Buy 4 January Dogs Of The Dow, Watch 4 More

Foreword

While more than half this collection of Dow Industrials is too pricey and reveals only skinny dividends, four of the five lowest priced Dogs of the Dow are ready to buy. This month, Verizon Communications Inc (VZ), Dow Inc (DOW), Intel Corp (INTC), and Walgreens Boots Alliance (WBA), live up to the dogcatcher ideal of annual dividends from $1K invested exceeding their single share prices. Furthermore, four more, Cisco (CSCO), 3M (MMM), International Business Machines (IBM) and JPMorgan Chase (JPM), showed prices within $71 of meeting that goal. When the slide continues, watch those last three (currently out of the top-five) bubble to the surface.

With renewed downside market pressure of 65%, it would be possible for all ten to become elite fair-priced dogs with their annual yield (from $1K invested) meeting or exceeding their single share prices by year’s end.

[See a summary of top ten fair-priced January Dow Dogs in Actionable Conclusion 21 near the middle of this article.]

Actionable Conclusions (1-10): Brokers Expect 16.59% To 47.43% Net Gains From Top-Ten Dow Dogs By January 2024

Five of ten top dividend-yielding Dow dogs (tinted gray in the chart below) were among the top ten gainers for the coming year based on analyst 1-year target prices. So, this January 2023 yield-based forecast for Dow dogs, as graded by Wall St. wizard estimates, was 50% accurate.

Estimated dividend-returns from $1,000 invested in the ten highest-yielding stocks and their aggregate one-year analyst median target prices, as reported by YCharts, created the 2023-24 data points for the projections below. (Note: one-year target prices estimated by lone analysts were not applied.) Ten probable profit-generating trades projected to January 2024 were:

Salesforce Inc (CRM) was projected to net $474.27, based on the median of target price estimates from 45 analysts, less broker fees. The Beta number showed this estimate subject to risk/volatility 15% greater than the market as a whole.

The Walt Disney Co (DIS) was projected to net $418.41, based on the median of target estimates from 29 analysts, less broker fees. The Beta number showed this estimate subject to risk/volatility 22% over the market as a whole.

Apple Inc (AAPL) was forecast to net $323.20, based on the median of target price estimates from 42 analysts, less broker fees. The Beta number showed this estimate subject to risk/volatility 23% greater than the market as a whole.

Microsoft Corp (MSFT) was projected to net $238.89, based on the median of target price estimates from 45 analysts, plus the estimated annual dividend, less broker fees. The Beta number showed this estimate subject to risk/volatility 6% less than the market as a whole.

Verizon Communications Inc was projected to net $233.86, 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.

Intel Corp was projected to net $225.68 based on the median of target price estimates from 33 analysts, plus dividends, less broker fees. The Beta number showed this estimate subject to risk/volatility 22% less than the market as a whole.

Visa Inc (V) was projected to net $186.61, based on dividends, plus the median of target price estimates from 31 analysts, less broker fees. The Beta number showed this estimate subject to risk/volatility 5% under the market as a whole.

Walgreens Boots Alliance was projected to net $168.27, based on the median of target prices estimated by 13 analysts, less broker fees. The Beta number showed this estimate subject to risk/volatility 25% less than the market as a whole.

3M Co netted $166.28 based on the median of target price estimates from 18 analysts, less broker fees. The Beta number showed this estimate subject to risk/volatility equal to the market as a whole.

Cisco Systems Inc was projected to net $165.90, based on dividends, plus the median target price estimates from 22 analysts, less broker fees. The Beta number showed this estimate subject to risk/volatility equal to the market as a whole.

The average net gain in dividend and price was estimated at 26.01% on $10K invested as $1K in each of these top ten Dow Index stocks. This gain estimate was subject to average risk/volatility 16% less 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”.

The January 2023 Dow 30 By Yield

Actionable Conclusions (11-20): 10 Top Dow Dividend Stocks By Yield Ranged 2.98% To 6.62% Per YCharts

Top ten Dow dogs as of 12/30/22 represented seven of eleven Morningstar sectors.

The lone communication services sector member took first place, Verizon [1]. In second place was the lone basic materials dog, Dow Inc [2].

Then three technology dogs placed in the third, sixth, and eighth positions, Intel Corp [3], International Business Machines [6], and Cisco Systems Inc [8].

The first of two healthcare stocks placed fourth, represented by Walgreens Boots Alliance [4], and the other placed seventh, Amgen Inc (AMGN) [7]. Then, a lone industrials dog was fifth, 3M Co[5]; another lone energy representative was eighth, Chevron (CVX) [8].

Finally, tenth place belonged to the financial services representative, JPMorgan Chase & Co [10], to complete the incoming January Dogs of the Dow by yield lists from YCharts.

Dividend Vs. Price Results

A graph above shows the relative strengths of the top ten Dow dogs by dividend and price as of market close 12/30/2022.

This month, six of the top-ten Dow dogs show an overbought condition (in which aggregate single share price of those six exceeds projected annual dividend from $10K invested as $1K each). A dividend dogcatcher priority is to select stocks whose dividends from $1K invested exceed their single share price. As mentioned above, that condition was reached by four of the five lowest priced Dogs of the Dow: Verizon Communications, Dow Inc, Intel Corp, and Walgreens Boots Alliance, live up to the dogcatcher ideal of annual dividends from $1K invested exceeding their single share prices. Furthermore, four more, showed prices within $71 of meeting that ideal goal as of December 30. Those four (close but no cigar) outliers are: Cisco Systems Inc, $8.66 away; 3M Co, $42.72 away; International Business Machines Corp, $59.70 away; JPMorgan Chase & Co, $70.89 away.

Actionable Conclusion (21): Six of Ten Top Dow Dogs Are Overbought

This gap between high share price and low dividend per $1K (or oversold condition) means, no matter which chart you read, 23 of all 27 Dow dividend payers are low risk and low opportunity dogs, with the non-dividend payers being particularly dismal. The Dow top-ten average cost per dollar of annual dividend for December 30, 2022 was $23.95 per YCharts.

One that cut its dividend after March 2020, Boeing (BA), has re-learned (and is now certified that it knows how to fly in some countries) and is thus prepared to take off again when airlines trust planes made in the USA again. The used plane and airbus market, however, is soaring. BA is struggling to recover from being in worse shape than was GE when excised from the Dow index.

As for The Walt Disney Co, the magic kingdom may never be close to reinstating a dividend. Furthermore, the newest of the three latest no-dividend stocks on the block, Salesforce Inc, is simply overpriced. But fading rapidly and its previous CEO unexpectedly bailed out, leaving the founder in a lurch.

Those three non-dividend payers are the true down-in-the-dumps dogs of the Dow, despite analysts high-balling their future share price estimates. All of the three demonstrate a total disregard for shareholders.

Remember, this dogcatcher yield-based stock-picking strategy is contrarian. That means rooting for (buying) the underdog is productive when you don’t already own these stocks. If you do hold these stocks, then you must look for opportune pull-backs in price to add to your position to best improve your dividend yield. Plenty of pull-back opportunities appear to be ahead.

Price Drops or Dividend Increases Could Get All Ten Dow Dogs Back to “Fair Price” Rates For Investors

The charts above retain the current dividend amount and adjust share price to produce a yield (from $1K invested) to equal or exceed the single share price of each stock. As the top illustration shows, four are ideally priced. Beside Verizon Communications, Dow Inc, Intel Corp, and Walgreens Boots Alliance already in the ideal zone, four more low-priced stocks are within $71 of getting there as noted above.

Two more (CVX & AMGN), however, need to trim prices over $104 and $170 to attain that elusive 50/50 goal.

The alternative, of course, could be that these companies raise their dividends but that is a lot to ask in these highly disrupted, inflationary, recessionary, yet cash-rich times. Mr. Market is much more effective at moving prices up or down to appropriate amounts; just watch and buy when the targeted stock price moves into the sweet spot.

Actionable Conclusions: (22-31) The Dow Index Showed 12.98% To 48.43% Top Ten Upsides To January 2024; (32) Three Downsides of -1.56% to -2.11% Were Revealed By Broker 1-Yr. Targets

To quantify top dog rankings, analyst median price target estimates provided a “market sentiment” gauge of upside potential. Added to the simple high-yield “dog” metrics, analyst median price target estimates provided another tool to dig out bargains.

Analysts Forecast A 36.48% Advantage For 5 Highest-Yield, Lowest-Priced of 10 Dow Dogs As Of December 30, 2023

Ten top Dow dogs were culled by yield for their monthly update. Yield (dividend / price) results as verified by YCharts did the ranking.

As noted above, top-ten Dow dogs selected 12/30/22 by YCharts methods revealed that the highest dividend-yields represented seven of the eleven sectors. Consumer Cyclical and Defensive selections went missing. (Real Estate is not reported and Utilities has its own Dow Index.)

Actionable Conclusions: Analysts Expected 5 Lowest-Priced of the Ten Highest-Yield Dow Dogs (34) To Deliver 17.19% Vs. (35) 12.59% Net Gains by All Ten Come December 30, 2023

$5,000 invested as $1K in each of the five lowest-priced stocks in the top ten Dow Dividend kennel by yield were predicted by analyst 1-year targets to deliver 36.48% more gain than from $5,000 invested in all ten. The third lowest priced top ten stock, Verizon Communications Inc, showed top analyst-estimated gains of 23.39%.

The five lowest-priced Dow top-yield dogs for December 30 were: Intel Corp, Walgreens Boots Alliance Inc, Verizon Communications Inc, Cisco Systems Inc, and Dow Inc, with prices ranging from $26.43 to $50.39.

Five higher-priced Dow top-yield dogs for December 30 were: 3M Co, JPMorgan Chase & Co, International Business Machines Corp, Chevron Corp, and Amgen Inc, whose prices ranged from $119.92 to $262.64.

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 85% accurate on the direction of change and just 0% to 15% accurate on the degree of change. (In 2017, the market somewhat followed analyst sentiment. In 2018, analysts’ estimates were contrarian indicators of market performance, and they continued to be contrary for the first two quarters of 2019 but switched to conforming for the last two quarters.) In 2020, analyst projections were quite contrarian. The first half of 2021, most dividend stock price actions exceeded all analyst expectations. The last half of 2021 was still gangbusters. The 2022 September-December slump freed-up five or more Dow dogs, sending them into the ideal zone where returns from $1K invested equal (or exceed) their single-share price. As the Fed-fueled slide gains momentum in 2023, look for all ten Dow Dogs to become fair-priced.

Afterword

Lest there be any doubt about the recommendations in this article, this month there were four Dow Index stocks showing dividends for $1K invested exceeding single share price: Intel Corp, Verizon Communications, Walgreens Boots Alliance, and Dow Inc.

The dogcatcher hands-off recommendations are still in place referring to one that cut its dividend in March 2020. While Boeing has re-learned (and is certified in certain countries) to fly, it still has to coax customers to buy planes again. BA faces strong headwinds to stay on the Dow index (despite analyst optimism for the lone U.S. commercial air-crafter).

Also keep hands off the newest non-dividend member of the Dow, Salesforce Inc, until it declares a dividend from $1K invested greater than its single share price; perhaps new leadership will help.

While subscriptions keep the ship afloat, Disney needs audiences to get strapped back into buying tickets to watch and ride and may never resume a dividend. Meanwhile, DIS has Apple, Amazon, Netflix, and Paramount, and numerous other content providers pouring out streamable content. Will the mouse house ever roar again, let alone pay dividends?

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 Dow 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 indexArb.com; YCharts.com; finance.yahoo.com; analyst mean target price by YCharts. Open source dog art from dividenddogcatcher.com