Three buy and hold lists featured below provided six actionable conclusions. To draw these conclusions, May 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.
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 CAPITAL ((NYSE: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-five dividend equities plus sixty funds, preferreds, and trusts were culled from nearly 700 entities listed here paying monthly returns. All were ranked as of May 30, 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 in May represented just three of the nine Yahoo market sectors: financials (Fins), utilities (Utes), and basic materials (BasMat). The top two dogs revealed by Yahoo Finance data were two of seven in the financial sector: Orchid Island Capital Inc (NYSE:ORC), and Armour Residential REIT (NYSE:ARR). The remaining five financial MoPay dogs placed fourth though seventh, and ninth: Javelin Mortgage Investment Corp. (NYSE:JMI); Five Oaks Investment Corp. (NYSE:OAKS); Prospect Capital Corporation (NASDAQ:PSEC); Full Circle Capital Corporation (NASDAQ:FULL); Mesa Royalty Trust Units (NYSE:MTR).
The lone utility listed, Just Energy Group, Inc. (Canada) (NYSE:JE) placed third. The eighth and tenth slots in the top ten were filled by two basic materials concerns: Pacific Coast Oil Trust (NYSE:ROYT); QR Energy LP (NYSE:QRE) to round out the May 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 May 30 were compared with analyst mean target prices one year hence. Ten stocks for May boasted 3.76% to 25.45% price upsides for the coming year
Five stocks on the price upside list were not on the top ten list by yield. Two basic materials firms lead the upside list, LinnCo, LLC (LNCO) and Linn Energy LLC (LINE). Three financials placed third, sixth and tenth: Harvest Capital Credit Corp. (NASDAQ:HCAP); Solar Senior Capital Ltd (NASDAQ:SUNS); Stellus Capital Investment Corporation (NYSE:SCM). Price upside, of course, is defined as the discrepancy between the current price and analyst one year mean target price for each stock.
Ten 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 May 30 to determine the Top Ten.
Ten monthly dividend funds, trusts and preferreds showing the biggest yields for May as revealed by dividends.com and verified using Yahoo Finance data featured four closed-end funds (CEFs), five exchange traded notes (ETNs), and one trust.
Top dogs were two of the four CEFs: Cornerstone Progressive Return Fund (NYSEMKT:CFP), and Cornerstone Strategic Value Fund, Inc. (NYSEMKT:CLM). The other two CEFs placed fourth and ninth: Cornerstone Total Return Fund, Inc (NYSEMKT:CRF), and Pimco High Income Fund Com Shs (NYSE:PHK).
Tops of the five ETNs, ETRACS Monthly Pay 2X Leveraged Mortgage REIT ETN (NYSEARCA:MORL), placed third. Other ETNs placed fifth through eighth: Credit Suisse AG - Credit Suisse Silver Shares Covered Call (NASDAQ:SLVO), UBS E-TRACS 2X Closed End ETN (NYSEARCA:CEFL), Credit Suisse Gold Shrs Cov Call (NASDAQ:GLDI), and UBS E-TRACS Mthly Pay 2x Divs Hi Income ETN (NYSEARCA:DVHL). The lone trust in the top ten, Gabelli Global Gold Natural Resources & Income Trust (NYSEMKT:GGN) placed tenth to round out this list.
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 readers contributed mightily. Reader suggestions have continued this year following the January, February, March, and April 2014 articles. All these articles 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 May 30, 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 Dogs Got Mixed Up As Dow Dogs Mixed Down In May
The ten top MoPay dogs increased in both dividend and price in May thus becoming "mixed-up." Aggregate dividend from $10k invested as $1k in each of the top ten stocks rose 0.45% while total single share price of those ten went up 14.7%.
Meanwhile, the Dow dogs dithered down as projected annual dividend from $10k invested as $1K in each of the top ten Dow dogs fell 0.6% in May. Aggregate single share price sank 2.8% to affirm the mixed down sign. The Dow dogs overbought condition eased slightly as aggregate single share price of the ten still 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, increased to $187 or 51% in April and sank to $174 or 48% in May. Most of this recent confusion on the Dow was triggered by Microsoft (NASDAQ:MSFT) replacing Merck & Co (NYSE:MRK) at the tail of the top ten as Pfizer (NYSE:PFE) climbed the list based on a sagging market price.
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 15.4% 1 yr. Net Gain from Top 10 May MoPay Dogs
Top dogs on the MoPay stock list were graphed below to show relative strengths by dividend and price as of May 30, 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 a 3.4% lower dividend from $10K invested as $1k in the top ten May MoPay dogs, while aggregate single share price was projected to increase by nearly 3.8% in the coming year.
Actionable Conclusion (3): Analysts Forecast NEXT10 MoPay DiviDog Net Gains of 14.3% to May 2015
Ten monthly dividend equities that showed the next best yields May 30 represented the same three of the nine Yahoo market sectors as the top dogs: financials, utilities, and basic materials.
The NEXT ten dogs showed a 6.4% 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 26.5% 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 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 13.45% to 33.8% Gains Through May 2015
Five 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 May 30 by Wall St. wizards was 50% accurate.
Ten probable profit-generating trades revealed by Yahoo Finance come June 2015 were:
LinnCo, LLC netted $338.73 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.
Linn Energy LLC. netted $242.99 based on dividends plus mean target price estimate from fourteen analysts less broker fees. The Beta number showed this estimate subject to volatility 34% less than the market as a whole.
Harvest Capital Credit netted $226.51 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.
Orchid Island Capital, Inc, netted $206.68 based on estimates from two analysts plus dividends less broker fees. A Beta number was not available for ORC.
Pacific Coast Oil Trust netted $200.56 based on dividends plus a mean target price estimate from four analysts less broker fees. The Beta number showed this estimate subject to volatility 46% opposite the market as a whole.
Solar Senior Capital Ltd. netted $188.238 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.
Prospect Capital Corp. netted $186.86 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 14% less than the market as a whole.
QR Energy LP netted $164.15, based on dividend plus mean target price estimates from eleven analysts less broker fees. The Beta number showed this estimate subject to volatility 33% less than the market as a whole.
Full Circle Capital netted $136.94 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 64% less than the market as a whole.
Stellus Capital Investment netted $134.55, based on dividend plus mean target price estimates from five analysts less broker fees. The Beta number showed this estimate subject to volatility 97% less than the market as a whole.
The average net gain in dividend and price was 20.26% on $1k invested in each of these ten MoPay dog stocks. This gain estimate was subject to average volatility 64% 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 May 30, 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 Were Bullish As Stocks Mixed Upward Through April
Charts above show MoPay funds and trusts sank in dividend but climbed in price to run with bulls since April. Projected dividend from 10k invested as $1k in each of the top ten funds and trusts dropped 0.7% while aggregate single share price of the top ten over the same period rose 2%.
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, retreated to 992% in April, then retreated again to 961% for May.
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, retreated to 1022% in April, and shrunk again to 883% in May.
As of May 30 the top MoPay fund and trust dogs showed $297 or 23% more dividend at a $18 or 14% 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, MSFT, 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.