Reader suggestions about monthly pay (MoPay) dividend dog stock lists reviewed in June and July prompted expansion of the stocks list to include funds, trusts, and partnerships. A list of MoPay equities to buy and hold in October resulted from reader additions supplemented with a high yield collection from here. Thereafter the docile, sleeping dogs list was supplemented by an upside potential article in October and a upside vs. buy and hold in November.
Now, with further reflection, review, reader comment, and another list, this article compared and contrasted recent stocks looking for their upside potential with high yield (and higher risk) buy and hold fund, trust and partnership candidates.
The Monthly Pay Dividend Advantage
Quarterly and annual pay dividend stock owners anxiously await announcements from a firm, fund, or analyst to learn if their next dividend will be higher, lower, or paid at all. Monthly pay stocks, funds, trusts, and partnerships inform the holder every four and one third weeks by check or statement. If the equity reduces or suspends a payment, the holder can sell out of the investment immediately to cut future losses.
Dogs of the Index Metrics Culled Out Current Bargains
For this article, 25 dividend equities plus 30 funds and trusts out of over 400 paying monthly returns were ranked as of December 19, 2012 using the two key dog performance metrics: (1) stock price; (2) annual dividend. Dividing the annual dividend by the price declared the percentage yield by which each dividend dog stock was ranked.
Historically dividend dog investors utilized this ranking system to select portfolios of five or ten stocks in any one index, sector, survey, or list to trade. They awaited the results from their investments in the lowest priced, highest yielding stocks and prayed that the price of every stock they now owned climbed higher (having locked in a high yield percentage at purchase).
Dogs of the index strategy, popularized by Michael B. O'Higgins in the book "Beating The Dow" (HarperCollins, 1991), revealed how high yielding stocks whose prices increase (and whose dividend yields therefore decrease) can be sold off once each year to sweep gains to reinvest the seed money into higher yielding stocks in the same index. Prior to the publication of the O'Higgins book, Dow dogs were known by some market watchers as "fallen angels."
Monthly Pay Dividend Stocks
The ten monthly dividend equities showing the best yields as of December represented three of nine market sectors. Top dog stock as revealed by Yahoo Finance data was one of six financial firms, Armour Residential REIT (NYSE:ARR). The other five financial firms placed second, fourth, fifth, sixth and eighth: Javelin Mortgage Investment Corp. (NYSE:JMI); Full Circle Capital Corp. (NASDAQ:FULL); Prospect Capital Corporation (NASDAQ:PSEC); Fifth Street Finance (NASDAQ:FSC); Gladstone Capital Corporation (NASDAQ:GLAD). Two utilities made the top ten MoPay stock list in third and seventh places, Just Energy Group Inc. (NYSE:JE), and Atlantic Power Corporation (NYSE:AT). The remaining two places of the top ten were filled by basic materials concerns: Pengrowth Energy (NYSE:PGH) in ninth position; Vanguard Natural Resources (NASDAQ:VNR) in the number ten slot.
Dividend vs. Price Results
Below relative strengths for the top ten MoPay dividend dog stocks by yield was graphed as of December 19, 2012. Ten periods of historic projected annual dividend history from $1000 invested in the ten highest yielding stocks and the total single share prices of those ten stocks created the data points for each period shown in blue for dividend and green for price.
Actionable Conclusion One: MoPay DiviDog Stocks Still Bearish
Charts displayed MoPay dividend dog stocks in a bear market pattern. Since January dividend from 1k invested in each of the top ten stocks jumped 26.6% while aggregate single share price of the ten for nine periods declined 5.7%. Most recently dividend went up 12.6% and price went down .7% between November and December.
Actionable Conclusion Two: Analysts Forecast 2013 MoPay DiviDog Stock Net Gains over 30%
Top ten dogs for the MoPay stock list were graphed below to show relative strengths by dividend and price as of December 2012 and those projected by analyst mean price target estimates to December 2013.
Historic prices and actual dividends paid from $1000 invested in the ten highest yielding stocks and the aggregate single share prices of those ten stocks created the data points for 2012. Projections based on estimated increases in dividend amounts from $1000 invested in the ten highest yielding stocks and aggregate one year analyst mean target prices as reported by Yahoo Finance created the 2013 data points in blue for dividend and green for price. Note: one year target estimated prices below current price were not included.
Charting MoPay DiviDog Stock Upside Potential
The top ten equities paying out monthly dividends were ranked using the two key dog performance metrics: (1) stock price; (2) annual dividend. Dividing the annual dividend by the price declared the percentage yield by which each dividend dog stock was primarily ranked. (3) One year mean target price estimates by analysts supplemented eight equities showing higher prices for 2013.
A hypothetical $1000 investment in each equity was divided by the current share price to find a number of shares purchased. The number of shares was multiplied by projected annual per share dividend amounts to find a dividend return amount. Thereafter one year mean target prices multiplied by the number of shares supplemented the dividend amount minus a flat $20 broker fee to determine a net gain amount for the 12 stocks showing upside price gains into 2013.
For the coming year, Yahoo Finance projected a 10.7% lower dividend from $1k invested in each stock within this MoPay group, while aggregate single share price for the ten was projected by analysts to increase by 16%.
The number of analysts contributing to the mean target price estimate for each stock is noted in the far right column on the charts. Three to nine analysts were considered optimal for a higher probability projection estimate.
Net gains from five probable profit generating trades were revealed by Yahoo Finance for December 2013:
Armour Residential REIT netted $317.31 (31.7%), based on mean target price estimates from eight analysts.
Fifth Street Finance Corporation netted $148.92 (14.9%), based on estimates from nine analysts.
Atlantic Power Corporation netted $509.43 (51%), based on estimates from two analysts.
Pengrowth Energy netted $1089.16 (109%), based on estimates from three analysts.
Vanguard Natural Resources netted $317.71 (32%) to 2013, based on estimates from nine analysts.
The total 2013 net gain in dividend and price for all ten MoPay top dog stocks was projected at 30.1% on $10k invested.
Monthly Pay Dividend Funds and Trusts
The thirty top monthly dividend paying (MoPay) funds and trusts listed above were culled from over 400 candidates then ranked by yields calculated as of December 19 to determine the Top Ten.
Ten monthly dividend funds and trusts showing the biggest yields for December featured nine funds and one trust. The top three dog funds as revealed by Yahoo Finance data were by Cornerstone: Cornerstone Strategic Value Fund (NYSEMKT:CLM); Cornerstone Progressive Return Fund (NYSEMKT:CFP); Cornerstone Total Return Fund Inc. (NYSEMKT:CRF). Two Alpine funds were in fourth and sixth positions by yield: Alpine Total Dynamic Dividend Fund (NYSE:AOD); Alpine Global Dynamic Dividend Fund (NYSE:AGD). Two PIMCO funds placed fifth and eighth in the yield rankings: PIMCO High Income Fund (NYSE:PHK); PIMCO Global Stocks PLUS & Income Fund (NYSE:PGP). The balance of the top ten funds and trusts were: AGIC Convertible and Income Fund II (NYSE:NCZ) in seventh position. The only trust on the list placed ninth, Enduro Royalty Trust (NYSE:NDRO). Finally, ING Global Equity Dividend & Premium Opportunity fund (NYSE:IGD) was tenth.
Fund & Trust Dividend vs. Price Results
Below relative strengths for the top ten MoPay Dividend F&T Dogs by yield was graphed as of December 2012 and compared to those of the Dow Dogs. Ten periods of historic projected annual dividend history from $1000 invested in the ten highest yielding equities and the total single share prices of those ten equities created the data points for each period shown in blue for dividends and green for price.
Actionable Conclusion Three: MoPay Top Ten DiviDog Funds and Trusts Very Bearish; Dow Too
The charts showed MoPay dividend dog funds and trusts in an extreme bear market pattern. Since January projected dividend from 1k invested in each of the top ten funds and trusts soared 68% while aggregate single share price of the ten for the same period declined 28.7%. The gap between aggregate single share price sinking beneath rising projected dividend from $1k invested in those ten equities widened from 1567% in November to 1713% in December.
Since January the top ten Dow dogs projected dividend from $1k invested in each pup increased 3% while aggregate single share price sank 11.6%. Since the data source for Dow dividend indexArb.com anticipates future increases, dog dividend kept a more level pace than price. The most recent gap for the Dow shows aggregate single share price finally dropping below dividend from $1k invested in each of the top ten dogs by 15% canceling an overbought condition.
As of December 19 the top MoPay fund and trust Dogs showed $1036 or 246.6% more dividends (with equally bigger risk) at a $344 or 79.7% lower aggregate single share price than the Dow top ten.
Actionable Conclusion Four: Buy and Hold Monthly Dividend Paying Funds & Trusts, If You Dare
Stock analysts don't hazard guesses as to when or how fund prices will rise. They are paid to gauge individual stocks, and a few trusts and partnerships. Hence this monthly pay F&T dog diligence only revealed a list of funds and trusts to buy and hold if you dare, since the risk is rising.
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.
Disclosure: I am long T, VZ, INTC, JNJ, CVX. 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.