Thirty-nine Stocks Ready For Market
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 1/25/16 revealed ten 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. The same scale was used to select funds, trusts, and notes based on their net asset value.
See my most recent Dow 30 article for an explanation of the term "dogs" for stocks reported based on Michael B. O'Higgins book "Beating The Dow" (HarperCollins, 1991), 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 Revealed Bargains
Thirty-nine small, mid, and large cap monthly dividend paying stocks were pulled from 755 equities of all sizes for this article. Closed End Funds, ETFs and ETNs were excluded here and Preferred Shares were also moved to the FTP list. Real Estate Investment Trusts, MLPs, Royalty Trusts, and Business Development Companies populated the stock list along with common shares.
After January 1, 2016, preferred stocks moved back to be listed with funds trusts and notes. Analyst coverage for all those entities is consistent. (That is, analyst coverage is sparse for preferred shares but more thorough for common stocks).
Ten top monthly pay SML Cap dividend stocks this week included six financial firms, three basic materials, and one service entity, covering just three of a possible nine business sectors. Financial firms loaded the top 10 list and dominated the master list of 39.
ARMOUR Residential REIT (NYSE:ARR)  led the list and five other financial representatives. The other financials placed second, fourth through sixth, and tenth: United Development Funding IV (NASDAQ:UDF) ; Prospect Capital Corporation (NASDAQ:PSEC) , and American Capital Agency (NASDAQ:AGNC) ; Fifth Street Finance (NASDAQ:FSC) ; Gladstone Commercial (NASDAQ:GOOD) .
The three basic materials MoPay stocks placed third, eighth, and ninth: Vanguard Natural Resources, LLC. (NASDAQ:VNR)  (compensating for its late December dividend cut with a much lower price), Sabine Royalty Trust (NYSE:SBR) , and Enerplus Corporation (NYSE:ERF) , (the overall top MoPay dog this week).
Finally, the lone service ace to crack the top ten placed seventh, Student Transportation Inc, (NASDAQ:STB) , and completed the January 15th MoPay SML top yield ten dog list.
Monthly Pay Dividend Funds, & Trusts by Yield
50 small cap monthly dividend paying (MoPay) funds, trusts and notes listed below were culled from nearly 700 candidates by yields calculated as of January 15 to determine the Top Ten.
Ten monthly dividend funds, trusts & preferreds showing the biggest yields (revealed by dividends.com and verified using Yahoo Finance data) featured six preferred stocks [PREF], one exchange traded note [ETN], and three closed-end funds [CEFs].
Breitburn Energy Partners LP Preferred (BBEPP)  led the FTPs and the overall list. The five other preferred stocks claimed slots two three, five, seven, and eight: Legacy Reserves LP - 8% Series B (LGCYO) ; ; Vanguard Natural Resources, LLC. Pref (VNRAP) ; Legacy Reserves LP - 8% Series A (LGCYP) ; Gastar Exploration B Prf. (GST-PB) ; Gastar Exploration A Prf. (GST-PA) .
The lone ETN, ETRACS Monthly Pay 2X Leveraged Mortgage REIT ETN (NYSEARCA:MORL) , placed fourth this week.
The leader of the three CEFs placed sixth, Cornerstone Strategic Value Fund, Inc. (NYSEMKT:CLM) .
Actionable Conclusions: (1) MoPay SML Dogs Charged; (2) Funds, Trusts, & Notes Retreated Most Bearishly; (3) Dow Dogs Charged Bullishly To Stay Overbought
After January 8, MoPaySML top ten dogs plunged in dividend and rose in price to create a bull signal. Dividend sagged 3.6%, while aggregate single share price of those ten equities rose 21.4%.
At the same time, MoPay Funds, Trusts & Preferred top ten dogs soared in dividend and swooned in price to send a bearish signal. Dividend popped up 9.25%, while aggregate single share price of those ten equities declined 38.12%.
Dow dogs charged up as aggregate single share price for the ten rose over 2% during the week of January 8 to 15 while annual dividend from $10k invested as $1K in each of those ten dogs declined about 4.5% for the period according to IndexArb. The price increase was caused by Boeing bumping GE out of the top ten and the dividend drop was caused by a reduction of the VZ payout estimate by IndexArb.
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) expanded.
[I invite you to sign on to my premium site, The Dividend Dog Catcher, to share my discussion about how the Dow (short of tossing out IBM) could, in one move, return to a normal balance where dividends from 10 $1k investments can again exceed the aggregate single share price of those top ten stocks.]
Actionable Conclusion (4): Dow Dogs Go More Overbought
Historically, an overhang of price above dividend gapped to $239 or 62% February 4; surged to the new record $256 or 65% as of March 6; gapped to $295 or 81% for a new annual record April 9; the gap extended to $321 or 90% May 1; swelled to $392 or 104% June 5, marking new 2014-15 yearly record gaps each time.
A July 1 price retreat narrowed the gap to $237 or 63%. However to begin August, IBM's high price and dividend pushed the gap to $343 or 89%. As September dawned, KO ascended and PFE was back in tenth while nearly all ten dogs dropped in price to temporarily shrink the gap to $273 or 67%. October saw prices rise and dividend fall to move the price over dividend chasm to $305 or 76%. November 6 price action and top dog shuffle put the gap at $305 or 79%. As of December 4 the gap stood at $302 or 78%. January 8 the gap closed to $223 or 56%.
As of January 14, however, the burden of Boeing's $129 price over GE's $30 in tenth place raised the aggregate price of the top ten. Meanwhile, IndexArb slashed the VZ dividend estimate of $2.28 to $1.71 which reduced the likely dividend from $10k invested as $1K in each of the ten. That action widened the gap to $351 or 91.5% as of 1/14.
This gap between high share price and low dividend per $1k invested shows an overbought condition. Meaning, no matter which chart you read, these are low risk and low opportunity Dow dogs.
Conversely, the MoPay dog charts for either stocks or FTPs shows those dogs to be volatile, high risk, though potentially more rewarding pups as their opportunity gaps point to the advantage of preferred stocks in the MoPay universe.
Actionable Conclusion (5) Financial Sector Equities Topped Basic Materials 5 To 4 on Upside and Net Gain Lists
A service dog, STB in fifth place on both the upside and the net gain lists broke the potential tie.
Actionable Conclusion (6) Wall St. Analysts Estimated a 73.82% Average 1 yr. Upside for Top 10 MoPaySML Dogs Come January, 2017
One-year median 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 2017 out of 30 selected by yield in 2016. The number of analysts providing price estimates was noted after the name for each stock. Three to nine analysts have proven most accurate in target price estimating
Actionable Conclusion (7) Preferreds Outnumbered Closed End Funds & Exchange Traded Notes 6 To 4 On January 15 MoPay Top 10 Funds, Trusts, & Preferreds List By Yield
Top ten funds, trusts, and preferreds paying monthly dividends showed yields ranging from 19.78% to 45.87% promising investors healthy returns without counting any estimated price appreciation.
Actionable Conclusions: Wall St. Wizards Predicted (8) A 32.69% Average 1 yr. Upside and (9) A 34.97% Average Gain for Top 30 SML Stocks As Of January 15, 2017
Top 30 dogs on the MoPay stock list graphed below show relative strengths by dividend and price as of January, 2016 and those projected by analyst mean price target estimates to the same date in 2017.
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 was then multiplied by projected annual dividend amounts to find the dividend return. Thereafter the analyst mean target price was applied to gauge each stock's upside to 2017.
Historic prices and actual dividends paid from $1000 invested in each of the highest yielding stocks and the aggregate single share prices of those thirty stocks divided by 3 created the data points for 2016. Projections based on estimated increases in dividend amounts from $1000 invested in the thirty highest yielding stocks and aggregate one-year analyst target share prices from Yahoo Finance divided by 3 created the 2017 data points on the chart below: green for price and blue for dividend.
Yahoo reported Thomson/First Call analyst survey numbers that predicted a 21.77% lower dividend from $10K invested as $1k in the average ten of this group, while aggregate single share price of those ten was estimated to increase almost 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 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 opposed to market direction.
Actionable Conclusion (10): Wall St. Wizards Foresaw 47.54% to 152.78% Net Gains By Top 10 MoPaySML Dogs As Of January 15, 2017
This week, five of the ten top dividend yielding MoPaySML dogs were verified as being among the top ten by upside and gain for the coming year based on analyst 1-year target prices. So for this period dog methodology graded by Wall St. wizards was again 50% accurate.
Ten probable profit generating trades revealed by Thomson/First Call in Yahoo Finance for January 15, 2017 were:
Enerplus Corporation was projected to net $1,527.83 based on the median target estimate from six analysts plus dividends less broker fees. The Beta number showed this estimate subject to volatility 8% more than the market as a whole.
Vanguard Natural Resources was projected to net $1,464.67 based on dividends plus median target price estimates from thirteen analysts less broker fees. The Beta number showed this estimate subject to volatility 56% more than the market as a whole.
Vermillion Energy, Inc. (NYSE:VET) was projected to net $796.73 based on the median target price estimate from five analysts combined with projected annual dividend less broker fees. The Beta number showed this estimate subject to volatility 32% less than the market as a whole.
Crescent Point Energy (NYSE:CPG) was projected to net $770.37 based on dividend plus the median target price estimate from two analysts less broker fees. The Beta number showed this estimate subject to volatility 68% more than the market as a whole.
Student Transportation Inc was projected to net $737.02 based on the median target price estimate from three analysts plus dividends less broker fees. The Beta number showed this estimate subject to volatility 4% more than the market as a whole.
Prospect Capital Corporation was projected to net $741.07 based on a median target price estimate from nine analysts combined with its projected annual dividend less broker fees. The Beta number showed this estimate subject to volatility 73% less than the market as a whole.
Pembina Pipeline Corp. (NYSE:PBA) was projected to net $603.44 based on dividends plus the median of annual price estimates from four analysts less broker fees. The Beta number showed this estimate subject to volatility 1% more than the market as a whole.
Whitestone REIT (NYSE:WSR) was projected to net $605.23 based on dividends plus the median of annual price estimates from six analysts less broker fees. The Beta number showed this estimate subject to volatility 18% less than the market as a
Fifth Street Finance was projected to net $582.34 based on dividends plus the median of annual price estimates from thirteen analysts less broker fees. The Beta number showed this estimate subject to volatility 3% opposite the market as a whole.
Chatham Lodging Trust (NYSE:CLDT) was projected to net $475.43 based on dividends plus median target price estimate from seven analysts less broker fees. The Beta number showed this estimate subject to volatility 14% less than the market as a whole.
The average net gain in dividend and price was 83.24% on $10k invested as $1k in each of these ten MoPay dogs. This gain estimate was subject to volatility 10% less than the market as a whole.
Three Microcaps of Note:
Enduro Royalty Trust (NYSE:NDRO):
Enduro was declassified from small cap to micro cap category Stock in December 2014 when the oil industry price slump reduced its market capitalization to less than $200M. Thereafter, company management slashed the NDRO dividend to less than a penny a month per share in February to take it out of the top thirty by yield. However, the dividend has increased and as of this January 15, NDRO would be in the fifth slot by yield had its market capitalization remained above the $200M mark.
Furthermore, analysts persist in projecting a healthy price upside for NDRO despite its reduced capitalization. As of January 15, the stock was projected to net $1,481.65 based on the lowest estimate from two analysts including dividends less broker fees. (The Beta number showed this estimate subject to volatility 55% less than the market as a whole.) That net gain would put NDRO in second place on the net gain chart above had it qualified by market cap size.
Pacific Coast Oil Trust (NYSE:ROYT):
In a similar case, Pacific Coast Oil Trust was mistakenly listed in second place by yield for the SML MoPay Dogs by net gain as of June 19, 2015. However, it's market cap had not been above $200M since December 2014. As of this January 15, ROYT was projected to net $2050.00 based on the lowest estimate from one of three analysts plus dividends less broker fees. The Beta number showed this estimate subject to volatility 2% less than the market as a whole. That net gain would put ROYT in first place on the chart above (with NDRO in third) had it qualified by market cap size and a stock price greater than $1.
Atlas Resource Partners, L.P. (NYSE:ARP):
In a familiar case, Atlas Resource Partners, L.P. spent most of 2015 at the top of this list. However, a dividend cut and a subsequent plummeting of price has reduced ARP to penny stock status. Of course as price plummeted, the ARP dividend has increased and as of this January 15, ARP would be in the top slot by yield had its market capitalization remained above the $200M mark and its price was greater than $1.
Based on analyst targets, as of January 15, ARP was projected to net $1,271.67 based on the lowest estimate from one of seven analysts plus dividends less broker fees. The Beta number showed this estimate subject to volatility 9% greater than the market as a whole. That net gain would put ARP in fifth place on the chart above (with ROYT in first and NDRO in third) had it qualified by market cap size and a stock price greater than $1.
Dog Metrics Extracted Bargains
Ten top monthly pay SML Cap dividend stocks this week included six financial firms, three basic materials, and one service entity, covering just three of a possible nine business sectors. Financial firms loaded the top 10 . Listed as of market close, January 15, the MoPay leaders ranked themselves by yield as follows:
Actionable Conclusions: Analysts Allege (10) 5 Lowest Priced of Top Ten Highest Yield MoPay SMLs Deliver 101.46% VS. (11) 61.91% Net Gains from All Ten As Of January 15, 2017
$5000 invested as $1k in each of the five Lowest priced stocks in the top ten MoPaySML kennel by yield were predicted by analyst 1 year targets to deliver 63.88% more net gain second lowest priced MoPaySML dog, (our hero this week) Enerplus Corporation , was projected to deliver the greatest net gain of 152.78%.
Lowest priced five MoPaySML dogs as of January 15 were: Vanguard Natural Resouces, LLC.; Enerplus Corporation; Student Transportation Inc; Fifth Street Finance; Prospect Capital Corporation, with prices ranging from $2.14 to $5.96.
The higher priced five MoPaySML dogs for January 15 were: United Development Funding IV; Gladstone Commercial; American Capital Agency; Armour Residential REIT; Sabine Royalty Trust, whose prices ranged from $8.65 to $26.63.
This distinction between five low priced dividend dogs and the general field of ten reflects the "basic method" Michael B. O'Higgins employed for beating the Dow. It also works well for teasing bargains out of this list of top yielding REIT category leaders, as you see.
The added scale of projected gains based on analyst targets contributed a unique element of "market sentiment" gauging upside potential. It provided a here and now equivalent of waiting a year to find out what might happen in the market. Its also the work analysts got paid big bucks to do.
A caution is advised, however, as analysts are historically 20% to 80% accurate on the direction of change and about 0% to 20% accurate on the degree of the change.
All the stocks listed above were suggested only as decent starting points for a MoPay dog dividend stock investment research process in mid-January, 2016. These were not recommendations.
Net gain and loss 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.
See my instablog for specific instructions about how to best apply the dividend dog data featured in this article.--Fredrik Arnold
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.
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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/we are long ARR, FSC, GE, PFE, 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.
Editor's Note: This article covers one or more stocks trading at less than $1 per share and/or with less than a $100 million market cap. Please be aware of the risks associated with these stocks.