Russell 2000 Full Of Shipping Dogs In June/July

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Includes: AI, AMTG, ANH, CBL, CLNY, CMRE, CORR, DHT, GHL, KRO, NNA, NRZ, NYMT, ORC, RSO, STNG, TNK, TRTN
by: Fredrik Arnold

Summary

It's been a year since I wrote about Russell 2000 Index component stocks. They are back, and full of ships and REITs. Top ten yields ranged 13.53% to 20.41%.

Yields by top dogs RSO, NNA, NRZ, AMTG, NYMT, ORC, CRE, CL, AI and DHT averaged 16.32%. Russell 2000 dogs mixed down as Dow dogs charged bullishly after May.

Top 30 Russell 2000 upsides averaged 21%, with gains averaging 31.55% as of July 5. Average cost per $1 of annual dividend was $6.13. The Dow ten averaged $27.08.

Average upside of 53.7% and net gains of 65.3% were predicted for the top ten Russell 2000 stocks. NNA at 104% and 115.7% led. The lowest Russell dog, CORR, fell 11%.

Top ten June/July Russell 2000 gainers were ANH, GHL, TAL, KRO, CLNY, DHT, CMRE, TNK, STNG, and NNA.

What are dividend dogs?

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

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Top Russell 2000 Dogs For June/July

Russell 2000 index dividends were tallied as of market closing prices July 5. Yield (dividend/price) results from YCharts, verified by Yahoo Finance, for 30 top-yielding Russell 2000 stocks stacked against analyst 1-year target projections led to the actionable conclusions below.

Actionable Conclusion (1): 50 Russell 2000 Dogs Showed 7.59% to 20.41% Yields as of July 5

Seeking Alpha reader requests prompted this series of index-specific articles reporting dividend yield plus price upside results for these indices: Dow 30; S&P 500; S&P Aristocrats; Nasdaq 100; Russell 1000; Russell 2000; Russell Combined; Champions; Contenders; Challengers; CCC Combined; and Global. Bonus reports cover Bad Boy AllStars and Sector Leaders.

50 for the Money

This article was written to reveal bargain stocks to buy and hold for up to one full year. See the Dow 30 article for an explanation of the term "dogs" for stocks reported, based on Michael B. O'Higgins's book "Beating The Dow" (HarperCollins, 1991), now named Dogs of the Dow. O'Higgins's 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 Sorted Russell 2000 Stocks by Yield

FTSE Russell states:

"The Russell Indexes are a family of global equity indices that allow investors to track the performance of distinct market segments worldwide."

"Using a rules-based and transparent process, Russell forms its indexes by listing all companies in descending order by market capitalization adjusted for float, which is the actual number of shares available for trading. In the United States, the top 3,000 stocks (those of the 3,000 largest companies) make up the broad-market Russell 3000 Index. The top 1,000 of those companies make up the large-cap Russell 1000 Index, and the bottom 2,000 (the smallest companies) make up the small-cap Russell 2000 Index."

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10 stocks in this Russell 2000 index promising the top yields in June/July represented just three of eleven Morningstar (YCharts) sectors: industrial, financial services, real estate.

Three industrial representatives placed first, fourth, and ninth: DHT Holdings (NYSE:DHT) [1], Costamare (NYSE:CMRE) [4], and Navios Maritime (NYSE:NNA) [9], respectively. A lone financial services firm placed second, Arlington Asset Investment (NYSE:AI) [2].

Six real estate firms took the rest of the ten slots - third, fifth through eighth, and tenth: CBL & Associates (NYSE:CBL) [3], Orchid Island Capital (NYSE:ORC) [5], New York Mortgage Trust (NASDAQ:NYMT) [6], Apollo Residential (NYSE:AMTG) [7], New Residential Investment (NYSE:NRZ) [8], and Resource Capital (NYSE:RSO) [10], respectively. These completed the Russell 2000 top 10 June/July dogs by yield.

Russell 2000 Dividend vs. Price Results Compared to Dow Dogs

Relative strengths of the top 10 Russell 2000 dogs by yield as of market close on 7/5/2016 stacked against those of the Dow were charted below. Projected annual dividend history from $10,000 invested as $1k in each of the 10 highest-yielding stocks and the total single-share prices of those 10 stocks created the data points shown in green for price and blue for dividend.

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Actionable Conclusions: (2) Russell 2000 Dogs Mixed Down, As (3) Dow Dogs Charged Bullishly After May

Russell 2000 top ten dividend payers moved closer toward overbought as they fell further in dividend than they fell in price after May. The aggregate single-share price dropped 6.6%, while aggregate dividend from $10k invested declined 13.9% to make the mix down.

Dow dogs, however, charged bullishly and expanded their overbought condition by 42.4%. The aggregate single-share price for the ten soared 14.7% between May 23 and July 1, while annual dividend from $10k invested as $1K in each of the top ten dropped 5.5%, according to IndexArb.

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As mentioned, the Dow dogs' overbought condition (where the aggregate single-share price of the ten exceeded projected annual dividend from $10k invested as $1k each in those ten) expanded over 1/3rd after May. Say "goodbye" to any long overdue retreat!

Actionable Conclusion (4): Dow Dogs Now More Overbought

Historically, to begin August 2105, IBM's high price and dividend entrance pushed the Dow overbought gap to $343, or 89%. As September dawned, 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, 2016, 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 March charge put the gap up to $293, or 73%. April set a 2016 record expanding to $400, or 104%, May's price retreat brought the price over dividend gap down to $350, or 91%, and June put the gap down to $342, or 90%. The July surge was led by heavyweight ExxonMobil (NYSE:XOM) muscling little General Electric (NYSE:GE) out on the tenth slot by yield. The resulting gap between aggregate single-share price of ten dogs above dividends projected from $10K invested as $1K per each of the ten was $401, or 109%.

The Dow dogs remain overbought and overpriced. Meaning, these are low-risk and low-opportunity Dow dogs. The Dow top ten average price per dollar of annual dividend was $27.08.

Unlike the Dow, the Russell 2000 ten remained far away from overbought territory. Despite their movement toward that condition, they are over $1500 away from parity, or 1700% removed.

The Russell 2000 dog chart showed how a normal condition of dividends above price appears. The Russell 2000 top ten average price per dividend $1 was $6.13 as of July 5.

Russell Dog Upsides

Results from YCharts tallied for the 50 top Russell 2000 dividend yielders as of market closing prices July 5, 2016 were stacked against analyst mean target price projections one year out. The results led to the actionable conclusions continuing below.

Actionable Conclusions: (5) 10 Top Russell 2000 Dogs Showed 53.74% Average Upsides Per Analysts, And (6) Four Russell 2000 Dogs Averaged A 6.94% Downside

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Actionable Conclusion (7): Wall St. Wizards Calculated A 21% Average 1-year Upside And (8) A 31.55% Average Net Gain for Top 30 Russell 2000 Dogs To July 2017

Top 30 dogs on the Russell 2000 index stock list graphed below showed relative strengths by dividend and price as of July 5, 2016 and those projected by analyst median 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 used to gauge each stock's upside to 2017.

Historical prices and actual dividends paid from $1000 invested in each of the highest-yielding stocks and the aggregate single-share prices of those 30 stocks divided by 3 created the data points for 2016. Projections based on estimated increases in dividend amounts from $1000 invested in the 30 highest-yielding stocks and aggregate 1-year analyst target share prices from Yahoo Finance divided by 3 created the 2017 data points on the chart below, shown in green for price and blue for dividend.

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Yahoo reported Thomson/First Call analyst survey numbers predicted a 14% lower dividend from $10K invested as $1k in the average ten of this group, while the aggregate single-share price of those ten was predicted to increase 12.3% in the coming year. Notice that the 2016-17 graph shows price well below dividend.

Actionable Conclusion (8): Analysts Predicted 10 Russell 2000 Dogs Would Net 30.32% to 115.7% By July 2017. (Here is where the Ships come in.)

Three of the top ten dividend-yielding Russell 2000 dogs were among the top ten gainers for the coming year, based on analyst 1-year target prices. Therefore, the past month dog strategy (as graded by Wall St. wizards) was 30% accurate.

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Navios Maritime was projected to net $1,156.87, based on a mean target price estimate from seven analysts, combined with projected annual dividend less broker fees. The Beta number showed this estimate subject to volatility 26% greater than the market as a whole.

Scorpio Tankers (NYSE:STNG) was projected to net $1,003.81, based on dividends plus the mean of annual price estimates from seventeen analysts less broker fees. The Beta number showed this estimate subject to volatility 47% more than the market as a whole.

Teekay Tankers (NYSE:TNK) was projected to net $809.35, based on dividends plus median target price estimate from thirteen analysts less broker fees. The Beta number showed this estimate subject to volatility 130% greater than the market as a whole.

Costamare was projected to net $729.64, based on dividends plus median target price estimates from five analysts less broker fees. The Beta number showed this estimate subject to volatility 98% more than the market as a whole.

DHT Holdings was projected to net $714.69, based on dividends plus a median target price estimate from thirteen analysts less broker fees. The Beta number showed this estimate subject to volatility 7% less than the market as a whole.

Colony Capital (NYSE:CLNY) was projected to net $546.03, based on dividends plus a mean target price estimate from three analysts less broker fees. The Beta number showed this estimate subject to volatility 33% less than the market as a whole.

Kronos Worldwide (NYSE:KRO) was projected to net $537.38, based on dividends plus a mean target price estimate from three analysts less broker fees. The Beta number showed this estimate subject to volatility 14% more than the market as a whole.

TAL International Group (NYSE:TAL) was projected to net $386.13, based on a median target price estimate from seven analysts combined with projected annual dividend less broker fees. The Beta number showed this estimate subject to volatility 127% more than the market as a whole.

Greenhill & Co. (NYSE:GHL) was projected to net $342.50, based on a mean target price estimate from six analysts combined with projected annual dividend less broker fees. The Beta number showed this estimate subject to volatility 4% more than the market as a whole.

Anworth Mortgage Asset (NYSE:ANH) was projected to net $303.21, 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 91% less than the market as a whole.

The average net gain in dividend and price was 65.3% on $10k invested as $1k in each of these dogs. This gain estimate was subject to average volatility 48% more than the market as a whole.

"If Everyone Told The Truth, The Market Would Not Move:" NNA vs. CORR Price History

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Year-to-date price performance of CorEnergy Infrastructure Trust (NYSE:CORR), the Nasdaq 100 Index "loser" red-lined by analysts, showed a big upside in contrast to the sizeable downside price movement for analyst-tagged upside leader, Navios Maritime.

Price momentum was solidly opposed to this pair of analyst forecasts.

Analyst Metrics Projected Big Gains From Five Lowest-Priced Russell 1000 Highest-Yielding Dogs

Yield (dividend / price) results from Yahoo Finance for Russell 2000 index July 5 did the ranking.

Actionable Conclusions: (9) 5 Lowest-Priced of Top Ten Highest-Yield Russell 1000 Dogs Promised 58.62% Vs. (10) 40.93% Net Gains by All Ten by July 5, 2017

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$5000 invested as $1k in each of the five lowest-priced stocks in the top ten Russell 2000 dividend kennel by yield were estimated by analyst 1-year targets to deliver 43.23% more net gain than the same amount invested in all ten. The very lowest-priced Russell 2000 dividend dog, Navios Maritime, was projected to deliver the best net gain of 115.69%.

The five lowest-priced Russell 2000 dogs for July 5 were Navios Maritime, DHT Holdings, New York Mortgage Trust, Costamare, and CBL & Associates, whose prices ranged from $1.47 to $9.74.

Five higher-priced Russell 2000 dogs for July 5 were Orchid Island Capital, Resource Capital, Arlington Asset Investment, New Residential Investment, and Apollo Residential, whose prices ranged from $10.21 to $13.13.

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 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. It's also the work analysts got paid big bucks to do.

Caution is advised, however, as analysts are historically 20-80% accurate on the direction of change and about 0-20% accurate on the degree of the change.

Annual Analyst Accuracy

You see below the 1-year result of ten analyst target estimates for Dow stocks, per Yahoo, from mid-May in 2015. These were applied to the "basic method" Michael B. O'Higgins employed for beating the Dow. The key shows losses in a reddish tint, poor results tinted yellow, gains tinted green, and no tint means no difference.

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The "basic method" top ten annual analyst accuracy score for early-mid May 2015 was eight losses, one poor performance, and one gain.

The stocks listed above were suggested only as reference points for a Russell 1000 dividend dog investigation in early July 2016. 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

One of these Russell 2000 pups qualifies as a valuable catch! It is listed with the now 46 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 on May 13. For a free copy of both quarterly reports and analysis of the winning Arnold Q1, Q2, and Q3 August picks, send your e-mail address, ticker symbol for your favorite dividend stock, and name of your favorite team of any sport or activity to: fredrika120@gmail.com. Remember: e-mail, ticker, team!

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.

The stocks listed above were suggested only as possible starting points for your index dog dividend stock purchase/sale 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 indexarb.com; YCharts.com; analyst mean target prices by Thomson/First Call in Yahoo Finance.

Disclosure: I am/we are long 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.