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 Buffett-holdings list is perfect for the dogcatcher process. Here is the July 24 data for 36 dividend-paying stocks in the Kiplinger-documented collection of 50 owned by his Berkshire Hathaway (BRK.B) firm.
Actionable Conclusions (1-10): Analysts Estimated 9.8% To 38.35% Net Gains For Ten Top Buffett-Held Dividend Stocks Come July/August 2020
Six of ten top yield Buffett-held 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 Buffett dogs was graded by Wall St. Wizards as 60% accurate.
Source: YCharts.com
Projections were based on estimated dividends from $1,000 invested in each of the highest yielding stocks and their aggregate one-year analyst median target prices, as reported by YCharts. Note: one-year target prices by lone analysts were not applied. Ten probable profit-generating trades projected to July 24, 2020, were:
Suncor Energy Inc. [Canada] [SU.TO] was projected to net $383.52, based on a median of target price estimate from twenty-six analysts, plus dividends, less broker fees. The Beta number showed this estimate subject to risks 42% more than the market as a whole.
Suncor Energy Inc. [US] (SU) was projected to net $219.92, based on a median of target price estimate from twenty-six analysts, plus dividends, less broker fees. The Beta number showed this estimate subject to risks 9% more than the market as a whole.
American Airlines Group (AAL) netted $189.80 based on a median of estimates from twenty analysts, plus dividends. The Beta number showed this estimate subject to volatility 69% more than the market as a whole.
Johnson & Johnson (JNJ) was projected to net $165.86, based on dividends, plus a mean target price estimate from twenty analysts, less broker fees. The Beta number showed this estimate subject to risk 30% under the market as a whole.
Phillips 66 (PSX) was projected to net $61.99, based on a median of target price estimate from eighteen analysts, plus dividends, less broker fees. The Beta number showed this estimate subject to risks 8% more than the market as a whole.
General Motors Co. (GM) was projected to net $157.34, based on the median of target estimates from 22 analysts, plus dividends, less broker fees. The Beta number showed this estimate subject to risks 40% more than the market as a whole.
The Kraft Heinz Co. (KHC) was projected to net $131.26, based on a median of target price estimates from twenty analysts plus annual dividend, less broker fees. The Beta number showed this estimate subject to risk 8% less than the market as a whole.
Delta Air Lines Inc. (DAL) was projected to net $123.80, based on dividends, plus the median of target price estimates from twenty analysts, less broker fees. The Beta number showed this estimate subject to volatility 18% more than the market as a whole.
Verizon Communications (VZ) was projected to net $105.10, based on dividends, plus the median of target price estimates from twenty-seven analysts, less broker fees. The Beta number showed this estimate subject to risk 49% less than the market as a whole.
Synchrony Financial (SYF) was projected to net $98.00, based on the median of target price estimates from twenty analysts, plus annual dividend, less broker fees. The Beta number showed this estimate subject to risks 19% more than the market as a whole.
The average net gain in dividend and price was estimated at 17.37% on $10k invested as $1k in each of these ten stocks. These gain estimates were subject to average risks 12% more than the market as a whole.
Source: dogstrust.org.uk
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".
50 Buffett Holdings By Target Gains
Source: YCharts.com
36 Buffett Picks By Yield
Source: YCharts.com
Actionable Conclusions (12-21): 10 Top Buffett-Held Stocks By Yield
Top ten Buffett-held stocks selected 7/24/19 by yield represented seven of eleven Morningstar sectors. The lone dog from the consumer defensive sector placed first, The Kraft Heinz Co. (KHC) [1]. Second place went to the communication services representative, Verizon Communications Inc. (VZ) [2].
Third and tenth places were claimed by financial services, Wells Fargo & Co. (WFC) [3], and PNC Financial Services Group Inc. (PNC [10]. Two from the energy sector placed fourth, fifth. and eighth, Suncor Energy Inc. (SU)[4] [SU.TO][5] and Phillips 66 (PSX) [8].
The sixth slot was claimed by the lone real estate sector representative in the top ten, STORE Capital Corp. (STOR) [6]. In seventh place was the lone representative from the consumer cyclical sector, General Motors Co. (GM) [7].
Finally, the lone industrials representative placed ninth, United Parcel Service Inc. (UPS) [9 to complete the July Buffett-held top ten dividend dogs, by yield.
Actionable Conclusions: (22-31) Top Ten July Buffett-Held Dividend Dogs Showed 7.82%-35.16% Upsides While (31) Four Lowly Downsiders Ranged -0.51% To -2.77%
Source: YCharts.com
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 39.97% Advantage For 5 Highest Yield, Lowest Priced Buffett-Collected Dividend Stocks To 2020
Ten top Buffett-held dividend dogs were culled by yield for this update. Yield (dividend/price) results provided by YCharts did the ranking.
Source: YCharts.com
As noted above, top ten Buffet-chosen dividend dogs screened 7/24/19, showing the highest dividend yields, represented seven of eleven Morningstar sectors.
Actionable Conclusions: Analysts Predicted 5 Lowest-Priced Of The Top Ten Highest-Yield Buffett-Held Dogs (32) Delivering 19.68% Vs. (33) 14.06% Net Gains by All Ten Come July 2020
Source: YCharts.com
$5,000 invested as $1k in each of the five lowest-priced stocks in the top ten dividend Buffett-selected kennel by yield were predicted by analyst 1-year targets to deliver 10.68% more gain than $5,000 invested as $.5k in all ten. The eighth lowest priced selection, Phillips 66 (PSX), was projected to deliver the best net gain of 31.5%.
Source: YCharts.com
The five lowest-priced top-yield Buffett-Picked dividend dogs as of July 24 were: Suncor Energy Inc. (SU); The Kraft Heinz Co. (KHC), STORE Capital Corp. (STOR); Suncor Energy Inc. (SU.TO); and General Motors Co. (GM), with prices ranging from $30.55 to $40.88.
Five higher-priced Buffett-picked dividend dogs as of June 24 were: Wells Fargo & Co. (WFC); Verizon Communications Inc. (VZ); Phillips 66 (PSX); United Parcel Service Inc. (UPS); and PNC Financial Services Group Inc. (PNC), whose prices ranged from $48.45 to $141.33.
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.
Graphs and charts were compiled by Rydlun & Co., LLC from data derived from www.indexarb.com; YCharts; Yahoo Finance; analyst mean target price by YCharts. Dog photo: dogstrust.org.uk
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