(Editors' Note: This article covers micro-cap stocks. Please be aware of the risks associated with these stocks.)
Bargain stocks were revealed below as candidates to buy and hold for at least one year. This was one installment in an ongoing series that has reported (1) dividend yield; (2) price upside; (3) net gain results based on analyst 1 yr target projections. Stocks reported were termed dogs because they were all selected based on Michael B. O'Higgins book "Beating The Dow" (HarperCollins, 1991), which revealed how high yielding stocks whose prices increased (and whose dividend yields therefore decreased) could be sold off once a year to sweep gains and reinvest the seed money into higher yielding stocks in the same index, named Dogs of the Dow. O'Higgins system works to find bargains in any collection of dividend paying stocks. Utilizing analyst price upside estimates has expanded the universe to include popular growth equities when desired.
Yield (dividend / price) results from here verified by Yahoo Finance for monthly dividend paying MicroCap (MoPay MicroCap) stocks as of market closing prices March 5 and compared those results with analyst 1 yr target projections. Four actionable conclusions were drawn.
Wall Street Wizard Weightings
One year mean target price set by brokerage analysts multiplied by the number of shares in a $1k investment were used to compare four stocks showing the highest upside price potential into 2015 out of 14 selected by yield. The number of analysts providing price estimates was noted after the name for each stock. Three to nine analysts was considered optimal for a valid mean target price estimate.
Actionable Conclusion (1) Four MoPay MicroCap Dividend Dogs Ran After 7.24% to 19.94% Upsides
Dogs of the Index Metrics Extracted Bargains
Fourteen micro cap (worth $30 million to $300 million) stocks with monthly payouts were culled for this article.
Ten monthly pay micro cap dividend equities showing the best yields, represented just two of nine Yahoo market sectors: financials, & basic materials. Nine financial sector firms were led by top dog Five Oaks Investment Corp. (NYSE:OAKS). Other financial firms placed second through eighth, and tenth: Javelin Mortgage Investment Corp (NYSE:JMI); Wheeler Real Estate Investment Trust Inc. (NASDAQ:WHLR); Full Circle Capital Corporation (NASDAQ:FULL); Mesa Royalty Trust Units (NYSE:MTR); Gladstone Investment (NASDAQ:GAIN); Harvest Capital Credit Corp. (NASDAQ:HCAP); Gladstone Commercial (NASDAQ:GOOD); Solar Senior Capital Ltd (NASDAQ:SUNS).
One basic materials concern placed ninth: Cross Timbers Royalty Trust (NYSE:CRT) to complete the March 5 MoPay Micro top dog list by yield.
Actionable Conclusion (2): MoPay Micro Caps Got Bullish as Dow Dogs Retreated From A Bear
MoPay Micro dividend dogs rose in price and dropped in dividend since February. Total single share price of the top ten rose 10%. Aggregate dividend from $10k invested as $1k in each of the top ten dogs fell at a rate of 3% to confirm the bull signal.
The Dow dogs, meanwhile, turned mildly bearish as projected annual dividend from $10k invested as $1K in each of the top ten Dow dogs rose 0.3% since February 20, while aggregate single share price fell 0.12%. The Dow dogs overbought condition in which aggregate single share price of the ten exceeded projected annual dividend from $10k invested in those ten (@$1k each) shrank 1%. The overhang of $129 or 34% February 20 narrowed to $128 or 33% March 5. A little of the recent move was attributable to Microsoft (NASDAQ:MSFT) replacing Coca-Cola Co. (NYSE:KO) at the tail of the top ten Dow dogs since February.
Actionable Conclusion (3): Wall Street Wizards Want 11.3% 1 yr. Net Gain from 14 MoPay MicroCap Dogs
Dogs on the MoPay MicroCap stock list were graphed below to show relative strengths by dividend and price as of March 5, 2014 and those projected by analyst mean price target estimates to the same date in 2015.
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 2015.
Historic prices and actual dividends paid from $1000 invested in each of the 14 stocks and the aggregate single share prices of those twenty stocks divided by 1.4 created the data points for 2014. 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 1.4 created the 2015 data points green for price and blue for dividends.
Yahoo projected over 2% lower dividend from $10K invested as $1k in the average ten of this group of while aggregate single share price of those ten was projected to increase by nearly 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). It is plain to see that very few analysts follow these micro caps.
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. Like analyst coverage, beta rankings are also sparse for the micro caps.
Actionable Conclusion (4): Wall St. Analysts Forecast 2/20/2015 MoPay MicroCap DiviDog Net Gains of 17% to 40%
Three of the ten top dividend yielding MoPay MicroCap dogs were verified as being among the four gainers for the coming year based on analyst 1 year target prices. So this week the dog strategy for this collection as graded by Wall St. wizards was again 75% accurate.
Four probable profit generating trades were revealed by Thompson/First Call in Yahoo Finance into 2015:
Gladstone Commercial. netted $212.99 based on a mean target price estimate from two 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.
Gladstone Land Corporation (NASDAQ:LAND) netted $206.59 based on dividends plus mean target price estimate from four analysts less broker fees. A Beta number was not available for LAND.
Harvest Capital Credit Corp netted $159.92 based on estimates from two analysts plus dividends less broker fees. A Beta number was also not available for HCAP.
Solar Senior Capital Ltd netted $131.31 based on a mean target price estimate from four analysts combined with projected annual dividend less broker fees. A Beta number was also not available for SUNS.
The average net gain in dividend and price was 17.8% on $10k invested as $1k in each of these four MoPay dogs. This gain estimate was subject to average volatility 44% less than the market as a whole.
The stocks listed above were suggested only as decent starting points for a MoPay MicroCap dog dividend stock purchase research process in March, 2014. These were not recommendations.
Gains as reported do not factor-in any tax problems resulting from dividend, profit, or return of capital distributions. Consult your tax advisor regarding the source and consequences 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.
Disclosure: I am long CSCO, CVX, GE, INTC, MCD, MSFT, 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.