Three buy and hold lists revealed in the article below led to six actionable conclusions. April monthly pay (MoPay) stock (1) yield and (2) upside potential lists were compared and contrasted against (3) a high yield (and higher risk) MoPay buy and hold fund, trust, and preferreds list to draw those 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. 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
"If one buys just before the ex date and sells after the record date, the drop in price cancels out the dividend. So, I do not understand the wisdom of this strategy as submitted by a reader." --tstreet
"[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
"[Y]ou list a few issues here whose distributions are rife with RETURN OF CAPTAL ((ROC)) at its most destructive form, funds that pay you back your own money each and every month in their distributions with no regard to what they truly earn...- these should not be included in any list containing the word "dividend". --NYer1
"Mopay dividends reinvested will return almost 1% more yearly than quarterly payors as it compounds faster." --drking
"I can enter or exit a position and still reap dividends for at least 2/3s of the quarter. They also smooth the income stream so I have cash at any given time to make a purchase at dips." --Ed Invests
"Dividend dog investing really works well for income in my experience. I have been seriously invested in dogs the more unloved the better." --Urbannek
Dogs of the Index Metrics Found Bargains
For this article fifty-six dividend equities plus sixty funds, preferreds, and trusts were culled from nearly 700 entities listed here paying monthly returns. All were ranked as of April 28, 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 April represented just three of the nine Yahoo market sectors, financials (Fins), basic materials (BasMat) and, utilities (Utes). The top six dog stocks revealed by Yahoo Finance data were six of seven in the financial sector: Orchid Island Capital Inc (NYSE:ORC); Armour Residential REIT (NYSE:ARR); Javelin Mortgage Investment Corp. (NYSE:JMI); Five Oaks Investment Corp. (NYSE:OAKS) Prospect Capital Corporation (NASDAQ:PSEC); Full Circle Capital Corporation (NASDAQ:FULL). The remaining financial MoPay dog placed ninth: Fifth Street Finance (NYSE:FSC).
The seventh slot in the top ten was filled by one of two basic materials concerns: Pacific Coast Oil Trust (NYSE:ROYT). The other basic material firm, LinnCo LLC (LNCO) placed ninth on the list. The lone utility Atlantic Power Corp (NYSE:AT) placed eighth to round out the April MoPay top dog list by yield.
List Two: Monthly Pay Dividend Stocks by Price Upside
Results from Yahoo Finance for monthly paying (MoPay) dividend stocks as of market closing prices April 28 were compared with analyst mean target prices one year hence. Ten stocks for April boasted 5.5% to 34% price upsides for the coming year
Four stocks on the price upside list were not on the top ten list by yield: Stellus Capital Investment Corporation (NYSE:SCM) a financial firm suggested by readers projected a 34.32% price upside to lead the field; Linn Energy LLC (LINE), a basic materials firm placed fourth with 17.62% upside; Solar Senior Capital Ltd (NASDAQ:SUNS) & Harvest Capital Credit Corp.(NASDAQ:HCAP), from the financial sector had 16.74% and 15.36% upsides to place fifth and sixth. Price upside, of course, is defined as the discrepancy between the current price and analyst one year mean target price estimate for each stock.
MoPay stocks showing the highest upside price potential into 2015 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 mean target price estimate.
List Three: Monthly Pay Dividend Funds and Trusts by Yield
Sixty top monthly dividend paying (MoPay) funds and trusts listed below Were culled from nearly 700 candidates by yields calculated as of April 28 to determine the Top Ten.
Ten monthly dividend funds, trusts and preferreds showing the biggest yields for April featured five exchange traded notes, and five closed-end funds. Top dog was one of the five ETNs, ETRACS Monthly Pay 2X Leveraged Mortgage REIT ETN (NYSEARCA:MORL). Other ETNs placed second, and sixth through eighth: Credit Suisse AG - Credit Suisse Silver Shares Covered Call (NASDAQ:SLVO), UBS E-TRACS 2X ClosedEnd ETN (NYSEARCA:CEFL), Credit Suisse Gold Shrs Cov Call (NASDAQ:GLDI), and UBS E-TRACS Mthly Pay 2x Divs Hi Income ETN (NYSEARCA:DVHL).
Five closed-end funds as revealed by divideds.com and verified using Yahoo Finance data placed second; third through fifth; ninth & tenth: Cornerstone Strategic Value Fund, Inc. (NYSEMKT:CLM); Cornerstone Progressive Return Fund (NYSEMKT:CFP); Cornerstone Total Return Fund, Inc (NYSEMKT:CRF); Pimco High Income Fund Com Shs (NYSE:PHK); Western Asset High Income Fund II Inc. (NYSE:HIX).
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 a 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 as did the January, February , and March 2014 articles. All compared and contrasted MoPay stock upside potential against high yield (and higher risk) buy and hold fund, trust and preferred share constituents.
MoPay Stock Dividend vs. Price Compared to Dow
Ten top MoPay dividend dog stocks by yield were graphed below as of April 28, 2014 and compared to those of the Dow. Annual dividend history from $1000 invested in each of the ten highest yielding stocks and their aggregate single share price created the data points shown in green for price and blue for dividends.
Actionable Conclusion (1): MoPay & Dow Dogs Chased Bulls In April
The ten top MoPay dividend dogs became bullish in April. Aggregate dividend from $10k invested as $1k in each of the top ten stocks went down 2.9% while total single share price of those ten went up 9.8%.
Meanwhile, the Dow dogs romped as projected annual dividend from $10k invested as $1K in each of the top ten Dow dogs fell 1.3% in April. Aggregate single share price swelled 6.3% to affirm the bullish sign. The Dow dogs overbought condition grew as aggregate single share price of the ten exceeded projected annual dividend from $1k invested in each of the ten. The overhang was $145 or 38% for January, retreated to $125 or 33% in February, swelled to $149 or 40% in March, and increased to $187 or 51% in April. Most of this recent joy on the Dow was triggered by Merck replacing Coca-Cola Co. in the top ten.
To quantify top dog rankings, analyst mean price target estimates provide a "market sentiment" gauge of upside potential. Added to the simple high yield "dog" metric, analyst mean price target estimates is another tool used to dig out bargains
Actionable Conclusion (2): Wall St. Wizards Wished 20% 1 yr. Net Gain from Top 10 April MoPay Dogs
Top dogs on the MoPay stock list were graphed below to show relative strengths by dividend and price as of April 28, 2014 compared 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 prices from one analyst were not applied (n/a).
Yahoo projected an 8% lower dividend from $10K invested as $1k in the top ten March MoPay dogs while aggregate single share price was projected to increase by nearly 13% in the coming year.
Actionable Conclusion (3): Analysts Forecast NEXT10 MoPay DiviDog Net Gains of 16.2% to April 2015
Ten monthly dividend equities that showed the next best yields April 28 represented the same three of the nine Yahoo market sectors as the top dogs: basic materials, financials, and utilities.
The NEXT ten dogs showed a 7.7% 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 23% 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 were 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 opposed to market direction.
Actionable Conclusion (4): Analysts Project Ten MoPay Dog Stocks to Net 17.9% to 42.4% Gains Through April 2015
Six 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. Thus the dog strategy for this MoPay group as tallied April 28 by Wall St. wizards was 60% accurate.
Ten probable profit generating trades revealed by Yahoo Finance come May 2015 were:
Stellus Capital Investment netted $423.98, based on dividend plus mean target price estimates from six analysts less broker fees. The Beta number showed this estimate subject to volatility 97% less than the market as a whole.
LinnCo, LLC netted $351.75 based on dividends plus the mean of annual price estimates from ten analysts less broker fees. The Beta number showed this estimate subject to volatility 88% less than the market as a whole.
Orchid Island Capital Inc netted $333.52 based on estimates from two analysts plus dividends less broker fees. A Beta number was not available for ORC.
Linn Energy LLC. netted $257.62 based on dividends plus mean target price estimate from fourteen analysts less broker fees. The Beta number showed this estimate subject to volatility 32% less than the market as a whole.
Pacific Coast Oil Trust netted $243.24 based on dividends plus a mean target price estimate from four analysts less broker fees. The Beta number showed this estimate subject to volatility 88% less than the market as a whole.
Solar Senior Capital Ltd. netted $232.88 based on estimates from four analysts plus dividends less broker fees. The Beta number showed this estimate subject to volatility 38% less than the market as a whole.
Harvest Capital Credit netted $226.56 based on estimates from two analysts plus dividends less broker fees. The Beta number showed this estimate subject to volatility 61% greater than the market as a whole.
Prospect Capital Corp. netted $208.20 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 15% less than the market as a whole.
Fifth Street Finance netted $190.47, based on dividend plus mean target price estimates from ten analysts less broker fees. The Beta number showed this estimate subject to volatility 32% less than the market as a whole.
ARMOUR Residential REIT netted $179.52 based on a mean target price estimate from nine analysts combined with projected annual dividend less broker fees. The Beta number showed this estimate subject to volatility 65% less than the market as a whole.
The average net gain in dividend and price was 26.5% on $1k invested in each of these ten MoPay dog stocks. This gain estimate was subject to average volatility 57% 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 April 28, 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 Mixed Downward As Stocks Were Bullish Through April
Charts show MoPay funds and trusts soared markedly in dividend and also climbed in price since February. Projected dividend from 10k invested as $1k in each of the top ten funds and trusts popped up 20% while aggregate single share price of the top ten over the same period also rose 13%.
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, retreated to 1,221% in January, shrank to 934% in February, widened to 998% through March, then retreated to 992% in April.
For stocks the gap between aggregate single share price and dividend from $1k invested in each was 1184% in November, surged to 1348% in December, shrank to 1204% for January, scaled back to 1018% in February, widened to 1170% through March, then retreated to 1022% in April.
As of April 28 the top MoPay fund and trust dogs showed $315 or 25% more dividend at a $32 or 28% higher aggregate single share price than the MoPay stocks top ten.
Actionable Conclusion (6): Buy and Hold Monthly Dividend Paying Stocks, Funds, Trusts, & Preferreds 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.
Disclosure: I am long ARR, AT, ERF, FSC, HRZN, 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.