Results from Yahoo Finance tallied for Russell 2000 Index members as of market closing prices June 26 compared with analyst mean target gain results one year hence showcased ten top stocks exhibiting 8.62% to 27.45% price upsides.
The chart above used the one year mean target price set by brokerage analysts matched against a June 28 closing price to compare ten 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 article reported results of the Russell 2000 as a 14 index as one in a series of index-specific articles reporting dividend yield and price upside results. Prompted by Seeking Alpha reader requests, the series has reported results for now a baker's dozen plus one of stock indices: Dow 30; Barron's 15 Gems; Russell 2000; S&P 500; S&P Aristocrats; Russell 50; NASDAQ; NYSE International 100; Mergent Dividend Achievers; Champions; Contenders; Challengers; Carnevale's Power 25; Carnevale's Super 29.
This report presumed yield (dividend / price) dividend dog methodology applied to any index and compared that index side by side with the Dow. Below, the Arnold Russell 2000 Index top dog elections for July were disclosed step by step.
Dog Metrics Ranked Russell 2000 Index Stocks by Yield
Russell Investments states:
"The Russell 2000 Index measures the performance of the small-cap segment of the U.S. equity universe. The Russell 2000 is a subset of the Russell 3000® Index representing approximately 10% of the total market capitalization of that index. It includes approximately 2000 of the smallest securities based on a combination of their market cap and current index membership.
The Russell 2000 Index is constructed to provide a comprehensive and unbiased small-cap barometer and is completely reconstituted annually to ensure larger stocks do not distort the performance and characteristics of the true small-cap opportunity set."
All of the top ten stocks in this index promising the biggest yields since June were financial sector firms: Spirit Realty Capital, Inc. (NYSE:SRC) led these. Second through tenth places were filled by: (2) Resource Capital (NYSE:RSO); (3) Anworth Mortgage Asset (NYSE:ANH); (4) Dynex Capital, Inc. (NYSE:DX); (5) Prospect Capital Corporation (NASDAQ:PSEC); (6) TICC Capital Corporation (NASDAQ:TICC); (7) KCAP Financial (NASDAQ:KCAP); (8) Fifth Street Finance Corp. (NASDAQ:FSC); (9) Capstead Mortgage Corp. (NYSE:CMO); (10) ZAIS Financial Corporation (ZFC). These completed the Russell 2000 top ten dogs.
Dividend vs. Price Results Compared to Dow Dogs
Below is a graph of the relative strengths of the top ten Russell 2000 dogs by yield as of market close7/26/2013 compared to those of the Dow. Historic projected annual dividend history from $1,000 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 dividend.
Actionable Conclusion (1): Russell 2000 And Dow Dogs Cowed By Bears
The July Russell 2000 collection of dividend payers initiated a bearish price course. In the past month Russell 2K top ten dog annual dividends from 1k invested in each increased nearly 2% while aggregate single share price of the ten dropped over 8%.
For the Dow dogs, meanwhile, annual dividend from $1k invested in each of the top ten increased just 0.03% since June, while aggregate single share price dropped over 8%. Dow dogs decreased their overbought condition in which aggregate single share price of the ten exceeded projected annual dividends from $1k invested in each of the ten by over $198 or 53% in June was shrunk to $152.51 or 41% in July.
Since Russell 2K index 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 cull out bargains.
Actionable Conclusion Too (2): Analysts Calculate Over 16% Net Gain from Top 20 Russell 2000 Dogs In 2014
Top twenty dogs from the Russell 2000 index were graphed below to show relative strengths by dividend and price as of July 26, 2013, and those projected by analyst mean price target estimates to the same date in 2014.
A hypothetical $1,000 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 price upsides and net gains including dividends less broker fees as of 2014.
Historic prices and actual dividends paid from $1,000 invested in the ten highest yielding stocks and the aggregate single share prices of those 20 stocks divided by 2 created data points for 2013. Projections based on estimated increases in dividend amounts from $1,000 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 in green for price and blue for dividends.
Yahoo projected a near 7% lower dividend from $10K invested in this group while aggregate single share price was projected to increase over 7% in the coming year. The number of analysts contributing to the mean target price estimate for each stock was noted in the next to the last column on the charts. Three to nine analysts are considered optimal for a valid estimate.
A beta (risk) ranking for each analyst rated stock was provided in the far right column on the above chart. A beta of 1 meant the stock's price would move with the market. Less than 1 showed lower than market movement. Higher than 1 showed greater than market movement. A negative beta number indicated the degree of a stock's movement opposed to market direction.
Actionable Conclusion (3): Analysts Forecast 10 Russell 2000 DiviDogs to Net 16% to 37.5% By July 2014
Ten probable profit generating trades revealed by Yahoo Finance for 2014 were:
Anworth Mortgage Asset netted $374.79, based on dividend plus mean target price estimates from seven analysts less broker fees. The Beta number showed this estimate subject to volatility 76% less than the market as a whole.
Spirit Realty Capital, Inc. netted $349.68 based on dividends plus the mean of annual price estimates from five analysts less broker fees. The Beta number showed this estimate subject to volatility 7% opposite to the market as a whole.
PennyMac Mortgage Investment Trust (NYSE:PMT) netted $225.84, based on dividends plus a mean target price estimate by nine analysts less broker fees. The Beta number showed this estimate subject to volatility 55% less than the market as a whole.
Ship Finance International (NYSE:SFL) netted $219.90 based on a mean target price estimate from seven analysts combined with a projected annual dividend less broker fees. The Beta number showed this estimate subject to volatility 23% greater than the market as a whole.
Dynex Capital, Inc. netted $203.82 based on a mean target price estimate from five analysts combined with projected annual dividend less broker fees. The Beta number showed this estimate subject to volatility 28% less than the market as a whole.
TICC Capital Corporation netted $186.35 based on dividends plus mean target price estimate from five analysts less broker fees. The Beta number showed this estimate subject to volatility 15% less than the market as a whole.
Apollo Commercial Real Estate Finance (NYSE:ARI) netted $178.15 based on dividends plus mean target price estimate from eight analysts less broker fees. The Beta number showed this estimate subject to volatility 43% less than the market as a whole.
Capstead Mortgage Corporation netted $176.18 based on dividends plus the mean of annual price estimates from five analysts less broker fees. The Beta number showed this estimate subject to volatility 53% less than the market as a whole.
Horizon Technology Finance Corporation (NASDAQ:HRZN) netted $173.44 based on dividends plus mean target price estimates from five analysts less broker fees. The Beta number showed this estimate subject to volatility 38% greater than the market as a whole.
Apollo Investment (NASDAQ:AINV) netted $163.25 based on estimates from 11 analysts plus dividends less broker fees. The Beta number showed this estimate subject to volatility 17% greater than the market as a whole.
The average net gain in dividend and price was over 22.5% on $1k invested in each of these ten dogs. This gain estimate was subject to average volatility 30% less than the market as a whole.
Net gain 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.
The stocks listed above were suggested only as decent starting points for your index dog dividend stock purchase 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.