Yield (dividend/price) results from here verified by Yahoo Finance for monthly dividend paying small, mid, and large cap (MoPaySML) stocks as of market closing prices as of March 24 compared with analyst 1-yr target projections led to four actionable conclusions discussed below.
Wall Street Wizard Weights
One-year mean target price set by brokerage analysts multiplied by the number of shares in a $1k investment were used to compare ten stocks showing the highest upside price potential into 2015 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 was considered optimal for a valid mean target price estimate.
Actionable Conclusion (1): Ten MoPaySML Dividend Dogs Chased Near 8% to 36.5% Upsides
Dog Metrics Extracted Bargains
Stocks 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.
Thirty small, mid, and large cap monthly return equities were culled from over 650 entities for this article. Funds, and partnerships and preferred shares were excluded but Real Estate Investment Trusts made the list along with common shares.
Ten monthly pay SML Cap dividend equities showing top yields, represented the usual trio out of the nine Yahoo market sectors: financials, utilities, and basic materials. Top dog Armour Residential REIT (NYSE:ARR) was one of four financial sector firms listed. Prospect Capital Corporation (NASDAQ:PSEC) in third, and Fifth Street Finance (NYSE:FSC) in seventh, were followed by relative newcomer small cap Stellus Capital Investment Corporation (NYSE:SCM) in tenth place.
Two utilities, Atlantic Power Corp. (NYSE:AT) and Just Energy Group Inc. (NYSE:JE), placed second and ninth by yield. Finally, four basic materials companies placed fourth through sixth, and eighth: Pacific Coast Oil Trust (NYSE:ROYT); QR Energy LP (NYSE:QRE); LinnCo LLC (LNCO); Linn Energy LLC (LINE), to complete the March 24 MoPaySML top dog list.
Actionable Conclusion (2): MoPaySML Were Mixed Up as Dow Dogs Chased Bulls
MoPaySML rose up in both price and dividend since March 5. Total single share price of the top ten increased 8% for that period. Aggregate dividend from $10k invested as $1k in each of the top ten dogs rose at a rate of 2.2% since then to confirm the mixed up signal.
The Dow dogs, meanwhile, turned mildly bullish as projected annual dividend from $10k invested as $1K in each of the top ten Dow dogs fell 0.8% since March 5, while aggregate single share price rose 4%. 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) grew 7%. The overhang of $128 or 33% March 5, widened to $150 or 40% March 24. A little of the recent move was attributable to Merck (NYSE:MRK) replacing Coca-Cola Co. (NYSE:KO) in the top ten Dow dog list since March 5.
Actionable Conclusion (3): Wall Street Wizards Wanted Nearly 20% 1 yr. Net Gain from Top 20 MoPaySML Dogs By March 24, 2015
Top 20 dogs on the MoPay stock list were graphed below to show relative strengths by dividend and price as of March 24, 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 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 nearly 11% 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 over 13% 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 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): Wall St. Analysts Forecast MoPaySML DiviDog Net Gains of nearly 20% to 44% by March 24, 2015
Six of the ten top dividend yielding MoPaySML dogs were verified as being among the ten gainers out of 20 for the coming year based on analyst 1-year target prices. So this time the dog strategy for this collection as graded by Wall St. wizards was 60% accurate.
Ten probable profit generating trades were revealed by Thomson/First Call in Yahoo Finance into 2015:
Linn Co., LLC netted $436.38, based on dividend plus mean target price estimates from nine analysts less broker fees. A Beta number was not available for LNCO.
Enduro Royalty Trust (NYSE:NDRO) netted $411.17 based on dividends plus mean target price estimate from four analysts less broker fees. The Beta number showed this estimate subject to volatility 69% less than the market as a whole.
Pengrowth Energy Corp. (NYSE:PGH) netted $343.48, based on dividend plus mean target price estimates from nine analysts less broker fees. The Beta number showed this estimate subject to volatility 62% greater than the market as a whole.
Pacific Coast Oil Trust netted $325.89 based on dividends plus a mean target price estimate from three analysts less broker fees. A Beta number was also not available for ROYT.
Linn Energy LLC netted $321.97 based on a mean target price estimate from thirteen analysts combined with projected annual dividend less broker fees. The Beta number showed this estimate subject to volatility 33% less than the market as a whole.
Atlantic Power Corp. netted $312.10 based on estimates from five analysts plus dividends less broker fees. The Beta number showed this estimate subject to volatility 63% less than the market as a whole.
Home Loan Servicing Solutions Ltd. (NASDAQ:HLSS) netted $280.56 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 23% less than the market as a whole.
American Realty Capital (ARCP) netted $238.04 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 18% opposite the market as a whole.
QR Energy LP netted $197.98 based on dividends plus the mean of annual price estimates from eleven analysts less broker fees. The Beta number showed this estimate subject to volatility 32% less than the market as a whole.
Prospect Capital Corp netted $180.92 based on estimates from eleven analysts plus dividends less broker fees. A Beta number was also not available for PSEC.
The average net gain in dividend and price was 30.5% on $10k invested as $1k in each of these ten MoPay dogs. This gain estimate was subject to average volatility 39% less than the market as a whole.
The stocks listed above were suggested only as decent starting points for a MoPay dog dividend stock purchase research process in late 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 ARR, AT, FSC, PGH, CSCO, CVX, GE, INTC, MCD, 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.