Results from the financial sector tallied as of market closing prices June 28 projecting gain results one year hence showed CYS Investments, Inc. (NYSE:CYS) with 36.81% and American Capital Agency (NASDAQ:AGNC) with 29.55% price upsides.
The chart above used one year mean target price set by brokerage analysts multiplied by the number of shares in a $1k investment to compare ten financial sector stocks showing the highest upside price potential into 2014 out of 20 selected by yield. The number of analysts providing price estimates was noted after the name for each stock. Three to nine analysts were considered optimal for a valid mean target price estimate.
This report series started applying dog dividend methodology in the fall of 2011 to reveal possible buy opportunities in each of eight major market sectors listed by Yahoo Finance: basic materials (BasMats), consumer goods (ConGo), financials (Fins), healthcare (Heal), industrial goods (IndiGo), services (Svcs), technology (Tec), and utilities (Utes).
Below the author supplemented Dow dividend dog theory picks with the highest yield (dividend / price) from Yahoo sectors with one year mean target price estimates reported by yahoo from broker analysts.
Note my Arnold Fins selections for May/June as follows:
Dog Metrics Pointed Out Ten Top Financial Stocks
Top ten financial sector dogs showing the biggest dividend yields by Yahoo Finance's screen as of June 28 represented six industries. Top financial sector stock, American Capital Agency (AGNC) was one of four residential REITs. Others in that industry were Armour Residential REIT (NYSE:ARR) in second place, New York Mortgage Trust Inc. (NASDAQ:NYMT) in third, and CYS Investments (CYS), in fifth place. Invesco Mortgage Capital Inc. (NYSE:IVR), the only mortgage investment firm was fourth dog. Resource Capital Corp. (NYSE:RSO) the lone retail REIT, was sixth dog. The diversified investments industry was represented by two firms: Adminisradora de Fondos (NYSE:PVD) in seventh, and Prospect Capital (NASDAQ:PSEC), in tenth position. A diversified REIT, Annaly Capital Management (NYSE:NLY), took eighth place. The lone asset management firm took the ninth slot, Pimco High Income Fund (NYSE:PHK) and rounded out the top ten financial dogs by yield.
Dividend vs. Price Results Compared to Dow Dogs
Below is a graph of the relative strengths of the top ten financials dogs by yield as of market close 6/18/2013 compared to those of the Dow. Historic projected annual dividend history from $1000 invested in each of the ten highest yielding stocks and the total single share prices of those ten stocks created the data points shown in green for price and blue for dividends.
Actionable Conclusion (1): Financial Dogs on Neutral Path As Dow Stayed Bullish
May/June financial dividend dogs displayed a mixed signal after April. Aggregate dividend from $10k invested in each of the top ten stocks increased at a rate of 23.5% since April while total single share price inclined 25.8% for that period.
For the Dow dogs, meanwhile, projected annual dividend from $1k invested in each of the top ten dropped over 2.2% since April, while aggregate single share price popped up over 13.6%. The Dow dogs bull run increased their overbought condition as aggregate single share price of the ten exceeded projected annual dividend from $1k invested in each of the ten by over $198 or 53%.
Since sector dogs are not the blue chip high quality equivalents of the Dow list, an additional gauge of upside potential was added to the simple high yield metric used to sniff out initial bargains.
Actionable Conclusion Two (2): Wall Street Wizard Wisdom Weighed to Calculate Over 20.57% Net Gain from Top 20 Dogs Come 2014
Top twenty dogs in the financials sector were graphed below to show relative strengths by dividend and price as of June 28, 2013 and those projected by analyst mean price target estimates to the same date in 2014.
A hypothetical $1000 investment in each equity was divided by the current share price to find the number of shares purchased. The shares number was then multiplied by projected annual per share dividend amounts to find the dividend return. Thereafter the analyst mean target price was used to gauge the stock upsides to 2014.
Historic prices and actual dividends paid from $1000 invested in the ten highest yielding stocks and the aggregate single share prices of those twenty stocks divided by 2 created the data points for 2013. Projections based on estimated increases in dividend amounts from $1000 invested in the twenty highest yielding stocks and aggregate one year analyst target share prices from Yahoo Finance divided by 2 created the 2014 data points green for price and blue for dividends.
Yahoo projected a 7.8% lower dividend from $10K invested in this group while aggregate single share price for those ten was projected to increase by 8% in the coming year.
The number of analysts contributing to the mean target price estimate for each stock was noted in the last column on the charts. Three to nine analysts was considered optimal for a valid projection estimate. Estimates provided by one analyst were not applied.
Actionable Conclusion Three (3): Analysts Forecast 2014 Financials DiviDog Net Gains of 20% to 49.6%
Ten probable profit generating trades revealed by Yahoo Finance for 2014 were:
- CYS Investments, Inc. (CYS) netted $495.74, based on dividends plus mean target price estimates by thirteen analysts less broker fees;
- American Capital Agency (AGNC) netted $458.05 based on dividends plus mean target price estimates from seventeen analysts less broker fees;
- Annaly Capital Management (NLY) netted $283.90, based on dividends plus mean target price estimates from eighteen analysts less broker fees;
- New York Mortgage Trust Inc. (NYMT) netted $272.47, based on dividends plus mean target price estimates from three analysts less broker fees;
- Anworth Mortgage Asset Co. (NYSE:ANH) netted $255.00 based on dividends plus mean target price estimate from seven analysts less broker fees;
- Apollo Investment Corp. AINV) netted $240.98 based on a mean target price estimate from eight analysts combined with projected annual dividend less broker fees;
- Solar Capital Ltd. (NASDAQ:SLRC) netted $222.10, based on dividend plus mean target price estimates from four analysts less broker fees;
- MFA Financial (NYSE:MFA) netted $208.40 based on dividends plus the mean of annual price estimates from eight analysts less broker fees;
- Capstead Mortgage Corp. (NYSE:CMO) netted $206.45 based on a mean target price estimate from five analysts combined with projected annual dividend less broker fees;
- Hatteras Financial Corp. (NYSE:HTS) netted $201.59 based on estimates from eleven analysts plus dividends less broker fees.
The average net gain in dividend and price was 28.45% on $1k invested in each of these ten dogs.
Gains calculated did not factor-in any tax problems resulting from distributions (not dividends and K-1s) from MLPs and any possible re-capture tax problems/rates that could suck projected gains out of some of these estimates at the regular tax bracket rate and not capital gain rates. Consult your tax advisor regarding the source of "dividends" from any investment.
The stocks listed above are suggested only as decent starting points for your consumer goods dividend stock purchase research process. These are not recommendations.
Disclosure: I am long ARR, FAS, DD, GE, INTC, JNJ, MCD, PFE, T, VZ. 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.
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.