8 Top MLP Dividend Dogs Pursue 10% To 19% July Upsides

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 |  Includes: ARP, CVRR, EFC, HLSS, LNCOQ, LRE, MCEP, MEMP, NTI, PDH, QRE, RNO, STON, UAN
by: Fredrik Arnold

Summary

10 top Master Limited Partnership (MLP) dividend dogs chased decent 1 yr. upsides averaging nearly 15% after a bearish month.

Top ten MLP dogs were bearish since June; Dow dogs stayed bullish.

Analysts projected average 21.2% 1 yr. net gains for ARP, LNCO, NTI, STON, HLSS, UAN, EFC, LRE, MCEP, & MEMP.

Consider these stocks as possible starting points for your mid-July MLP dividend dog stock purchase research.

Yield (dividend / price) results from Yahoo Finance as of market closing prices July 11 for Master Limited Partnership stocks listed here were compared with analyst 1-yr target projections to reveal 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 of each stock. Three to nine analysts were optimal for a valid mean target price estimate.

Actionable Conclusion (1) Ten July MLP Dividend Dogs Produced 8.77% to 19% Upsides

Forty For the Money

Since the fall of 2011, a series of reports has applied dog dividend methodology to uncover possible buy opportunities in each of eight major market sectors listed by Yahoo Finance. This article responds to recent reader suggestions for a dividend dog analysis of the Master Limited Partnership field. Dividend.com describes them thus:

"Master Limited Partnerships... trade on securities markets like normal stocks. MLPs are not subject to income tax, and shareholders in MLPs are actually "limited partners" in company."

"A special tax designation allows MLPs to pass the tax burden onto their shareholders [by paying] the vast majority of their earnings out to their partners, similar to REITs."

Dog dividend methodology is 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. Now named Dogs of the Dow, O'Higgins system also works to find bargains in any collection of dividend paying stocks. Utilizing analyst price upside estimates has expanded the stock lists to include popular growth equities, if desired.

Dog Metrics Gauged MLP Stocks by Yield

Top ten master limited partnership dogs showing the biggest dividend yields as of July 11 represented three of nine Yahoo! Finance business sectors: financial; basic material; services. Top MLP stock by yield, Ellington Financial LLC (NYSE:EFC) was from the financial sector.

Seven of the top ten BDC dogs by yield represented the basic materials sector. Those companies placed second, through sixth, and eighth through tenth: Rhino Resource Partners LP (RNO [2], CVR Refining, LP (NYSE:CVRR) [3], Atlas Resource Partners, L.P. (NYSE:ARP) [4], LRR Energy L.P. (NYSE:LRE) [5], QR Energy LP (NYSE:QRE) [6], PetroLogistics LP (NYSE:PDH) [8], CVR Partners L.P. (NYSE:UAN) [9] and LinnCo., LLC (NASDAQ:LNCO) [10].

The services sector representative, StoneMor Partners L.P. (NYSE:STON), placed seventh to complete the top ten MLP dog list.

Ten MLP Yield Leader Dividend vs. Price Results Compared to Top Ten Dow Index Dogs

Graphs below compared relative strengths of the top ten MLP field dogs by yield as of market close 7/11/2014 with those of the Dow industrials index. Annual dividend history from $10,000 invested as $1k in each of the ten highest yielding stocks along with the total single share price of those ten stocks made the data points shown in green for price and blue for dividends.

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Actionable Conclusion (2): MLP Pups Were Mixed Down into July as Dow Dogs Stayed Bullish

The MLP collection of dividend payers was bullish since the first of the year as total single share price rose 7% and aggregate dividend from $10k invested as $1k in each of the top ten MLP dogs fell at a rate of 9.7%. In the past two months, however, both dividends and price declined: 2.5% for dividend and 2.4% for price

Dow dogs frolicked as projected annual dividend from $10k invested as $1K in each of the top ten fell 4.8% since January. At the same time aggregate single share price moved up 13.25% to confirm the bullish annual turn. For the past two months the Dow dog dividend dropped 1.3% while price rose 1.9%.

The Dow dogs overbought condition in which aggregate single share price of the ten exceeded projected annual dividend from $1k invested in each of the ten increased. The overhang of $132 or 35% in January/February, expanded to $136 or 36% in March/April, widened $193 or 53% for May/June, and swelled again to $218 or 60% for July/August.

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 (3): Wall Street Wizards Won A 15.6% Net Gain from Top 20 MLP Dogs Come July 2015

Top twenty dogs from the Master Limited Partnership field were graphed below to show relative strengths by dividend and price as of July 11, 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 share 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 price upsides and net gains including dividends less broker fees as of 2015.

Historic prices and actual dividends paid from $20,000 invested as $1k in each of the highest yielding stocks and the aggregate single share prices of those twenty stocks divided by 2 created data points for 2014. Projections based on estimated 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 2015 data points green for price and blue for dividend.

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Yahoo projected a 4.5% lower dividend from $10K invested as $1k in ten dogs in this group while aggregate single share price for those ten was projected to increase by 5.7% 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 of 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's movement opposite of market direction.

Actionable Conclusion (4): Analysts Assess Ten Top MLP DiviDog Net Gains of 17.6% to 24.9% by July 2015

Six of the ten top dividend yielding MLP dogs were verified as being among the ten gainers for the coming year based on analyst 1-year target prices. So this month the dog strategy for the MLP field as graded by Wall St. wizards was 60% accurate.

Ten probable profit generating trades were revealed by Thomson/First Call in Yahoo Finance for 2015:

Atlas Resource Partners, L.P. netted $248.54 based on estimates from nine analysts plus dividends less broker fees. The Beta number showed this estimate subject to volatility 51% less than the market as a whole.

LinnCo., LLC netted $248.23 based on dividends plus mean target price estimate from eight analysts less broker fees. The Beta number showed this estimate subject to volatility 88% less than the market as a whole.

Northern Tier Energy LP. (NYSE:NTI) netted $244.81 based on dividends plus the mean of annual price estimates from eight analysts less broker fees. The Beta number showed this estimate subject to volatility 35% more than the market as a whole.

StoneMor Partners L.P. netted $224.80 based on dividends plus the mean of annual price estimates from two analysts less broker fees. The Beta number showed this estimate subject to volatility 40% less than the market as a whole.

Home Loan Servicing Solutions Ltd. (NASDAQ:HLSS) netted $203.49 based on dividends plus a mean target price estimate from eight analysts less broker fees. The Beta number showed this estimate subject to volatility 25% less than the market as a whole.

CVR Partners L.P. netted $197.97, based on mean target price estimates from three analysts plus dividends less broker fees. The Beta number showed this estimate subject to volatility 18% less than the market as a whole.

Ellington Financial LLC netted $197.63 based on estimates from six analysts plus dividends less broker fees. The Beta number showed this estimate subject to volatility 43% less than the market as a whole.

LRR Energy L.P. netted $197.47 based on dividend plus a mean target price estimate from nine analysts less broker fees. The Beta number showed this estimate subject to volatility 18% more than the market as a whole.

Mid-Con Energy Partners LP (NASDAQ:MCEP) netted $183.73 based on a mean target price estimate from seven analysts combined with projected annual dividend less broker fees. The Beta number showed this estimate subject to volatility 55% more than the market as a whole.

Memorial Production Partners LP (NASDAQ:MEMP) netted $175.80, based on dividends plus mean target price estimate from ten analysts less broker fees. The Beta number showed this estimate subject to volatility 66% less than the market as a whole.

Average net gain in dividend and price was 21.2% on $10k invested as $1k in each of these ten dogs. This gain estimate was subject to average volatility 3% less than the market as a whole.

The 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.

Stocks listed above were suggested only as possible starting points for your index dog 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.

Graphs and charts were compiled by Rydlun & Co., LLC from data derived from finance.yahoo.com; analyst mean target price by Thomson/First Call in Yahoo! Finance.

Disclosure: The author is long CSCO, GE, INTC, MSFT, PFE, T, VZ. The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.