4 Monthly Pay Dividend Dogs Display 15% To 57% Early August Upsides

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 |  Includes: ARP, ARR, AT, BBEPQ, FSC, FSIC, HGT, HLSS, LINEQ, LNCO, PSEC, QRE, ROYT, SCM, VER
by: Fredrik Arnold

Summary

10 top monthly pay (MoPay) SML dividend dogs displayed serious 1 yr. analyst mean target price upsides averaging 16.4% as of August 8. One dog sagged 15% to the downside.

MoPaySML and Dow dogs were both bearish through July.

Analysts projected average 25.5% 1 yr. net gains from ROYT, HLSS, LNCO, ARP, GOOD, ARR, LINE, PSEC, and STB; and a 1 yr. net loss of 6.7% for AT.

Consider these stocks as starting points for your early August MoPaySML dividend dog stock buy/sell research.

Yield (dividend / price) results from here verified by Yahoo Finance for monthly dividend paying small, mid, & large cap (MoPaySML) stocks as of market closing prices August 8 were augmented by analyst 1-yr target projections to reveal six actionable conclusions discussed below. Small cap firms were valued at $200M(illion) to $2B(illion); mid cap firms were worth $2B to $10B; large caps were valued above $10B.

Wall Street Wizard Weightings

One-year mean target price set by brokerage analysts multiplied by the number of shares in a $1k investment revealed ten stocks showing the highest upside price potential into 2015 out of 20 selected by yield. One stock showed a loss by the same metric. The number of analysts providing price estimates was noted after the name for each stock. Three to nine analysts have provided the most accurate mean target price estimates.

Actionable Conclusion (1) Ten MoPaySML Dividend Dogs Projected 7.11% to 56.6% Upsides; One Showed A 15% Downside

Forty-Six For the Money

This article revealed bargain stocks to buy and hold for at least one year. Stocks reported were termed dogs because they were all selected based on Michael B. O'Higgins book "Beating The Dow" (HarperCollins, 1991), which showed how high yielding stocks whose prices increased (and whose dividend yields therefore decreased) could be sold off once a year to sweep gains to be reinvested in higher yielding stocks in the same index. Now named Dogs of the Dow, O'Higgins system works to find bargains in any collection of dividend paying stocks. Utilizing analyst price upside estimates expanded the stock universe to include popular growth equities, as desired.

Dog Metrics Extracted Bargains

Forty-six small, mid, and large cap monthly dividend paying stocks were culled from over seven hundred equities of all sizes for this article. Funds, and preferred shares were excluded but Real Estate Investment Trusts and Business Development Companies made the list along with other common shares.

Ten monthly pay SML Cap dividend equities showing top yields, represented the usual trio of basic materials, financials, and utilities from the nine Yahoo market sectors. Top dog Pacific Coast Oil Trust (NYSE:ROYT) led five basic materials concerns after suffering a huge price drop in July. Other basic materials concerns placed third, fifth, ninth, and tenth: Hugoton Royalty Trust (NYSE:HGT); Atlas Resource Partners, L.P. (NYSE:ARP); LinnCo LLC (NASDAQ:LNCO); QR Energy LP (NYSE:QRE).

Second dog, Armour Residential REIT (NYSE:ARR) was one of four financial sector firms listed. Other financials were Prospect Capital Corporation (NASDAQ:PSEC) in fourth place, Fifth Street Finance (NASDAQ:FSC) seventh, and FS Investment Corporation (NYSE:FSIC), eighth.

Finally, one utility, Atlantic Power Corp (NYSE:AT), placed sixth to complete the August 8 MoPaySML top dog list.

Actionable Conclusion (2): MoPaySML And Dow Stumbled Into Early August

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MoPaySML top ten dogs since early July increased 7.4% in dividend from $10k invested as $1K in each of the top ten, while total single share price of the top ten fell 6.7% for the period to signal their bearish retreat.

Meanwhile, Dow dogs also stumbled bearishly showing 4.7% higher annual dividend from $10k invested as $1K in each of the top ten Dow dogs since early July, while aggregate single share price dropped more than 3.6%. As a result, the Dow dogs overbought condition (in which aggregate single share price of the ten exceeded projected annual dividend from $10k invested as $1k each in those ten) shrank. Historically, an overhang of $75 or 19% on April 8 widened to $173 or 47% May 1; widened to $193 or 53% June 6; spread to $222 or 62% July 3; then shrank to $185 or 49% August 8. Much of the recent move was attributable to price swoons by several of the top ten, most notably by T, VZ, MCD, and CVX.

Actionable Conclusion (3): Wall Street Wizards Wished 16.5% 1 yr. Net Gain from Top 20 MoPaySML Dogs By August 8, 2015

Top 20 dogs on the MoPay stock list were graphed below to show relative strengths by dividend and price as of August 8, 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 number of shares were then multiplied by projected annual 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 2014. 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 2015 data points green for price and blue for dividends.

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Yahoo analyst numbers projected 7.8% 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 nearly 8.7% 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 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 Assessed 10 MoPaySML DiviDog Net Gains at 16.5% to 69.4% by August 8, 2015

Six of the ten top dividend yielding MoPaySML dogs were verified as being among the top ten gainers out of 20 for the coming year based on analyst 1-year target prices. So this week the dog methodology 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:

Pacific Coast Oil Trust netted $694.14 based on dividends plus a mean target price estimate from two analysts less broker fees. The Beta number showed this estimate subject to volatility 45% opposite the market as a whole.

Home Loan Servicing Solutions Ltd. (NASDAQ:HLSS) netted $303.45 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 25% less than the market as a whole.

Atlas Resource Partners netted $275.60 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 51% less than the market as a whole.

Linn Co., LLC netted $227.93 based on dividend plus mean target price estimates from six analysts less broker fees. The Beta number showed this estimate subject to volatility 88% less than the market as a whole.

ARMOUR Residential REIT netted $193.27 based on dividends plus mean target price estimate from eight analysts less broker fees. The Beta number showed this estimate subject to volatility 61% less than the market as a whole.

Prospect Capital Corp netted $184.12 based on estimates from nine analysts plus dividends less broker fees. The Beta number showed this estimate subject to volatility 17% less than the market as a whole.

FS Investment Corporation netted $170.13, based on dividend plus mean target price estimates from three analysts less broker fees. No Beta number was available for FSIC.

Stellus Capital Investment (NYSE:SCM) netted $167.04 based on estimates from five analysts plus dividends less broker fees. The Beta number showed this estimate subject to volatility 97% less than the market as a whole.

Linn Energy LLC (LINE) netted $165.35 based on a mean target price estimate from twelve analysts combined with projected annual dividend less broker fees. The Beta number showed this estimate subject to volatility 34% less than the market as a whole.

BreitBurn Energy Partners (BBEP) netted $165.27 based on a mean target price estimate from twelve 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.

The average net gain in dividend and price was 25.46% on $10k invested as $1k in each of these ten MoPay dogs. This gain estimate was subject to volatility 65% less than the market as a whole.

Actionable Conclusion (5): (Bear Alert) Analysts Forecast AT Mo Pay DiviDog to Post Net Loss of 6.7% By August 8, 2015

The probable losing trade revealed by analysts reported by Thomson/First Call in Yahoo Finance for 2015 was:

Atlantic Power Corp was projected to lose $66.67 based on dividend and a mean target price estimate from four analysts including $20 of broker fees. The Beta number showed this estimate subject to volatility 58% less than the market as a whole.

Actionable Conclusion (6): Analysts See Net Gains of 24% for ARCP by August 8, 2015

A note about American Realty Capital Properties Inc (ARCP):

Last month's second place upside leader dropped out of the top twenty by yield as its share price ramped up into August. However, analysts are still convinced that ARCP has significant upside potential to net $240.97 based on a mean target price of $15.38 from six analysts (with a Beta number showing this estimate subject to volatility 14% opposite the market as a whole.) So, despite a paltry dividend yield under 8%, ARCP would still sit in third place on the upside table and in fourth place by net gain this month, despite not qualifying for the field based on yield.

The stocks listed above were suggested only as decent starting points for a MoPay dog dividend stock purchase/sale research process in early August, 2014. These were not recommendations.

Gains/declines 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.

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

Disclosure: The author is long ARR, AT, FSC, 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.