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Summary

  • Top Real Estate Investment Trust (REIT) dividend dogs from 10 categories delivered honest 1-year upsides averaging 9.24%.
  • Top ten categorized REIT Dogs dithered down as Dow dogs dithered up since June.
  • Analysts projected average 16% 1-year net gains for CORR, WMC, ARCP, ARR, ORC, WSR, IRT, DOC, CSG, and FSP.
  • Consider these stocks as possible starting points for your August REIT dividend dog stock purchase research.

Yield (dividend/price) results from Yahoo Finance as of market closing prices July 29 for REIT Stocks listed here were compared with analyst 1-year 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 the top stock for each of ten REIT types. Those showing the highest upside price potential into 2015 out of 20 selected by yield were charted. The number of analysts providing price estimates was noted after the name for each stock. Three to nine analysts were deemed optimal for a valid mean target price estimate.

Actionable Conclusion (1): Ten July REIT Dividend Dogs Carry 1.8% to 20% Upsides

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 responded to reader suggestions for a dividend dog analysis of the Real Estate Investment Trust industry within the financials (Fins) sector.

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 REITs by Yield

Top REIT dogs from each of ten types were winnowed from 190 from here to a weighted list of 40 that showed the biggest dividend yields as of June 18. The ten types of REITS (in order by yield) and their percentage weight were: mortgage and finance (23%); residential (12%); retail (13%); diversified (13%); office (7%); health (6%); lodging (9%); specialty (8%); mixed industrial & office (4%); industrial (5%). Top REIT stock by yield, Western Asset Mortgage Capital (NYSE:WMC) was the top mortgage and finance representative.

Second place firm, Armour Residential REIT (NYSE:ARR) represented residential REITs. Third by yield, Wheeler REIT (NASDAQ:WHLR) led retail REITs. Fourth from the top, American Realty Capital Properties (NASDAQ:ARCP) stood for diversified REITs. In fifth place, the office REIT representative, Government Properties (NYSE:GOV). Senior Housing Properties (NYSE:SNH) in sixth place represented health care REITS. Seventh was Hospitality Properties Trust (NYSE:HPT) the lodging REIT rep. Specialty REITs were led by CorEnergy Infrastructure Trust, Inc. (NYSE:CORR) in eighth place. Chambers Street Properties (NYSE:CSG) representing mixed industrial & office REITs took ninth place. Finally, industrial REITs, led by Monmouth R.E. Investment Corp. (NYSE:MNR) completed the top ten dog list in tenth place.

REIT Yield Leader Dividend vs. Price Results Compared to Dow Index Dogs

Graphs below compared relative strengths of the top dogs from ten REIT industries by yield as of market close 7/29/2014 with those of the Dow Industrials index. Annual dividend history from $10,000 invested as $1k in each of the ten high 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): REIT Rascals Mixed Down as Dow Dogs Mixed Up.

The REIT collection of top dividend payers by category was bullish after the first of 2014 as total single share price rose 6% and aggregate dividend from $10k invested as $1k in each of the top ten REITs dropped at a rate of 2% into June. Since June, however, both dividend and price for the REITS declined. Dividends from $10k invested as $1k in each of the top ten REITs dropped 0.3% and aggregate single share price for those top ten REITs fell 0.5% since June to show a mixed down result for July.

Meanwhile, Dow dogs mixed up since June showing 0.3% higher annual dividend from $10k invested as $1K in each of the top ten Dow dogs since June 18, while aggregate single share price of the ten rose 2.7%. As a result, 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 $180 or 49% for March/April, widened to $193 or 53% for May/June, then gapped to $206 or 56% in July. Much of the recent move was attributable to price bumps by several of the top ten, most notably by VZ, CVX and MRK.

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 Wanted A 11.2% average Net Gain from Top 2 REIT Dogs in each of 10 Categories Come July 2015

Top two yielding dogs from the 10 REIT categories were graphed below to show relative strengths by dividend and price as of July 29, 2014 and those projected by analyst mean price target estimates to the same date in 2015.

A hypothetical $1k 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 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 high 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 $1k 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.

(click to enlarge)

Yahoo projected a 4% 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 2.2% 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 REIT DiviDog Net Gains of 9.8% to 24.1% by July 2015

Five of the ten top dividend yielding REIT 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 REIT portion of the financial industry as graded by Wall St. wizards was 50% accurate.

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

CorEnergy Infrastructure Trust, Inc. netted $241.18 based on dividends plus mean target price estimate from two analysts less broker fees. The Beta number showed this estimate subject to volatility 54% less than the market as a whole.

Western Asset Mortgage Capital netted $238.32 based on dividends plus a mean target price estimate from six analysts less broker fees. The Beta number showed this estimate subject to volatility 35% less than the market as a whole.

American Realty Capital netted $218.10 based on estimates from six analysts plus dividends less broker fees. The Beta number showed this estimate subject to volatility 14% opposite the market as a whole.

Armour Residential REIT netted $160.33 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 61% less than the market as a whole.

Orchid Island Capital (NYSE:ORC) netted $152.14 based on dividend plus a mean target price estimate from two analysts less broker fees. A Beta number was not available for ORC.

Whitestone REIT (NYSE:WSR) netted $132.43, based on mean target price estimates from five analysts plus dividends less broker fees. The Beta number showed this estimate subject to volatility 49% less than the market as a whole.

Independence Realty Trust (NYSEMKT:IRT) netted $126.07 based on estimates from five analysts plus dividends less broker fees. A Beta number was not available for IRT.

Physicians Realty Trust (NYSE:DOC) netted $119.32 based on dividends plus the mean of annual price estimates from seven analysts less broker fees. The Beta number showed this estimate subject to volatility equal the market as a whole.

Chambers Street Properties netted $109.23, based on dividends plus mean target price estimate from two analysts less broker fees. The Beta number showed this estimate subject to volatility 3% opposite the market as a whole.

Franklin Street Properties (NYSEMKT:FSP) netted $98.70, based on dividends plus mean target price estimate from two analysts less broker fees. The Beta number showed this estimate subject to volatility 6% less than the market as a whole.

Average net gain in dividend and price was 15.96% on $10k invested as $1k in each of these ten dogs. This gain estimate was subject to average volatility 53% 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 www.finance.yahoo.com; analyst mean target price by Thompson/First Call in Yahoo Finance.

Disclosure: The author is long ARR, 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.

Source: Top 5 REIT Dividend Dogs Pack 7% To 20% July Upsides