FSC Tops Monthly Pay SML Dog Gain Estimates As Of June 10

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Includes: AGNC, ARR, BDCS, BRG, CLDT, CLM, CPTA, FSC, FSFR, GAIN, GGN, GLO, GLQ, IGD, IRT, MLPS, MORL, NCZ, NHF, ORC, PBT, PFLT, PHK, PSEC, STB
by: Fredrik Arnold

Summary

49 monthly pay dividend (MoPay) Small, Mid, & Large capitalized (SML) dog yields ranged 0.69% to 16.08%; 50 SML Funds, Notes & Partnerships (FTPs) spanned 9.21% to 26.31% June 10.

Top ten MoPay dividend stocks mixed charged bullishly while averaging 12.42% yield. Ten MoPay FTPs mixed up averaging 15.35%, while ten Dow Dogs charged, too, averaging 3.72% yield.

Analyst 1yr. targets pegged thirty MoPay Stock dogs averaging 3.81% upsides and 11.67% net gains. FTPs are not tracked by analysts but their top 30 gains by yield averaged.

Top gaining SML stocks were: BRG; PBT; GAIN;FSFR; PSEC; AGNC; ARR; CPTA; FSC; with ORC leading. Top FTPs were: GLQ; GLO; NHF; NCV; GGN; IGD; NCZ; EDF; CLM; MORL leading.

Ten top yield SML stocks projected 6.72% more net gain from $5k invested in the lowest priced five than from $5K in all ten.

Forty-nine MoPay SML Stocks On The 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 6/10/16 revealed 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 total assets under management.

Dividend Dog Rules

The "dog" moniker was earned by stocks exhibiting three traits: (1) paying reliable, repeating dividends, (2) whose prices fell to where (3) yield (dividend/price) grew higher than their peers (such as this dog of the week collection). Thus, the highest yielding stocks in any collection became known as "dogs."

MoPaySML Dogs Of June 10

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 Posted Bargains

Forty-three 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 included in the FTP list. Real Estate Investment Trusts (REITs), Master Limited Partnerships (NYSEARCA:MLPS), Royalty Trusts (RTs), and Business Development Companies (NYSEARCA:BDCS) populated the stock list along with common shares.

After January 1, 2016, preferred stocks came to be listed with funds trusts and notes. Analyst coverage is sparse for preferred shares, funds, trusts, and notes but coverage is more robust for common stocks. The energy preferred issues that once rode the top of that list have all cut dividends and dropped out.

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Ten top monthly pay SML Cap dividend stocks this week by yield included four real estate firms, five financial firms, and one energy entity, covering just three of a possible eleven Morningstar business sectors. As usual, real estate and financial firms dominated the top 10 list and loaded the master list of forty-nine with sixteen REITs, ten financial service firms along with ten energy issues, four healthcare, one communication service firm, four industrials, two consumer cyclical, one utility, and one basic materials firm represented.

A diversified REIT led the top ten list, Orchid Island Capital (NYSE:ORC) [1]. Three other real estate entities followed in fourth, fifth, and tenth places, ARMOUR Residential REIT (NYSE:ARR) [4], American Capital Agency (NASDAQ:AGNC) [5], and Bluerock Residential Growth REIT, Inc. (NYSEMKT:BRG) [10].

Five Financial services representatives followed in second, third, sixth, seventh and eighth places: Fifth Street Finance (NYSE:FSC) [2]; Capitala Finance Corp. (NASDAQ:CPTA) [3]; Prospect Capital Corporation (NASDAQ:PSEC) [6]; Fifth Street Senior Floating Rate Corp. (NASDAQ:FSFR) [7]; Gladstone Investment (NASDAQ:GAIN) [8].

Finally, a lone energy dog in the top ten placed ninth, Permian Basin Royalty (NYSE:PBT) [9], and completed the June 10th MoPay SML top yield ten dog list.

Monthly Pay Dividend Funds, Trusts, & Partnerships by Yield

47 small closed end funds, plus one small ETN, and two small ETFs were culled from nearly 700 monthly dividend paying (MoPay) funds, trusts and Partnerships by yields calculated as of June 10 to determine the top ten.

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Ten monthly dividend funds, trusts & partnerships showing the biggest yields (revealed by YCharts.com and verified using Yahoo Finance data) this week included nine closed-end funds [CEFs], and one exchange traded note [ETN].

In the second spot was the lone ETN: ETRACS Monthly Pay 2X Leveraged Mortgage REIT ETN (NYSEARCA:MORL) [1].

Top dog and leader of the nine CEFs was, Cornerstone Strategic Value Fund, Inc. (NYSEMKT:CLM) [2].

The remaining eight CEFs placed third, through tenth: Stone Harbor Emerging Mkts (EDF) [3]; AllianzGI Convertible & Inc II (NYSE:NCZ) [4]; Voya Global Equity Dividend&Premium Opp (NYSE:IGD) [5]; GAMCO Glb Gold Natural Res & Income (NYSEMKT:GGN) [6]; PIMCO High Income [7]; NexPoint Credit Strategies Fund (NYSE:NHF) [8]; Clough Global Opportunities Fund (NYSEMKT:GLO) [9]; Clough Global Equity (NYSEMKT:GLQ) [10] to round out this FTP top ten list.

Actionable Conclusions: (1) MoPay SML Dogs Charged Bullishly; (2) Funds, Trusts, & Notes Mixed Up; (3) Dow Dogs Charged Barely, Remaining Overbought

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After May, MoPaySML top ten dogs dividend fell and price rose to affect a bullish charge. Dividend dropped 3.25%, while aggregate single share price of those ten equities rose 0.22%.

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At the same time, MoPay Funds, Trusts & Partnership top ten dogs rose in both dividend and price to mix up. Dividend increased 2%, while aggregate single share price of those ten equities inclined 2.9%.

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Dow dogs, however, barely charged with aggregate single share price for the ten rising just 2.5% during the days from May 4 to June 10, while annual dividend from $10k invested as $1K in each of those ten dogs swooned 3% for the period according to IndexArb. The charge was triggered by MRK replacing GE in the top ten.

As a result, the Dow dogs overbought condition (in which aggregate single share price of the ten being greater than projected annual dividend) increased.

Actionable Conclusion (3): Dow Dogs Get More Overbought

The July market dropped the gap to $237 or 63%. August was up slightly, then September shrank the gap to $279 or 67%. October expanded the chasm again to $323 or 82%. November-December constricted the gap somewhat to $271 or 70%.

January narrowed the gap slightly to $246 or 57%. In February when $30 Intel with its dividend dollar replaced Procter & Gamble's $75 price and $2.80 dividend, the gap of Dow price over dividend grew to $265 or 65%. But P&G reclaimed slot ten in March to join big dogs IBM and Boeing to move the gap to $400 or 104% as of April.

A May price retreat brought the price over dividend gap down to $350 or 91%. June put the gap back up to $386 or 104%

This gap between high share price and low dividend per $1k invested shows an overbought condition. Meaning, these are low risk and low opportunity Dow dogs. The Dow top ten average price per dollar of annual dividend June 10 was $26.75.

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Actionable Conclusion (4): Price Advantage to Preferred MoPay Shares

Conversely, the MoPay dog charts for either stocks or FTPs show those dogs to be volatile, high risk, though potentially more rewarding pups than those of the Dow. The June 10 SML MoPay stock top ten average price per dollar of annual dividend was $7.96.

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The opportunity gaps, and price per dividend dollar in fact, point to an advantage for funds, trusts and preferred stocks in the MoPay universe. The SML MoPay FTP stocks top ten average price per dollar of annual dividend was $6.13 That $1.83 difference lower than stock shares is likely due to the trust and funds ability to return capital to investors in addition to dividends.

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Actionable Conclusion (5) MoPay REITS & Financial Services Now Outnumber Energy & Industry 9 To 1 on Upside and Net Gain Lists

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Actionable Conclusion (6) Wall St. Analysts Projected a 13.8% Average 1 yr. Upside for Top 10 MoPaySML Dogs Come June 10, 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.

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Actionable Conclusion (7) Annual Yields Averaged 15.35% For June 10 MoPay Top 10 FT&P List

Top ten funds, trusts, & partnerships paying monthly dividends showed yields ranging from 12.72% to 26.31% promising investors strong returns, not counting price appreciation.

Actionable Conclusions: Wall St. Wizards Envisioned (8) A 3.81% Average 1 yr. Upside and (9) A 11.67% Average Gain for Top 30 SML Stocks As Of June 10, 2017

Top 30 dogs on the MoPay stock list graphed below show relative strengths by dividend and price as of June 10, 2016 and those projected by analyst mean target price 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.

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Yahoo reported Thomson/First Call analyst survey numbers that predicted a 3.5% 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 by over 2.75% 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 have the better track record for predicting upsides. 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. Predicts 22.56% Average Net Gains For Top 10 MoPaySML Dogs As Of June 10, 2017

This period, six 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 60% accurate.

Ten probable profit generating trades revealed by Thomson/First Call in Yahoo Finance for June 10, 2017 were:

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Fifth Street Finance was projected to net $332.11 based on dividends plus the median of annual price estimates from nine analysts less broker fees. The Beta number showed this estimate subject to volatility 96% less than the market as a whole.

Gladstone Investment was projected to net $259.26 based on the median target estimate from two analysts plus dividends less broker fees. The Beta number showed this estimate subject to volatility 28% less than the market as a whole.

Capitala Finance Corp. was projected to net $241.54 based on the median target price estimate from eleven analysts plus dividends less broker fees. A Beta number was not available for CPTA.

Independence Realty Trust, Inc. (NYSEMKT:IRT) was projected to net $240.70 based on a median target price estimate from six analysts combined with its projected annual dividend less broker fee. A Beta number was not available for IRT.

Fifth Street Senior Floating Rate Corp. was projected to net $215.96 based on the median target price estimate from three analysts combined with projected annual dividend less broker fees. The Beta number showed this estimate subject to volatility 89% less than the market as a whole.

PennantPark Floating Rate Capital (NASDAQ:PFLT) was projected to net $215.92 based on dividends plus median target price estimate from three analysts less broker fees. The Beta number showed this estimate subject to volatility 39% less than the market as a whole.

Chatham Lodging Trust (NYSE:CLDT) was projected to net $215.55 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 11% less than the market as a whole.

Orchid Island Capital was projected to net $193.40 based on the median target price estimate from three analysts plus dividends less broker fees. The Beta number showed this estimate subject to volatility 32% less than the market as a whole.

Student Transportation, Inc. (NASDAQ:STB) was projected to net $175.98 based on dividend plus the median target price estimate from three analysts less broker fees. The Beta number showed this estimate subject to volatility 13% less than the market as a whole.

American Capital Agency was projected to net $165.91 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 83% less than the market as a whole.

The average net gain in dividend and price was 22.56% on $10k invested as $1k in each of these ten MoPay dogs. The averaged Beta number showed this estimate subject to volatility 49% less than the market as a whole.

Actionable Conclusion (11): (Bear Alert) Analysts Projected One REIT Dog With A Net Loss of 6.25% By June, 2017

One probable losing trade revealed by Thomson/First Call in Yahoo Finance in 2017 was:

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Veresen (VSN.TO) was projected to lose $62.53 based on dividend and a median target price estimate from twelve analysts including $20 of broker fees. The Beta number showed this estimate subject to volatility equal to the market as a whole.

Dog Metrics Found More From Small Dogs

As noted above, ten top monthly pay SML Cap dividend stocks this week by yield included four real estate firms, five financial firms, and one energy entity, covering just three of a possible eleven Morningstar business sectors. Financial and real estate firms loaded the top 10. As of market close, June 10, MoPay leaders by yield were as follows:

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Actionable Conclusions: Analysts Alleged (12) 5 Lowest Priced of Top Ten High Yield MoPay SMLs Would Deliver 17.67% VS. (13) 16.56% Net Gains from All Ten As Of June 10, 2017

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$10,000 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 6.72% more net gain than $1k invested in each of all ten. The very lowest priced MoPaySML dog, Fifth Street Finance , was projected to deliver the best net gain of 33.21%.

Lowest price five MoPaySML dogs as of June 10 were: Fifth Street Finance; Gladstone Investment; Permian Basin Royalty Trust; Prospect Capital; Fifth Street Senior Floating Rate Corp., whose prices ranged from $4.97 to $8.01.

The higher priced five MoPaySML dogs for May 24 were: Orchid Island Capital; Bluerock Residential Growth REIT, Inc.; Capitala Finance Corp.; American Capital Agency; Armour Residential REIT, whose prices ranged from $10.45 to $19.72.

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 MoPay equities, 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 late-May, 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

Three of these monthly paying dividend pups qualify as valuable catches! They are listed with the now 40 Dogs Of The Week (DOTW) found on The Dividend Dog Catcher premium site. Click here to subscribe or get more information.

A top performing DOTW dog for the first quarter has been named. A second quarterly winner was discovered May 13. For a free copy of both quarterly reports and analysis of the winning Arnold Q1 & Q2 picks, plus a surprise bonus bottom dog report, send your e-mail address, ticker symbol for your favorite dividend stock, and name of your favorite team of any type to: fredrika120@gmail.com. Remember: E-mail, ticker, team!

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 ycharts.com; dividend.com; finance.yahoo.com; analyst mean target price by Thomson/First Call in Yahoo Finance.

Disclosure: I am/we are long ARR, FSC, GE, INTC, CSCO, 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.