The Graham Dogs: 24 Abundant April Value Stocks

Foreword

About the Ben Graham Formula

The Ben Graham Formula strategy contains ultra-stable stocks that will infrequently lose money if held over a long period of time. It was developed based on a screen in Graham’s book, The Intelligent Investor. For those who have read the book, it is the “Defensive Investor” screen. It selects stocks that are large in terms of sales and total assets, have a strong track record of earnings and dividend payments, have a reasonable current ratio and level of long term debt, and have a low valuation given by PE ratios and Price to Book Value ratios. — YCharts

While 10 out of this collection of 34 Graham dividend stocks are too pricey to justify their skinny dividends, 24 of the 34, by yield, live up to the ideal of offering annual dividends (from a $1k investment) exceeding their price per share.

In the current market advance, the dividends from $1k investments in any of the twenty-four stocks listed above met or exceeded their single share prices as of 4/14/22.

As we are now past the second anniversary of the 2020 Ides of March dip, the time to snap up some the twenty-four top-yield Graham value dogs is now… unless another big bearish drop in price looms ahead. (At which time your strategy would be to add to your position in any of these you then hold.)

Actionable Conclusions (1-10): Analysts Estimate 20.5% To 72.03% Top Ten Graham Net Gains To April 2023

Just one of the ten top Graham Formula picks by yield were verified as also being 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 Graham-derived dividend dogs (as graded by brokers) was 10% accurate.

Estimated dividend returns from $1000 invested in each of the highest-yielding stocks and their aggregate one-year analyst median target-prices, as reported by YCharts, created the 2022-23 data-points. Note: target prices by lone-analysts were not used. Ten probable profit-generating trades projected to April 14, 2023 were:

M.D.C. Holdings Inc. (MDC) netted $720.26 based on a median target price estimate from five analysts, plus dividends, less broker fees. The Beta number showed this estimate subject to risk/volatility 42% greater than the market as a whole.

Bank of N.T. Butterfield & Son (NTB) was projected to net $433.77, based on dividends, plus the median of target price estimates from five analysts, less broker fees. The Beta number showed this estimate subject to risk/volatility 71% over the market as a whole.

Piper Sandler Cos. (PIPR) was projected to net $420.38 based on dividends, plus the median of target price estimates from five analysts, less broker fees. The Beta number showed this estimate subject to risk/volatility 4% more than the market as a whole.

Sibanye Stillwater Ltd. (SBSW) was projected to net $388.41, based on the median of target price estimates from six analysts, plus the estimated annual dividend, less broker fees. The Beta number showed this estimate subject to risk/volatility 63% greater than the market as a whole.

First Interstate BancSystem (FIBK) was projected to net $324.45, based on a median of target estimates from six analysts, plus dividends, less broker fees. The Beta number showed this estimate subject to risk/volatility 3% greater than the market as a whole.

Franklin Resources Inc. (BEN) was projected to net $279.04, based on dividends, plus the median of target price estimates from eleven analysts, less broker fees. The Beta number showed this estimate subject to risk/volatility 14% greater than the market as a whole.

First Financial Bancorp (FFBC) was projected to net $276.46, based on dividends, plus the median of target price estimates from five analysts, less broker fees. The Beta number showed this estimate subject to risk/volatility 24% opposite the market as a whole.

Umpqua Holdings Corp. (UMPQ) was projected to net $266.99, 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/volatility equal to the market as a whole.

Huntington Bancshares Inc. (HBAN) was projected to net $216.84, based on the median of target price estimates from eighteen analysts, plus dividends, less broker fees. The Beta number 19% greater than the market as a whole.

Provident Financial Services Inc. (PFS) was projected to net $205.00, based on a median target price estimate from four analysts, plus dividends, less broker fees. The Beta number showed this estimate subject to risk/volatility 6% under the market as a whole.

The average net-gain in dividend and price was estimated to be 35.32% on $10k invested as $1k in each of these ten stocks. The average Beta showed these estimates subject to risk/volatility 23% 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”.

Top 35 Graham Value Formula Picks By Broker Targets

This scale of broker-estimated upside (or downside) for stock prices provides a scale of market popularity. Note: no broker coverage or 1 broker coverage produced a zero score on the above scale. This scale can be taken as an emotional component as opposed to the strictly monetary and objective dividend/price yield-driven report below. As noted above, these scores may also be taken as contrarian.

Top 35 Graham Value Formula Picks By Yield

Actionable Conclusions (11-20): Ten Top Stocks By Yield Are The April Dogs of The Graham Formula Pack

Top ten Graham stocks selected 4/14 /22 by yield represented just three of eleven Morningstar sectors. First place was secured by Embotelladora Andina SA (AKO.B) [1], the lone consumer Cyclical representative.

In second place was FS KKR Capital Corp. (FSK) [2], the first of five financial services representatives listed. The other four placed fourth, sixth, and eighth: Owl Rock Capital Corp. (ORCC) [4], Golub Capital BDC Inc (GBDC) [6], China Life Insurance Co. Ltd. (LFC) [8], and Main Street Capital Corp. (MAIN) [9].

Then four basic materials representatives placed third, fifth, seventh, and tenth: Rio Tinto PLC (RIO) [3]; Sibanye Stillwater Ltd (SBSW) [5]; Schweitzer-Mauduit International Inc (SWM) [7]; POSCO Holdings Inc (PKX) [10], to complete this Graham Formula top ten, by yield, for April.

Actionable Conclusions: (21-30) Ten Graham Value Dividend Stocks Showed 17.17% To 67.54% Upsides To April 2023, With (31) No Losers

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

Analysts Estimated A 29.17% Advantage For 5 Highest Yield, Lowest Priced of Top-Ten Graham Value Formula Dividend Stocks To April 2023

Ten top Graham Formula stocks were culled by yield for this monthly update. Yield (dividend/price) results verified by YCharts did the ranking.

As noted above, top-ten Graham Formula Dogs selected 4/14/22, showing the highest dividend yields, represented three of eleven sectors in the Morningstar scheme.

Actionable Conclusions: Analysts Estimated The 5 Lowest-Priced Of Ten Highest-Yield Graham Formula Dividend Stocks (33) Delivering 18.33% Vs. (34) 14.19% Net Gains by All Ten by April 2023

$5000 invested as $1k in each of the five lowest-priced stocks in the top ten Graham Formula dividend pack by yield were predicted by analyst 1-year targets to deliver 29.17% more gain than $5,000 invested as $.5k in all ten. The fifth lowest-priced Graham top-yield stock, Sibanye Stillwater Ltd., was projected to deliver the best net gain of 38.84%.

The five lowest-priced top-yield Graham formula dividend stocks for March 16 were: China Life Insurance Co. Ltd., Embotelladora Andina SA, Owl Rock Capital Corp., Golub Capital BDC Inc., Sibanye Stillwater Ltd., with prices ranging from $7.72 to $16.52

The five higher-priced top-yield Graham Formula dividend stocks for March 16 were: FS KKR Capital Corp., Schweitzer-Mauduit International Inc., Main Street Capital Corp., POSCO Holdings Inc., Rio Tinto PLC, whose prices ranged from $22.80 to $81.87.

This 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 15% accurate on the degree of change.

Afterword

If somehow you missed the suggestion of the twenty two stocks ripe for picking at the start of the article, here is a repeat of the list at the end:

In the current market advance, dividends from $1K invested in the twenty-four stocks listed above met or exceeded their single share prices as of 4/14/22.

As we pass the second anniversary of the 2020 Ides of March dip, the time to snap up those twenty-two top yield Graham dogs is now… unless another big bearish drop in price looms ahead. (At which time your strategy would be to add to your holdings.)

Since all of the top-ten Graham Value Dividend shares are now priced less than the annual dividends paid out from a $1k investment, the following charts compare those at current prices (top chart) with the break-even pricing of all ten (middle chart) concluding with the dollar and percent variants to all ten top dogs conforming to (but not exceeding) the dogcatcher ideal (bottom chart).

You could look at the bottom chart as an indicator of how high each stock might rise in the coming year or two. However, it also shows how much the price must rise (in either dollars or percentage) before it no longer conforms the standard of dividends from $1K invested exceeding the current single share price.

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 Graham Value Dividend dog stock purchase or sale research process. These were not recommendations.

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 YCharts. Dog silhouette: Open source dog art from dividenddogcatcher.com