowest-priced stocks in the top ten Dividend Billionaire-selected kennel by yield were predicted by analyst 1-year targets to deliver 19.69% more gain than $5,000 invested as $.5k in all ten. The very lowest priced selection, Fiat Chrysler Automobiles NV, was projected to deliver the best net gain of 61.74%.
The five lowest-priced top-yield Billionaire-Picked dividend dogs as of October 7 were: Fiat Chrysler Automobiles NV, Extended Stay America Inc.; VICI Properties Inc.; General Motors Co.; CVR Energy Inc., with prices ranging from $12.43 to $42.60.
Five higher-priced Billionaire-Picked dividend dogs as of October 73 were: CVS Health Corp.; Qualcomm Inc.; Royal Caribbean Cruises Ltd.; JPMorgan Chase & Co.; Broadcom Inc., whose prices ranged from $61.99 to $276.08.
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 20% to 80% accurate on the direction of change and just 0% to 20% 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.
Stocks listed above were suggested only as possible reference points for your Kiplinger Billionaire Picks stock purchase or sale research process. These were not recommendations.
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Disclosure: I am/we are long CVI, INTC, GLD. 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.
Additional disclosure: 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.