The Least Covered Dow Dividend Stocks
- July 28, 2010
- Dividend Investing, Dow Dividend Stocks, Featured, High Yield Dividend Stocks
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It’s well known that Wall Street analyst coverage of stocks is often less than helpful. It has been widely discussed how analysts often downgrade a stock after their stock price has already plunged and then upgrade the stock after the price has already recovered. Even in their research reports, many analysts just end up regurgitating what the company tells them in their conference calls.
Of course this is not true of all Wall Street analysts. Many are highly-talented individuals that provide insightful commentary to help guide investor’s decisions. However, it is not always easy to separate the good from the bad. It can also be difficult at times for individual investors to get access to high-quality Wall Street research as they sometimes even overlook cheap dividend stocks.
We recently reviewed the Wall Street analyst coverage of the 30 stock in the Dow Jones Industrial index. We expected to see analyst coverage fairly evenly distributed across all 30 stocks. After all, these are America’s top blue chip stocks and they are often the key holdings of many investment portfolios.
The disparity in analyst coverage that we found from stock to stock and even sector to sector was surprising.
The technology sector led the way with tech giant Intel (INTC: 21.5375 -0.20%) receiving the most coverage from Wall Street. 48 analysts have provided 2010 earnings estimates for INTC. That was followed by Cisco Systems (CSCO: 23.57 +1.16%) which has 41 analysts covering their stock. Microsoft (MSFT: 25.96 -0.76%), AT&T (T: 26.19 +0.15%) and Hewlett-Packard (HPQ: 47.35 -0.46%) rounded out the top 5.
The least covered Dow dividend stock was DuPont (DD: 40.61 +0.57%). Only 14 analysts have provided 2010 estimates and only 12 analysts have offered up price targets for DD. That means that DuPont receives less than a third of the coverage from Wall Street that fellow Dow components Intel or Cisco System receives.
Given that Wall Street analysts have such a poor reputation and track record, it may not be a bad thing when tons of analysts don’t rush to cover a stock. DuPont stock price has jumped 19% since the beginning of the year and offers the sixth highest dividend yield among all Dow stocks. By comparison, Intel stock has gained only 5% this year and Cisco Systems has actually dropped 2%. In fact, of the five most covered stocks in the Dow index, only Intel has outperformed the index this year.
On the other hand, the four least covered Dow dividend stocks – Dupont, General Electric (GE: 16.00 -1.11%), 3M (MMM: 86.63 -0.20%) and Caterpillar (CAT: 69.42 +0.35%) have all outperformed the index this year.
It’s also interesting to note that the least covered Dow dividend stocks also all pay above average dividends:
DuPont – 4.2% yield
General Electric – 3.0% yield
3M – 2.4% yield
Caterpillar – 2.5% yield
It has been over 10 years since the technology-led bubble burst in March 2000. However, Wall Street analysts still have an affinity to these tech stocks and give them the lion share of their coverage. Meanwhile, less sexy industrials stocks like DuPont or 3M receive scant attention. Yet these dividend paying Dow stocks are outperforming their peers despite the lack of coverage from Wall Street.
