50 Barron's 2020 Broker Picks: 31 Pay Dividends

Summary

• Annual stock lists are fair game for Dog Catchers. This Barron's Roundtable 50 watchlist appeared in two weekly issues - 1/20 and 27/20.
• Barron's convened 10 veteran Wall Street investors and economists at a roundtable discussion of market trends and favorite funds and equities in early January.
• 31 of Barron's Roundtable 50 advocated stocks pay dividends ranging 0.01%-10.36% in annual yield and -44.47% to 34.03% in annual price target upsides per current broker estimates.
• Top Ten Barron's Roundtable 50 listed stocks boasted net gains from 11.12% to 35.65%.
• $5k invested in the lowest-priced five of 10 top-yield Barron's Roundtable 50 listed dividend dogs showed 48.94% more net gain than from $5k invested in all ten. Little low-priced Barron's Roundtable 50 stocks led the pack.

Foreword

Barron's convened 10 veteran Wall Street investors and economists at a roundtable discussion of market trends and favorite funds, equities, and trades in early January. This Barron's Roundtable 50 watchlist appeared in two weekly issues - 1/20 and 1/27/20. While 50 equities, funds and currency trades were selected by the Roundtable panelists, only 47 were available for reference from YCharts.

Barron's Roundtable picks are available online here. As with all such lists, the underdogs with highest yields prevail and the other dogs show themselves for what they are.

Actionable Conclusions (1-10): Analysts Estimated 11.12% To 35.65% One-Year Net Gains For 10 Top Barron's Roundtable 50(47)

Three of these 10 top Barron's Roundtable stocks by yield were among the top 10 gainers for the coming year based on analyst one-year target prices. (They are tinted gray in the chart below). Thus, the yield-based forecast for these Fortune dogs was graded by Wall St. Wizards as 30% accurate.

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 January 29, 2021, were:

Source: YCharts.com

Takeda Pharmaceutical Co. Ltd. (TAK) was projected to net $356.47, based on a median of target price estimates from two analysts, plus dividends, less broker fees. The Beta number showed this estimate subject to risk 25% less than the market as a whole.

Chevron Corp. (CVX) was projected to net $255.80, based on the median of target estimates from 26 analysts, plus dividends, less broker fees. The Beta number showed this estimate subject to risk 2% more than the market as a whole.

China Mobile Ltd. (CHL) was projected to net $216.74, based on the median of target estimates from four brokers, less transaction fees. The Beta number showed this estimate subject to risk 44% under the market as a whole.

Royal Caribbean Cruises (RCL) was projected to net $214.11, based on a median of target price estimates from 23 analysts, less broker fees. The Beta number showed this estimate subject to risk 45% more than the market as a whole.

Fox Corp. (FOX) was projected to net $204.13, based on the median of target price estimates from two analysts, less broker fees. A beta number was not available for FOX.

Terex Corp (TEX) was projected to net $158.85, based on projected dividends, plus the median of target price estimates from 21 analysts, less broker fees. The Beta number showed this estimate subject to risk 77% more than the market as a whole.

The Walt Disney Co. (DIS) was projected to net $150.35, based on the median of target price estimates from 28 analysts, less broker fees. The Beta number showed this estimate subject to risk equal to the market as a whole.

EnerSys (ENS) was projected to net $143.48, based on dividends, plus the median of target price estimates from four analysts, less broker fees. The Beta number showed this estimate subject to risk 61% over the market as a whole.

Science Applications International Corp. (SAIC) was projected to net $122.92, based on median target price estimates from 29 analysts, less broker fees. The Beta number showed this estimate subject to risk 30% over the market as a whole.

L3Harris Technologies (LHX) netted $111.22, based on the median of estimates from 34 analysts, plus dividends. The Beta number showed this estimate subject to risk, 14% less than the market as a whole.

The average net gain in dividend and price was estimated at 19.34% on $10k invested as $1k in each of these 10 stocks. These gain estimates were subject to average risks 3% over the market as a whole.

Source: barkpost.com

The Dividend Dogs Rule

Stocks earned the "dog" moniker by exhibiting three traits: (1) paying reliable, repeating dividends, (2) their prices fell to where, and (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".

Barron's Roundtable 47 Future Stocks Per February Target Gains

Source: YCharts.com

Barron's Roundtable 47 Stocks By February Yield

Source: YCharts.com

Actionable Conclusions (11-20): Ten Top Barron's Roundtable 47 By Yield

Top 10 Barron's Roundtable Dogs uncovered 1/29/20 by yield represented six of eleven Morningstar sectors plus an ETF and a CEIC. The first place was claimed by the CEIC, Franklin Limited Duration Income Trust (FTF) [1]. Second place went to the lone Financial Services representative, Hercules Capital (HTGC) [2].

Placing third was the first of two consumer cyclical sector representatives, Subaru Corp. (OTCPK:FUJHY) [3], and the other placed seventh bed Bath & Beyond (BBBY) [7]. A lone real communication services sector representative placed fourth, China Mobile Ltd. [4].

In fifth place was the lone energy representative, Chevron [5]. Sixth pace was claimed by the first of two healthcare sector members, GlaxoSmithKline PLC (NYSE:GSK) (6), and the other placed eighth, Takeda Pharmaceutical [8].

Finally, a lone ETF placed ninth, the iShares MSCI United Kingdom ETF (EWU) [9], and a single consumer defensive representative placed tenth, Swedish Match AB (OTCPK:SWMAY) [10], to complete the Barron's Roundtable 50 top 10 by yield for February 2020.

Actionable Conclusions: (21-30) Top Ten Barron's Roundtable Dogs Showed 10.78%-32.46% Upsides While (31) Four Downsiders Were -.04% To -5.14%

Source: YCharts.com

To quantify top dog rankings, analyst mean 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 48.94% Advantage For Five Highest-Yield, Lowest-Priced Barron's Roundtable Dogs To February 2021

Ten top Barron's Roundtable 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 10 Barron's Roundtable 47 dogs screened 1/29/20 showing the highest dividend yields represented four of eleven in the Morningstar sector scheme.

Actionable Conclusions: Analysts Predicted Five Lowest-Priced Of The Top Ten Highest-Yield Barron's Roundtable 50 (32) Delivering 12.84% Vs. (33) 8.62% Net Gains by All Ten Come February 2021

Source: YCharts.com

$5,000 invested as $1k in each of the five lowest-priced stocks in the top 10 Barron's Roundtable 47 kennel by yield were predicted by analyst one-year targets to deliver 48.94% more gain than $5,000 invested as $.5k in all 10. The fifth lowest priced Takeda Pharmaceutical was projected to deliver the best net gain of 35.65%.

Source: YCharts.com

The five lowest-priced top-yield Barron's Roundtable 47 as of January 29 were: Franklin Limited Duration Income Trust, Subaru, Hercules Capital, Bed Bath & Beyond, and Takeda Pharmaceutical, with prices ranging from $9.66 to $19.78.

Five higher-priced Barron's Roundtable 47 of January 29 were: Swedish Match AB, iShares MSCI United Kingdom ETF, China Mobile, GlaxoSmithKline, and Chevron, whose prices ranged from $28.35 to $111.12.

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 Barron's Roundtable 50 stock purchase or sale research process. These were not recommendations.

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Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. 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: 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.

Graphs and charts were compiled by Rydlun & Co., LLC from data derived from www.indexarb.com; YCharts.com; finance.yahoo.com; analyst mean target price by Thomson/First Call in Yahoo Finance. Dog photo: barkpost.com