Editors' Note: This article covers stocks trading at less than $1 per share and/or with less than a $100 million market cap. Please be aware of the risks associated with these stocks.
Three buy and hold lists were drawn in the article below. January monthly pay (MoPay) stocks were listed by (1) yield and (2) upside potential. These were compared and contrasted against (3) a high yield (and higher risk) MoPay buy and hold fund, trust, and partnership list. The three lists were backed by six actionable conclusions.
Monthly Pay Dividend Features
Quarterly, Semi-Annual and Annual dividend stockholders anxiously await announcements from a firm, fund, or analyst to learn if their next dividend will be higher, lower, or paid at all. Monthly pay stocks, funds, trusts, and partnerships inform the holder every four and one third weeks by check and/or statement. If the entity reduces or suspends a payment, the holder can sell out of the investment immediately to cut future losses. This advantage has been countered when companies suddenly cut monthly dividends to save cash and trigger a price crash. So, the segment is volatile.
"One other advantage of monthly paying stocks is the way they are slightly protected against traders that buy just before the ex-date and sell after the record date. The brokerage commissions they have to pay for a measly monthly dividend helps keep them away and the stock price doesn't fluctuate so wildly." --TennisBoy88
"[A] problem with this analysis is you are comparing companies of VERY different varieties. REITs pay no taxes and their distributions are classified as ordinary income and thus not subject to the 15% or 20% tax rate. MLPs also pay little no taxes at the corporate level, but instead have "distributions"... Comparing REITs, MLPs and regular corporations thus requires a financial analysis...not include[d]." --arbtrdr
"Mopay dividends reinvested will return almost 1% more yearly than quarterly payors as it compounds faster." --drking
Dogs of the Index Metrics Found Bargains
For this article, fifty-one dividend equities plus sixty funds, partnerships, and trusts were culled from over 650 entities listed here paying monthly returns. All stocks were ranked as of January 17, 2014 using the two key dog performance metrics: (1) stock price; (2) annual dividend. Dividing the annual dividend by the price declared the percentage yield by which each dividend dog stock was ranked.
List One: Monthly Pay Dividend Stocks by Yield
Ten monthly pay dividend equities showing the best yields for January represented just three of the nine Yahoo market sectors, financials (fins), basic materials (bas mat), and utilities (utes). The top five dog stocks revealed by Yahoo Finance data were all financial: Orchid Island Capital (NYSEMKT:ORC); Armour Residential REIT (NYSE:ARR); Five Oaks Investment Corp. (NYSE:OAKS); Full Circle Capital Corp. (NASDAQ:FULL); Javelin Mortgage Investment Corp. (NYSE:JMI). These were five of seven financial sector firms that dominated the list. The two remaining financial MoPay dogs placed seventh, and tenth: Prospect Capital Corporation (NASDAQ:PSEC); Fifth Street Finance (NASDAQ:FSC).
The sixth slot in the top ten was filled by one of two basic materials concerns, Enduro Royalty Trust (NYSE:NDRO). Another basic materials firm, Pacific Coast Oil Trust (NYSE:ROYT), placed eighth. One utility on the list, Atlantic Power Corp. (NYSE:AT) rounded out the MoPay top dog list in ninth place.
List Two: Monthly Pay Dividend Stocks by Price Upside
Results from Yahoo Finance for MoPay dividend stocks as of January 17 market closing prices were compared with analyst 1-year mean target prices. Three stocks boasted 25.08% to 35.03% price upsides. Atlantic Power Corp., a long falling knife, infamous electric utility, loved by bears and analysts but dismissed by stockholders, showed the lesser 25.08% upside of those three. In the middle, Pacific Coast Oil Trust, an Austin, TX headquartered independent oil & gas firm, showed 26.29% In the end, Enduro Royalty Trust, another Austin based independent oil and gas firm, exhibited a 35.03% upside to lead the January MoPay dogs. Seven more members of the MoPay pack showed over 7% to near 18% price upsides.
There were two stocks not seen in the top ten list by yield: Breitburn Energy Partners (NASDAQ:BBEP), a recent graduate to the MoPay ranks from Q-pay in the basic materials sector, showed 9.74% upside; LinnCo LLC (NASDAQ:LNCO), another basic materials favorite, displaying a 13.9% discrepancy to the upside from January price to the mean of analyst one year target price estimates.
MoPay stocks showing the highest upside price potential into 2014 were listed above 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 estimate.
List Three: Monthly Pay Dividend Funds and Trusts by Yield
Sixty top MoPay funds and trusts listed below were culled from over 600 candidates by yields calculated as of January 21 to determine the top ten.
Ten monthly dividend funds, trusts and partnerships showing the biggest yields for January featured four exchange traded notes, five closed-end funds, and one trust. Top dog was the lone trust, Cherry Hill Mortgage Investment Corp. (NYSE:CHMI). Dog two and three were two of four ETNs: ETRACS Monthly Pay 2X Leveraged Mortgage REIT ETN (NYSEARCA:MORL) and UBS ETRACS Monthly Pay 2xLeveraged Closed - End Fund ETN (NYSEARCA:CEFL). The other ETNs, Credit Suisse AG - Credit Suisse Silver Shares Covered Call Exchange Traded Notes (NASDAQ:SLVO) and UBS E-TRACS Monthly Pay 2x Divs Hi Inc ETN (NYSEARCA:DVHL), placed eighth and ninth.
Five closed-end funds as revealed by Yahoo Finance data placed third through sixth, and tenth: Cornerstone Progressive Return Fund (NYSEMKT:CFP); Cornerstone Strategic Value Fund, Inc. (NYSEMKT:CLM); Cornerstone Total Return Fund, Inc. (NYSEMKT:CRF); Gabelli Global Gold Natural Resources & Income Trust (NYSEMKT:GGN); PIMCO High Income Fund Com Shs (NYSE:PHK).
Background and Actionable Conclusions
Monthly pay dividend dog stock lists reviewed since June 2012 prompted reader suggestions to include funds, trusts, and partnerships. A list of MoPay equities to buy and hold in September 2012 resulted from those reader suggestions supplemented with a high yield collection from here. Thereafter a docile, sleeping dogs list was supplemented by an upside potential article in October and an upside vs. buy & hold in November. One list factored December 2012 reader comments. January, February, March, April, May, June, July, August, September, October, November, and December 2013 reader input all contributed to this article which compared and contrasted January MoPay stock upside potential against high yield (and higher risk) buy and hold fund, trust and partnership constituents.
MoPay Dividend vs. Price Compared to Dow Dogs
Relative strength for the top ten MoPay dividend dog stocks by yield was graphed below as of January 17, 2014 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): MoPay Dogs Fell & Dow Dogs Flew in 2013
Top ten MoPay dividend dogs sagged bearishly in 2013. Aggregate dividend from $10k invested as $1k in each of the top ten stocks increased at a rate of 12% since January 2013 while total single share price of those ten stocks dropped at a 7.5% rate for that period.
Bullish sentiment however propelled the Dow dogs as projected annual dividend from $10k invested as $1K in each of the top ten Dow dogs dropped nearly 2% for the year past. Aggregate single share price increased over 3% to emphasize the bullish state. The Dow dogs overbought condition grew some, as aggregate single share price of the ten exceeded projected annual dividend from $1k invested in each. The overhang of $92 or 24% in February 2013 expanded to $115 or 31% by January 2014.
To quantify the top dog rankings, analyst mean price target estimates provided 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. Wizard Wisdom Wished 26.2% 1 yr. Net Gain from Top 10 MoPay Dogs
Top dogs on the MoPay stock list were graphed below to show relative strengths by dividend and price as of January 17, 2014 and those projected by analyst mean price target estimates to the same date in 2015.
Historic prices and actual dividends paid from $10,000 invested as $1K in each of the ten highest yielding stocks and the aggregate single share prices of those ten stocks created the data points for 2014. Projections based on estimated increases in dividend amounts from $1000 invested in the ten highest yielding stocks and aggregate one year analyst mean target prices as reported by Yahoo Finance created the 2015 data points in blue for dividend and green for price. Note: one year target estimated prices from one analyst were not included (n/a).
Yahoo projected a 12.4% lower dividend from $10K invested as $1k in the top ten MoPay dogs while aggregate single share price was projected to increase by 14.6% in the coming year.
Actionable Conclusion (3): Analysts Forecast 2014 NEXT10 MoPay DiviDog January Net Gains of 11%
Ten monthly dividend equities that showed the NEXT best yields January 17 represented two of the same three of nine Yahoo market sectors found in the top ten: basic materials and financials but a services sector (svcs) stock joined this pack.
The NEXT ten dogs showed a 4.4% lower dividend from $10k invested as 1k in each stock while aggregate single share price for the next ten was projected by analysts to increase by over 5.3% 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 above 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 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 price movement opposite of market direction.
Actionable Conclusion (4): Analysts Project Ten MoPay Dog Stocks to Net Near 18% to 45% Gains by January 2015
Eight of the ten top dividend yielding MoPay dogs were verified as being among the Top ten gainers for the coming year based on analyst 1 year target prices. So as of January 17 the dog strategy for this MoPay group as graded by Wall St. wizards was 80% accurate.
Ten probable profit generating trades revealed by Yahoo Finance for 2014 were:
Enduro Royalty Trust netted $449.42 based on dividends plus mean target price estimate from five analysts less broker fees. The Beta number showed this estimate subject to volatility 2% less than the market as a whole.
Pacific Coast Oil Trust netted $359.24 based on dividends plus a mean target price estimate from three analysts less broker fees. A Beta number was not available for ROYT.
Atlantic Power Corp netted $343.91 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 79% less than the market as a whole.
Armour Residential REIT netted $289.41 based on estimates from nine analysts plus dividends less broker fees. The Beta number showed this estimate subject to volatility 65% less than the market as a whole.
Full Circle Capital Corporation netted $288.70, based on dividend plus mean target price estimates from two analysts less broker fees. A Beta number was not available for FULL.
Orchid Island Capital Inc netted $252.31 based on estimates from two analysts plus dividends less broker fees. A Beta number was not available for ORC.
LinnCo, LLC netted $210.51 based on dividends plus the mean of annual price estimates from nine analysts less broker fees. A Beta number was not available for LNCO.
Fifth Street Finance netted $208.88, based on dividend plus mean target price estimates from eleven analysts less broker fees. The Beta number showed this estimate subject to volatility 24% less than the market as a whole.
Five Oaks Investment Corp netted $188.26 based on a mean target price estimate from three analysts combined with projected annual dividend less broker fees. A Beta number was not available for OAKS.
Breitburn Energy Partners netted $175.23 based on dividends plus the mean of annual price estimates from eighteen analysts less broker fees. The Beta number showed this estimate subject to volatility 20% less than the market as a whole.
The average net gain in dividend and price was 27.7% on $1k invested in each of these ten MoPay dogs. This gain estimate was subject to average volatility 38% less than the market as a whole.
Fund & Trust Dividend & Price Results vs. MoPay Top Ten Stocks
Below relative strengths for the top ten MoPay F&T Dogs by yield was graphed as of January 21, 2014 and compared to those of the top ten stocks. Twelve periods of projected annual dividend history from $10,000 invested as $1k in each of the ten highest yielding equities and the total single share prices of those ten equities created the data points for each period shown in blue for dividend and green for price.
Actionable Conclusion (5): MoPay Top Ten DiviDog Funds & Trusts Dithered As Stocks Charged in January
Charts show MoPay dividend dog funds and trusts increased markedly in dividend and price since December. Projected dividend from 10k invested as $1k in each of the top ten funds and trusts inclined 18.7% while aggregate single share price of the top ten over the same period also rose nearly 40%.
A gap between aggregate single share price of top ten MoPay funds and trusts and their projected dividend from $1k invested in those ten equities increased from 1,148% in November, to 1,458% for December, but retreated to 1,221% in January
MoPay dividend stock dogs however advanced after December. Aggregate dividend from $10k invested as $1k in each of the top ten stocks fell at a rate of 4% since then while total single share price of those ten inclined 6.6% for that period.
The gap between aggregate single share price and dividend from $1k invested in each for the ten MoPay stocks was 1184% in November and surged to 1348% in December but shrank to 1204% for January
As of January 21 the top MoPay fund and trust dogs showed $638 or nearly 50% more dividend at a $48 or 48% higher aggregate single share price than the MoPay stocks top ten.
Actionable Conclusion (6): Buy and Hold Monthly Dividend Paying Stocks, Funds, Trusts, & Partnerships If You Dare
Stock analysts don't hazard guesses as to when or how much fund and trust prices will rise or fall. They are paid to gauge individual stocks, and a few funds and partnerships. Hence this monthly pay F&T dog diligence only revealed a list of funds and trusts to buy and hold if you dare.
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 MoPay 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.