Three Lists To Ponder
Three buy and hold lists featured below provided several actionable conclusions. In order to make these conclusions, the February 5 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 preferred 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. (A recent example was BBEP severing its common share dividend November 30. A more recent example was GORO cutting dividends 80% from $.01 to $.002 per month January 6.) Thus, the segment is volatile.
"[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 CAPTAL [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
"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
"...Nice to see another contrarian strategy. This one seems to take a lot of attention in comparison [to Dow dogs], but I like the monthly rebalance." --colodude
"At this level of risk, I'm only buying monthly dividend payers. Dividend if cut only [sits] for a month and not a quarter." --Sinjjn Smythe
"...love those monthly payers." --Hardo
"Some of us are comfortable investing in Dog stocks because we feel the reward is worth the risk. As long as [my sin stock] continues to pay and raise the dividend like it has for 16 years now, it will have a spot in my portfolio." --Miz Magic DiviDogs
"One thing to point out: These stocks are not buy & hold. If you buy any of these stocks, set a price where you will sell... trailing stops work real good & with mopays you can get out & get back in without losing a whole quarter of dividends..." --drking
"I don't know how many times I've kicked myself for not investing in a beaten down group only to find it spring back up months later." --User 13258352
Dogs of the Index Metrics Found Bargains
For this article fifty-four dividend equities plus sixty funds, and trusts (including preferred shares) were culled from nearly 700 entities listed here paying monthly returns. All were ranked as of February 5, 2016 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 February represented three of the nine Yahoo market sectors: financials (Fins), basic materials (BasMat), and services.
The top four dogs revealed by Yahoo Finance data were from the financial sector: Armour Residential REIT (NYSE:ARR) ; Orchid Island Capital Inc (NYSE:ORC) ; Javelin Mortgage Investment Corp. (NYSE:JMI) ; Full Circle Capital Corporation (NASDAQ:FULL) .
For February only one basic material sector stock made the top ten, taking fifth place, Vanguard Natural Resources, LLC., (NYSE:NDRO) .
The sixth, through ninth slots in the top ten were filled by more financial sector entities: Prospect Capital Corporation (NASDAQ:PSEC) ; Stellus Capital Investment Corporation (NYSE:SCM) ; Five Oaks Investment Corp. (NYSE:OAKS) ; Wheeler Real Estate Investment Trust Inc. . Finally, the lone services entity, Liquor Stores NA Ltd. (OTCPK:LQSIF)  completed the February 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 February 5 were compared with analyst mean target prices one year out. Ten stocks for February boasted 47.21% to 121.24% price upsides for the coming year based on analyst 1 yr. targets.
Four stocks on the price upside list were not on the top ten list by yield. One basic materials firm outside the top ten placed tenth by upside: Enerplus Corporation (NYSE:ERF) .
The remaining three upside heroes from outside the top ten by yield were financial firms placing sixth, eighth, and ninth: Whitestone REIT (NYSE:WSR) ; Bluerock Residential Growth (NYSEMKT:BRG) ; Harvest Capital Credit (NASDAQ:HCAP) .
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 2017 came from 30 selected by yield. The number of analysts providing price estimates was noted after the name for each stock. Three to nine analysts provide the most accurate mean target price estimates.
List Three: Monthly Pay Dividend Funds, Trusts, & Preferreds by Yield
Sixty top monthly dividend paying (MoPay) funds, trusts and preferred issues listed below were culled from nearly 700 candidates by yields calculated as of January 8 to determine the Top Ten.
Ten monthly dividend funds, & trusts showing the biggest yields for January as revealed by dividends.com and verified using Yahoo Finance data featured four preferred shared (PREFs), two closed-end funds (CEFs), and four exchange traded notes (ETNs).
Preferred shares placed first, and fourth through sixth: Gastar Exploration B Pref. Stock (GST-PB) ; Breitburn Energy Partners LP Preferred (BBEPP) ; Gastar Exploration A Pref. Stock (GST-PA) ; Vanguard Natural Resouces, LLC. Preferred (VNRAP) .
Tops of the four ETNs placed third, ETRACS Monthly Pay 2X Leveraged Mortgage REIT ETN (NYSEARCA:MORL) . The three remaining anchored the bottom of the list, placing eighth to tenth: UBS ETRACS M Py 2x Lvg US Sm Cp HiDiv ETN (NYSEARCA:SMHD) . Then, two more UBS notes took the ninth and tenth slots, UBS ETRACS M Py 2xLvg WF MLP Ex-Engy ETN (NYSEARCA:LMLP) , and UBS E-TRACS 2X ClosedEnd ETN (NYSEARCA:CEFL) , to round out this top ten FTP list.
Notice in the graph below how adding the preferred stocks to this list pushed the dividends to another level beginning in January.
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 continued in 2014 following the January, February, March, April, May, June, July, August, September, October, November, and December articles. 2015 continued with readers contributing in January, February, March, April, May, June, July, August, September, October, November, and December.
The 2016 articles in January and this month continue to compare and contrast 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 February 5, 2016 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 Conclusions: (1) MoPay Dogs Retreated As (2) Dow Dogs Mixed Up
The ten top MoPay dogs soared in dividend but sagged in price after January to sound a bearish retreat. Aggregate dividend from $10k invested as $1k in each of the top ten stocks popped up 9% while total single share price of those ten sank 24% in that time.
Meanwhile, Dow dogs mixed up as they showed higher annual dividend from $10k invested as $1K in each of the top ten Dow dogs, rising 3.4% after January. Meanwhile, aggregate single share price rose 5.9%. 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) increased.
Historically, the overhang was $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%. Come January 8, prices of the ten Dow top dogs fell, and dividends rose, to push the overbought gap down to $224 or 56%. In February the gap grew to $246 or 59%.
The Dow Dogs remain overbought and overpriced.
[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 have returned to a normal balance in one move in August where dividends from 10 $1k investments could again exceed the aggregate single share price of those top ten stocks.]
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 provided another tool to dig out bargains.
Actionable Conclusion (3): Wall St. Wizards Cast A 67 % 1 yr. Net Gain from TOP10 February MoPay Stocks
Top dogs on the MoPay stock list were graphed below to show relative February 5, 2016 compared those projected by analyst mean price target estimates to the same date in 2017.
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 2016. 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 2017 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 29% lower dividend from $10K invested as $1k in the top ten February MoPay dogs while aggregate single share price was projected to increase by 35.5% in the coming year.
Actionable Conclusion (4): Analysts Augured NEXT10 MoPay Net Gains of 22% to February 2017
Ten monthly dividend equities that showed the next best yields February 5 represented three Yahoo market sectors: basic materials. financials, and services.
The NEXT ten dogs showed 20% 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 28% in the coming year.
Actionable Conclusion (5): Analysts Forecast LAST10 MoPay DiviDog Net Gains of 20.3% to February 2017
Ten monthly dividend equities February 8 represented just two of the nine Yahoo market sectors: financials, and basic materials.
The LAST ten dogs showed 11.6% lower dividend from $10k invested as 1k in each stock while aggregate single share price for the last ten was projected by analysts to increase 13% 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 charts. 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 (6): Analysts Expect Ten MoPay Dog Stocks to Net 58.3% to 146.15% Gains To February 2017
Six 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 January 8 by Wall St. wizards was 60% accurate.
Ten probable profit generating trades revealed by Yahoo Finance come 2017 were:
Vanguard Natural Resources (NASDAQ:VNR) netted $1,461.48 based on dividends plus the median of annual price estimates from twelve analysts less broker fees. The Beta number showed this estimate subject to volatility 43% more than the market as a whole.
Wheeler Real Estate (NASDAQ:WHLR) netted $1,109.50 based on estimates from three analysts plus dividends less broker fees. The Beta number showed this estimate subject to volatility 20% more than the market as a whole.
Five Oaks Investment Corp. netted $843.25 based on estimates from three analysts plus dividends less broker fees. The Beta number showed this estimate subject to volatility 17% less than the market as a whole.
Full Circle Capital netted $837.14 based on a mean target price estimate from three analysts combined with projected annual dividend less broker fees. The Beta number showed this estimate subject to volatility 85% less than the market as a whole.
Prospect Capital Corp. netted $648.78 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 61% less than the market as a whole.
Whitestone REIT netted $634.61 based on dividends plus median target price estimate from six analysts less broker fees. The Beta number showed this estimate subject to volatility 11% less than the market as a whole.
Stellus Capital Investment netted $624.06 based on estimates from six analysts plus dividends less broker fees. he Beta number showed this estimate subject to volatility 82% less than the market as a whole.
Bluerock Residential Growth netted $616.03 based on dividends plus a median target price estimate from six analysts less broker fees. A Beta number was not available for BRG.
Harvest Capital Credit netted $586.79, based on dividend plus mean target price estimates from two analysts less broker fees. The Beta number showed this estimate subject to volatility 86% less than the market as a whole.
Enerplus Corporation netted $583.13, based on dividend plus median target price estimates from six analysts less broker fees. The Beta number showed this estimate subject to volatility 1% more than the market as a whole.
Average net gain in dividend and price was 79.45% on $1k invested in each of these ten MoPay dog stocks. This gain estimate was subject to average volatility 31% less than the market as a whole.
Top Ten Dividend & Price Results For Funds, Trusts, & Preferreds (FTPs) vs. MoPay Stocks
Below relative strengths for the top ten MoPay FTP Dogs by yield was graphed as of February 5, 2016 and compared to those of the ten top 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 (7): MoPay Top Ten DiviDog Funds Trusts, & Preferreds Mixed Down As Stocks Retreated Into January
The chart above shows MoPay funds, trusts, & preferreds fell in dividend and tumbled in price to mix down after the new year. Projected dividend from 10k invested as $1k in each of the top ten funds and trusts fell 1.3% while aggregate single share price of the top ten over the same period fell 6.4%.
As of February 5, the top MoPay fund, trust and preferred dogs showed $1,222 or 72% more dividend at a $39 or 60% higher aggregate single share price than the MoPay stock top ten.
Actionable Conclusion (7): Buy and Hold Monthly Dividend Paying Stocks, Funds & Trusts, If You Dare
Stock analysts don't hazard guesses as to when or how much fund, trust & preferred stock prices will rise or fall. They are paid to gauge individual stocks, and a few funds and partnerships. Hence this monthly pay FT dog diligence only revealed a list of funds and trusts to buy and hold based on yield only, if you dare.
Dog Metrics Extracted More Bargains From Five Lowest Priced Highest Yield Monthly Pay Stocks
Ten monthly pay stock equities were culled by yield from here. Yield (dividend / price) results verified by Yahoo Finance did the ranking.
Actionable Conclusions: (1) Analysts Assert 5 Lowest Priced of Top Ten Highest Yield MoPay Dividend Stocks Generate 87.56% VS. (2) 67% Net Gains from All Ten by February, 2017
$5000 invested as $1k in each of the five Lowest priced stocks of the top ten MoPay dividend dog kennel by yield were predicted by analyst 1 year targets to deliver 30.67% more net gain than $5,000 invested as $.5k in all ten. The second lowest priced MoPay dividend dog, Vanguard Natural Resources, LLC. , was projected to deliver the best net gain of 146.5%.
Lowest priced five MoPay dividend dogs for February 5 were: Wheeler Real Estate Investment Trust Inc; Vanguard Natural Resouces, LLC.; Full Circle Capital Corporation; Five Oaks Investment Corp.; Liquor Stores NA Ltd.; with prices ranging from $1.39 to $5.26.
Higher priced five MoPay dividend dogs for February 5 were: Prospect Capital Corporation.; Javelin Mortgage Investment Corp, Stellus Capital Investment Corporation; Orchid Island Capital Inc; ARMOUR Residential REIT Inc., whose prices ranged from $5.99 to $19.27.
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. The same technique, you now see, can also be used to find the more rewarding dogs in the Healthcare kennel.
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.
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.
The stocks listed above were suggested only as decent starting points for your MoPay dividend stock purchase or sale research process. These were not recommendations.
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, HRZN, CSCO, INTC, 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.