Results from the financial sector tallied as of market closing prices August 2 projecting gain results one year hence showed CYS Investments, Inc. (CYS), the Waltham, MA headquartered residential REIT that "provides loans through intermediaries to homeowners, real-estate developers, corporations and other borrowers", brandished a 21.76% price upside.
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 the Arnold Fins selections for July/August 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 August 2 represented six industries. Top financial sector stock, American Capital Agency (AGNC) was one of seven residential REITs. Others in that industry were CYS Investments (CYS) in second place, New York Mortgage Trust Inc. (NYMT) in third, Armour Residential REIT (ARR) in fourth place. Other residential REITs positioned themselves in sixth, eighth, and tenth slots: Hatteras Financial Corp. (HTS); Dynex Capital Inc. (DX); Two Harbors Investment Co. (TWO). Ivesco Mortgage Capital Inc. (IVR), the only mortgage investment firm was fifth dog. The diversified REITs were represented by two firms: Annaly Capital Management (NLY), took seventh place, while Anworth Mortgage Asset Co. (ANH) took the ninth slot 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 8/2/2013 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 And Dow Cowed by Bear
July/August financial dividend dogs retreated from a bear after June. Aggregate dividend from $10k invested as $1k in each of the top ten stocks increased at a rate of 3.9% since April while total single share price of those ten decreased 39.9% for that period.
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%, showing the first bear tack of the year. Dow dogs decreased their overbought condition in which aggregate single share price of the ten exceeded projected annual dividend 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 sector dogs are not the bluechip 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 bargains.
Actionable Conclusion (2): Wall Street Wizard Wisdom Weighed An 18% Net Gain from Top Financial 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 7.4% lower dividend from $10K invested in this group while aggregate single share price for those ten was projected to increase by 8.5% 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 was considered optimal for a valid projection estimate. Estimates provided by one analyst were not applied (n/a).
A beta (risk) ranking for each stock was provided in the far right column of 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 stocks movement opposite of market direction.
Actionable Conclusion (3): Analysts Forecast 2014 Financials DiviDog Net Gains of 17% to 36.8%
Ten probable profit generating trades revealed by Yahoo Finance for 2014 were:
CYS Investments, Inc. (CYS) netted $368.68, based on dividends plus mean target price estimates by eleven analysts less broker fees. The Beta number showed this estimate subject to volatility 95% less than the market as a whole.
New York Mortgage Trust Inc. (NYMT) netted $300.25, based on dividends plus mean target price estimates from three analysts less broker fees. The Beta number showed this estimate subject to volatility 80% less than the market as a whole.
Invesco Mortgage Capital Inc. (IVR) netted $275.34, based on dividend plus mean target price estimates from nine analysts less broker fees. The Beta number showed this estimate subject to volatility 4% less than the market as a whole.
American Capital Agency (AGNC) netted $267.30 based on dividend plus mean target price estimates from seventeen analysts less broker fees. The Beta number showed this estimate subject to volatility 81% less than the market as a whole.
Dynex Capital Inc. (DX) netted $226.01, based on dividends plus mean target price estimates from five analysts less broker fees. The Beta number showed this estimate subject to volatility 35% less than the market as a whole.
Apollo Commercial Real Estate (ARI) netted $186.76 based on a mean target price estimate from eight analysts combined with projected annual dividend less broker fees. The Beta number showed this estimate subject to volatility 44% less than the market as a whole.
Capstead Mortgage Corp. (CMO) netted $178.17 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 59% less than the market as a whole.
TICC Capital Corp. (TICC) netted $173.84 based on dividends plus mean target price estimate from twelve analysts less broker fees. The Beta number showed this estimate subject to volatility 14% less than the market as a whole.
MFA Financial (MFA) netted $170.90 based on dividends plus the mean of annual price estimates from twelve analysts less broker fees. The Beta number showed this estimate subject to volatility 72% less than the market as a whole.
Solar Capital Ltd. (SLRC) netted $169.90 based on estimates from ten analysts plus dividends less broker fees. The Beta number showed this estimate subject to volatility 32% less than the market as a whole.
The average net gain in dividend and price was over 23% on $1k invested in each of these ten dogs. This gain estimate was subject to average volatility 52% less than the market as a whole.
The stocks listed above were suggested only as decent starting points for your sector dog dividend stock purchase research process. These were not recommendations.
These gains as reported do not factor in any tax problems resulting from distributions. Consult your tax advisor regarding the source of "dividends" from any investment.
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.