Results from Yahoo Finance tallied for Russell 2000 Index members as of market closing prices October 17 were compared to analyst mean target price projections one year hence. The resulting chart of that data below showcased six stocks going after 11% to 21.5% price upsides. Medley Capital Corporation (MCC) a New York based closed-end fund (CEF) equity firm with 10.8% showed the lowest upside of those top six. Fifth Street Finance Corp. (FSC) a credit services firm based in White Plains, NY posted an upside number just short of 12%. Two firms exceeded 13% price upsides: KCAP Financial (KCAP), a diversified investments financial sector firm from New York showed 13.02% upside and Ship Finance International (SFL) a shipping firm in the services sector showed nearly 14%. Horizon Technology Finance Corporation (HRZN) an specialty finance company based in Farmington, CT showed 16.15% price upside. Anworth Mortgage Asset Corporation (ANH) the Santa Monica, CA based diversified REIT firm from the financial sector exhibited a 21.49% price upside to lead the Russell 2000 Index of mid-cap stocks.
The chart above used the one year mean target price set by brokerage analysts matched against October 17 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 Index as one in a series of index-specific articles devoted to dividend yield and price upside results. Seeking Alpha reader requests prompted this series of index-specific articles reporting dividend yield plus price upside results for these fourteen stock indices: Dow 30; Barron's 15 Gems; S&P 500; S&P Aristocrats; Russell 1000; NASDAQ 100; NYSE International 100; Dividend Achievers; Champions; Contenders; Challengers; Carnevale's Power 25; Carnevale's Super 29; Russell 2000.
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 selections for October were disclosed step by step.
Dog Metrics Screened 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."
Ten stocks in this index promising the biggest yields in October represented only the financial sector. Resource Capital (RSO) led these. Second through tenth places were filled by: (2) Dynex Capital, Inc. (DX); (3) Prospect Capital Corporation (PSEC); (4) TICC Capital Corporation (TICC); (5) KCAP Financial ; (6) Fifth Street Finance Corp. ; (7) ZAIS Financial Corporation; (8) BlackRock Kelso Capital Corporation (BKCC); (9) Medley Capital Corporation ; (10) THL Credit Inc. (TCRD) 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 close 10/17/2013 compared to those of the Dow. 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): Russell 2000 Get Bullish as Dow Dogs Dither
The October Russell 2000 collection of dividend payers initiated a bullish price course. In the past month Russell 2000 top ten dog annual dividend from 10k invested as $1k in each dog decreased 1.3 % while aggregate single share price of the ten increased over 11%.
For the Dow dogs, meanwhile, projected annual dividend from $10k invested as $1K in each of the top ten Dow dogs dropped just 0.6% since September, while aggregate single share price swooned 11%, ending a brief bullish track. The Dow dogs overbought condition in which aggregate single share price of the ten exceeded projected annual dividend from $1k invested in each of the ten shrank. The overhang was $198 or 53% in June, then shrunk to $153 or 41% in July, compressed to $125 or 33% in August then expanded to $161 or 43% for September, then shrank down to $111 or 30% for October.
To quantify the top dog rankings, analyst mean price target estimates provide a "market sentiment" gauge of upside potential and was added to the simple high yield "dog" metric used to dig out bargains.
Actionable Conclusion (2): Wall St. Wizards Want 16% Net Gain from Top 20 Russell 2000 Dogs By 2014
Top twenty dogs from the Russell 2000 index were graphed below to show relative strengths by dividend and price as of October 17, 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 as of 2014.
Historic prices and actual dividends paid from $1000 invested in the 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 over 7% lower dividend from $10K invested in this group while aggregate single share price was projected to increase nearly 8% 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 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 numbers indicated the degree of a stocks movement opposed to market direction.
Actionable Conclusion (3): Analysts Predict 10 Russell 2000 DiviDogs to Net 9% to 21% By October 2014
Five of the top dividend yielding Russell 2000 dogs were verified as being among the top ten gainers for the coming year based on analyst 1 year target prices. So this month the dog strategy as graded by Wall St. wizards is 50% accurate.
Ten probable profit generating trades revealed by Yahoo Finance for 2014 were:
Anworth Mortgage Asset netted $297.02, based on dividend plus mean target price estimates from seven analysts less broker fees. The Beta number showed this estimate subject to volatility 80% less than the market as a whole.
Horizon Technology Finance Corporation netted $244.14 based on dividends plus mean target price estimate from four analysts less broker fees. The Beta number showed this estimate subject to volatility 57% less than the market as a whole.
KCAP Financial netted $226.51 based on dividends plus the mean of annual price estimates from four analysts less broker fees. The Beta number showed this estimate subject to volatility 53% greater than the market as a whole.
Ship Finance International netted $215.95 based on dividends plus the mean of annual price estimates from six analysts less broker fees. The Beta number showed this estimate subject to volatility 20% more than the market as a whole.
Fifth Street Finance Corp netted $210.39 based on dividends plus mean target price estimate from ten analysts less broker fees. The Beta number showed this estimate subject to volatility 13% less than the market as a whole.
Dynex Capital, Inc. netted $194.86 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 13% less than the market as a whole.
Medley Capital Corporation netted $194.08 based on a mean target price estimate from twelve analysts combined with projected annual dividend less broker fees. The Beta number showed this estimate subject to volatility 57% less than the market as a whole.
TICC Capital Corporation netted $184.61 based on dividends plus mean target price estimate from fiver analysts less broker fees. The Beta number showed this estimate subject to volatility 12% less than the market as a whole.
Apollo Commercial Real Estate (ARI) netted $179.87 based on estimates from eight analysts plus dividends less broker fees. The Beta number showed this estimate subject to volatility 18% greater than the market as a whole.
Gladstone Investment Corporation (GAIN) netted $174.52, based on dividends plus a mean target price estimate by two analysts less broker fees. A Beta number was not available for GAIN.
The average net gain in dividend and price was over 21% on $1k invested in each of these ten dogs. This gain estimate was subject to average volatility 28% less than the market as a whole.
Net gain estimates above did not factor-in any 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.