Morningstar/YChart (M/Y) real estate sector results tallied as of market closing prices August 21 compared with analyst mean target gain results one year hence showed ARMOUR Residential REIT (NYSE:ARR) exhibiting a 33.16% price upside. Nine more real estate sector stocks displayed 10.98% to 33% price upsides.
The chart above used the one year mean target price set by brokerage analysts matched against August 21 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 report series started applying dog dividend methodology in February prompted by Seeking Alpha reader requests. It complemented reports of possible dividend yield based buy opportunities from eight major market sectors as listed by Yahoo Finance posted since the fall of 2011.
So, responding to both the Seeking Alpha reader requests and Ycharts.com migration to an eleven sector list, this report series provided three actionable conclusions about the highest yield (dividend / price) stocks from the Morningstar/YCharts (M/Y) sectors: basic materials; communication services; consumer cyclical; consumer defensive; energy; financial services; healthcare; industrials; real estate; technology; utilities.
Below the author compared Dow dividend dog theory picks with one year mean target price estimates reported from broker analysts to reveal the following Arnold real estate selections for July/August:
Dog Metrics Graded Prime Real Estate Stocks
Top ten real estate sector dogs showing the biggest dividend yields by YChart's screen as of August 21 represented just two industries. Top real estate sector stock, JAVELIN Mortgage (NYSE:JMI) was one of six diversified REITs. Others in that industry were Western Asset Mortgage (NYSE:WMT), in second, CYS Investments (NYSE:CYS) placed fourth, AG Mortgage Investment (NYSE:MITT) was sixth, Invesco Mortgage Capital (NYSE:IVR) ninth, and American Capital Mortgage Investment (NASDAQ:MTGE) took tenth. One of four residential REITs in the top ten, Armour Residential REIT (ARR), was third. The other diversified REITs were American Capital Agency (NASDAQ:AGNC) in fifth; Apollo Residential Mortgage (NYSE:AMTG) in seventh; New York Mortgage Trust (NASDAQ:NYMT), in eighth completed the top ten.
Dividend vs. Price Results Compared to Dow Dogs
Below is a graph of the relative strengths of the prime ten real estate dogs by yield as of market close 8/21/2013 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 dividend.
Actionable Conclusion (1): Real Estate Dogs & Dow Were Bearish
The August m/y real estate collection of dividend payers took a very bearish price course as aggregate single share price dropped 5.8% since June. Dividend from $1k invested in each of the top ten m/y real estate stocks, ramped up at a rate of 22.4% since then.
For the Dow dogs, meanwhile, annual dividend from $1k invested in each of the top ten increased 3.6% since July, while aggregate single share price dropped 2.6%, continuing a bear track since June. 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, then shrunk to $153 or 41% in July, and kept compressing to $125 or 33% in August.
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 dig out bargains.
Actionable Conclusion Too (2): Wall Street Wizards Wrangle 28.46% Net Gain from Top 20 Real Estate Dogs Come 2014
Top twenty dogs for the M/Y Real Estate sector were graphed below to show relative strengths by dividend and price as of August 21, 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 price upsides and net gains including dividends less broker fees of $20 as of 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 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 13% lower dividend from $10K invested in this group while aggregate single share price was projected to increase by nearly 15% 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 (n/a).
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 stock price movement opposite market direction.
Actionable Conclusion Three (3): Analysts Forecast 10 Top Real Estate DiviDogs to Net 31.6% to 52.9% by 2014
Ten probable profit generating trades revealed by Yahoo Finance for 2014 were:
ARMOUR Residential REIT (ARR) netted $529.22 based on dividends plus a mean target price estimate from eight analysts less broker fees. A Beta number was not available for ARR.
CYS Investments (CYS) netted $508.38, based on dividends plus a mean target price estimate from eleven analysts less broker fees. The Beta number showed this estimate subject to volatility 85% less than the market as a whole.
Apollo Residential Mortgage (AMTG) netted $494.56 based on dividends plus the mean of annual price estimates from seven analysts less broker fees. The Beta number showed this estimate subject to volatility 41% less than the market as a whole.
American Capital Mortgage (MTGE) netted $426.20 based on dividends plus the mean of annual price estimates from nine analysts less broker fees. The Beta number showed this estimate subject to volatility 24% less than the market as a whole.
Anworth Mortgage Asset (NYSE:ANH) netted $420.64 based on a mean target price estimate from seven analysts combined with projected annual dividend less broker fees. The Beta number showed this estimate subject to volatility 77% less than the market as a whole.
New York Mortgage Trust (NYMT) netted $399.97 based on dividends plus a mean target price estimate from three analysts less broker fees. The Beta number showed this estimate subject to volatility 76% less than the market as a whole.
Invesco Mortgage Capital (NYSE:ARI) netted $374.58, based on dividends plus a mean target price estimate from nine analysts less broker fees. The Beta number showed this estimate subject to volatility 8% greater than the market as a whole.
Dynex Capital (NYSE:DX) netted $336.34 based on target estimates from six analysts plus dividends less broker fees. The Beta number showed this estimate subject to volatility 12% less than the market as a whole.
Western Asset Mortgage (NYSE:WMC) netted $330.97 based on estimates from seven analysts plus dividends less broker fees. The Beta number showed this estimate subject to volatility 46% less than the market as a whole.
Newcastle Investment Corp. (NYSE:NCT) netted $316.50 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 97% greater than the market as a whole.
The average net gain was slightly over 41.3% on $10k invested as 1k in each of these ten polished real estate dogs.
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.
Stocks listed above were suggested only as decent starting points for your M/Y sector 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.
Disclosure: I am long ARR, DD, GE, INTC, MCD, MSFT, 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.