3 Ideal Dividend Dogs Lead Barron’s 100 Most Sustainable Companies In March – Seeking Alpha

Foreword

This article is based on 100 Most Sustainable (M-S) companies based on Calvert Research and Management’s annual review of more than 230 ESG performance indicators, such as workplace diversity, data security, and greenhouse-gas emissions, as reported in the February 11, 2022 edition of Barron’s weekly.

How Barron’s determined their list

To build Barron’s fifth annual ranking of the most sustainable companies, Calvert Research and Management started with the 1,000 largest publicly traded companies by market value, then ranked each by how it performed for five key constituencies: shareholders, employees, customers, community, and the planet.

Specifically, Calvert, a unit of Eaton Vance, which is owned by Morgan Stanley, looked at more than 230 ESG performance indicators, such as workplace diversity, data security, and greenhouse-gas emissions.

Based on these indicators, Calvert assigned a score of zero to 100 in each stakeholder category. Then it created a weighted average of the categories for each company, based on how financially material each category was for its industry peer group.

To make the list, a company had to be rated above the bottom quarter in each of the material stakeholder categories. If it performed poorly in any key category that was financially material, it was disqualified.

The top 100, ranked by sustainability, appear in the table at the bottom. Those were the best performers in 2021.

– Barron’s editors

Any collection of stocks is more clearly understood when subjected to yield-based (dogcatcher) analysis. These 100 publicly traded Most Sustainable list (M-S) dogs are perfect for the dogcatcher process. Here is the March 14 data, focused on 78 dividend payers. The full list of 100 is posted in the Afterword at the tail of this article.

Happily, three of the 78 dividend-paying M-S companies live up to my Dogcatcher ideal of paying annual dividends from a $1K investment exceeding their single share prices. As of 3/14/22, they are Gap Inc (GPS), Regions Financial Corp (RF), and Levi Strauss & Co (LEVI). Many first-time investors regard this condition as a buy signal or, at least, a look-closer invitation.

Actionable Conclusions (1-10): Analysts Estimated 23.65% To 43.27% Net Gains For Ten Top M-S Companies To March 2023

Four of ten top 2022 M-S company 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, the yield-based forecast for these M-S top dogs was graded by Wall St. Wizards as 40% accurate.

Estimated dividends from $1,000 invested in each of the highest-yielding stocks plus their aggregated one-year analyst median target prices, as reported by YCharts, supplied the data points. Note: target prices from less than two analysts were not counted. Thus, ten probable profit-generating trades projected to March 14, 2023 were:

Air Products and Chemicals (APD) was projected to net $432.71, based on the median of target estimates from twenty-one analysts, plus dividends, less broker fees. The Beta number showed this estimate subject to risk/volatility 13% under the market as a whole.

V.F. Corp (VFC) was projected to net $373.06, based on the median of target price estimates from twenty-two analysts, plus annual dividend, less broker fees. The Beta number showed this estimate subject to risk/volatility 42% greater than the market as a whole.

State Street Corporation (STT) was projected to net $371.53, based on dividends, plus the median of target price estimates from sixteen analysts, less broker fees. The Beta number showed this estimate subject to risk/volatility 55% more than the market as a whole.

Gap Inc was projected to net $366.96, based on dividends, plus the median of the target price estimates from twenty-one analysts, less broker fees. The Beta number showed this estimate subject to risk/volatility 72% greater than the market as a whole.

BlackRock Inc (BLK) was projected to net $353.75, based on the median of target prices from thirteen analysts, plus annual dividends, less broker fees. The Beta number showed this estimate subject to risk/volatility 23% over the market as a whole.

Eastman Chemical Co (EMN) was projected to net $309.60, based on dividends, plus the median of target price estimates from nineteen analysts, less broker fees. The Beta number showed this estimate subject to risk/volatility 49% over the market as a whole.

Best Buy Co Inc (BBY) was projected to net $288.33 based on dividends, plus the median of target estimates from twenty-one brokers, less transaction fees. The Beta number showed this estimate subject to risk/volatility 52% greater than the market as a whole.

Citigroup Inc (C) was projected to net $263.72, based on dividends, plus the median of target price estimates from twenty-four analysts, less broker fees. The Beta number showed this estimate subject to risk/volatility 70% greater than the market as a whole.

Cummins Inc (CMI) was projected to net $252.78, based on a median of target price estimates from seventeen analysts, plus dividends, less broker fees. The Beta number showed this estimate subject to risk/volatility 4% greater than the market as a whole.

PNC Financial Services Group Inc (PNC) was projected to net $236.47, from dividends, plus the median of target price estimates from twenty-one analysts, less broker fees. The Beta number showed this estimate subject to risk/volatility 29% greater than the market as a whole.

The average net gain in dividend and price was estimated at 32.49% on $10K invested as $1K in each of these ten stocks. These gain estimates were subject to average risk/volatility 38% greater 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.”

50 Barron’s M-S Dogs Showed March Target Gains

50 Barron’s M-S Dogs Reveal March Yields

Actionable Conclusions (11-20):

10 Top Barron’s M-S Dogs By Yield For March

Top yield ten March 2022 Barron’s M-S stocks represented five of eleven Morningstar sectors.

A single communication services representative placed first, Verizon Communications Inc (VZ) [1]

The first of three financial services stocks occupied second place: Prudential Financial Inc (PRU) [2]. The other two financial firms placed fifth and sixth, Principal Financial Group Inc (PFG) [5], and Citigroup Inc [6].

Three consumer cyclical representatives placed third, seventh, and eighth: Gap Inc (GPS) [3], Best Buy Co Inc [7], and V.F. Corp [8].

Then the first of two consumer defensive stocks occupied fourth place, Kimberly-Clark Corp (KMB) [4]. The other consumer defensive firm placed ninth, Clorox Co (CLX) [9].

Finally, one healthcare firm placed tenth, Merck & Co Inc (MRK) [10], to complete the top ten March 2022 Barron’s Most Sustainable company stocks by yield.

Actionable Conclusions: (21-30) Top Ten Barron’s M-S Dividend Dogs Showed 22.92%-42.3% Upsides While (31) No Lowly Down-siders Showed Up For This March Report

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, analyst median target price estimates became another tool to dig out bargains.

Analysts Forecast A 27.2% Advantage For The 5 Highest Yield, Lowest Priced Of Ten 2022 Barron’s M-S Dividend Stocks Come March 2023

Yield (dividend / price) results provided by YCharts did the ranking for these ten dividend March Barron’s M-S stocks.

As noted above, top ten dividend Barron’s M-S dogs screened 3/14/22 showing the highest dividend yields represented five of eleven in the Morningstar sector scheme.

Actionable Conclusions: Analysts Predicted 5 Lowest-Priced Of The Top Ten Highest-Yield Barron’s M-S Dividend Dogs (32) Delivering 28.47% Vs. (33) 22.38% Net Gains by All Ten Come March 14, 2023

$5,000 invested as $1K in each of the five lowest-priced stocks in the top ten dividend Barron’s M-S kennel by yield were predicted by analyst 1-year targets to deliver 27.2% more gain than $5,000 invested as $.5K in all ten. The third lowest-priced selection, V.F. Corp, was projected to deliver the best net gain of 37.31%.

The five lowest-priced top-yield Barron’s M-S dividend dogs as of March 14 were: Gap Inc; Verizon Communications Inc; V.F. Corp; Citigroup Inc; Principal Financial Group Inc, with prices ranging from $13.93 to $66.21.

Five higher-priced Barron’s M-S dividend dogs as of March 14 were: Merck & Co Inc; Best Buy Co Inc; Prudential Financial Inc; Kimberly-Clark Corp; Clorox Co, whose prices ranged from $77.78 to $127.62.

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 90% 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.

Afterword

If somehow you missed the suggestion of the two stocks primed to buy at the start of the article, here is a repeat of the list at the end.

Happily, three of the 78 dividend-paying M-S companies live up to my Dogcatcher ideal of paying annual dividends from a $1K investment exceeding their single share prices. As of 2/14/22, they are Gap Inc, Regions Financial Corp, and Levi Strauss & Co. Many first-time investors regard this condition as a buy signal or, at least, a look-closer invitation.

Current vs. Fair Price Charts

However, only one of the top-ten Barron’s M-S shares is priced less than the annual dividends paid out from a $1K investment. Therefore, the following charts compare that one with all ten at current prices (top chart) with the fair pricing of all ten top dogs conforming to that ideal (middle chart). The dollar and percentage differences between current and fair prices are detailed in the bottom chart.

Barron’s Most Sustainable Companies As Ranked For 2022

Stocks listed above were suggested only as possible reference points for your Barron’s 100 Most Sustainable Companies 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.com; finance.yahoo.com; Barron’s.com, analyst mean target price by YCharts. Dog art: Source: Open source dog art #3 from dividenddogcatcher.com

Source: seekingalpha.com