Monthly Pay Dividends Fall As Prices Surge Per July 8 Tote

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Includes: AGNC, ARR, BA, CLDT, CLM, CPTA, FSC, FSFR, GAIN, GLO, GLQ, IBM, IGD, INTC, IRT, MORL, NCV, NCZ, NHF, ORC, PBT, PFLT, PG, PHK, PSEC, STAG, STB
by: Fredrik Arnold

Summary

57 monthly pay dividend (MoPay) Small, Mid, & Large capitalized equity (SML) yields ranged 0.44% to 16.37%; 60 SML Funds, Notes & Partnerships (FTPs) spanned 7.88% to 29.40% July 8.

Top ten MoPay dividend equities charged bullishly while averaging 12.28% yield. Ten MoPay FTPs mixed up, averaging 15.45%, also ten Dow Dogs charged, averaging 3.63% yield.

Analyst 1yr. targets caught thirty MoPay equities averaging 2.6% upsides and 10.3% net gains. FTPs are not tracked by analysts but their top 30 gains by yield averaged 12.56%.

Top gaining equities were: STB; AGNC; IRT; CLDT; PFLT; CPTA; FSFR; GAIN; ORC; with FSC leading. FTPs were: PHK; GLO; NCZ; GGN; GLQ; NHF; IGD; EDF; CLM; with MORL leading.

Ten top yield SML equities projected 1.62% LESS net gain from $5k invested in the lowest priced five than from $5K in all ten.

Fifty-seven MoPay SML For The Equities 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 7/8/16 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) 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."

MoPaySML Dogs Of July 8

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 Detected Bargains

Fifty-seven small, mid, and large cap monthly dividend paying equities were pulled from 755 equities of all sizes for this article. Closed End Funds, ETFs and ETNs were excluded here and Preferred Shares would be included in the FTP list. Real Estate Investment Trusts (REITs), Master Limited Partnerships [MLPS], Royalty Trusts [RTs], and Business Development Companies [BDCS] populated the equity 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, however their coverage is more robust for common stocks. Energy sector preferred issues that once rode the top of that list have since cut dividends and dropped out.

Ten top monthly pay SML Cap dividend stocks this week by yield included three real estate firms, six financial service firms, and one energy firm, covering three of the eleven Morningstar business sectors.

As usual, real estate and financial firms dominated the top 10 list and loaded the master list of fifty-seven with seventeen REITs, and ten financial service firms, along with seventeen energy issues, two consumer cyclical, four industrial, one utility, four healthcare, one communication services, and one basic materials firms represented. Only consumer defensive and technology sectors were missing from the monthly\dividend equity payor list.

A diversified REIT led the top ten list, Orchid Island Capital (NYSE:ORC) [1]. Two other real estate entities followed in fourth, and sixth places, ARMOUR Residential REIT (NYSE:ARR) [4], American Capital Agency (NASDAQ:AGNC) [6].

Six Financial services representatives followed in second, third, fifth, seventh, ninth and tenth places: Fifth Street Finance (NYSE:FSC) [2]; Capitala Finance Corp. (NASDAQ:CPTA) [3]; Prospect Capital Corporation (NASDAQ:PSEC) [5]; Fifth Street Senior Floating Rate Corp. (NASDAQ:FSFR) [7]; Gladstone Investment (NASDAQ:GAIN) [9]; PennantPark Floating Rate (NASDAQ:PFLT) [10].

Thereafter came the lone energy equity, in eighth position, Permian Basin Royalty Trust (NYSE:PBT) [8], to complete the July 8th MoPay SML top yield ten dog list.

MoPay Funds, Trusts, & Partnerships Were Also Ranked by Yield

57 small closed end funds, plus one small ETN, and two small ETFs were culled from nearly 800 monthly dividend paying (MoPay) funds, trusts and partnerships by yields calculated as of July 8 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 top spot was the lone ETN: ETRACS Monthly Pay 2X Leveraged Mortgage REIT ETN (NYSEARCA:MORL) [1].

Second 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]; NexPoint Credit Strategies Fund (NYSE:NHF) [4]; Voya Global Equity Dividend&Premium Opp (NYSE:IGD) [5]; AllianzGI Convertible & Inc II (NYSE:NCZ) [6]; Clough Global Equity (NYSEMKT:GLQ) [7]; Clough Global Opportunities Fund (NYSEMKT:GLO) [8]; AllianzGI Convertible & Income (NYSE:NCV) [9]; PIMCO High Income (NYSE:PHK) [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 To A New Level of Overbought

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After June 10, MoPaySML top ten dogs charged as dividend fell and price increased to make a bullish move. Dividend dropped 1.3%, while aggregate single share price of those ten equities rose 2.3%.

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Meanwhile, MoPay fund, trust & partnership top ten dogs mixed up more. Dividend increased 0.64%, while aggregate single share price of those ten equities rose 2.5%.

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Dow dogs, however, charged like the MoPay equities, Aggregate single share price for the ten rose 2.6% between June 10 and July 8, while annual dividend from $10k invested as $1K in each of the top ten dropped 2.3% according to IndexArb.

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

Actionable Conclusion (3): Dow Overbought Gap Expanded

The August 2015 gap 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 more to $246 or 57%. In February when $30 Intel (NASDAQ:INTC) with its dividend dollar replaced the Procter & Gamble (NYSE:PG) $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 (NYSE:IBM) and Boeing (NYSE:BA) 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 10 put the gap back up to $386 or 104%. Price action brought the gap to a new vastness of $414 or 114% as of July 8

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 July 8 was $27.30.

Actionable Conclusion (4): Price Advantage to MoPay Shares

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 July 8 SML MoPay equity top ten average price per dollar of annual dividend was $8.10.

The opportunity gaps, and price per dividend dollar, 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 $1.87 difference below equity share dividend cost is likely due to the trust and funds ability to return capital to investors in addition to dividends.

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

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Actionable Conclusion (6) Wall St. Analysts Projected a 9.21% Average 1 yr. Upside for Top 10 MoPaySML Dogs Come July 8, 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 greatest upside price potential into 2017 out of 30 selected by yield in 2016.

MOPYSML[UG] (10)FTP DVGAINS JUL8/16-17

Actionable Conclusion (7) Annual Yields Averaged 15.45% For July 8 MoPay Top 10 FT&P List

Top ten funds, trusts, & partnerships paying monthly dividends showed yields ranging from 12.42% to 29.4% promising investors strong returns, not counting price appreciation.

Actionable Conclusions: Wall St. Wizards Envisioned (8) A 2.55% Average 1 yr. Upside and (9) A 10.31% Average Net Gain for Top 30 SML Stocks As Of July 8, 2017

Top 30 dogs on the MoPay stock list graphed below show relative strengths by dividend and price as of July 8, 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 predicting a 2.5% 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 nearly 1.75% 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. Brokers Asserted 18.13% Average Net Gains For Top 10 MoPaySML Dogs As Of July 8, 2017

This period, seen 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 70% accurate.

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

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Fifth Street Finance was projected to net $269.83 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 95% less than the market as a whole.

Orchid Island Capital was projected to net $215.87 based on the median target price estimate from three analysts plus dividends less broker fees. The Beta number showed this estimate subject to volatility 35% less than the market as a whole.

Gladstone Investment was projected to net $208.65 based on the median target estimate from two analysts plus dividends less broker fees. The Beta number showed this estimate subject to volatility 29% less than the market as a whole.

Fifth Street Senior Floating Rate Corp. was projected to net $190.27 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 65% less than the market as a whole.

Capitala Finance Corp. was projected to net $187.22 based on the median target price estimate from eleven analysts plus dividends less broker fees. A Beta number was not available for CPTA.

PennantPark Floating Rate Capital was projected to net $175.8 based on dividends plus median target price estimate from three analysts less broker fees. The Beta number showed this estimate subject to volatility 38% less than the market as a whole.

Chatham Lodging Trust (NYSE:CLDT) was projected to net $151.16 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 15% less than the market as a whole.

Independence Realty Trust, Inc. (NYSEMKT:IRT) was projected to net $146.87 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.

American Capital Agency was projected to net $144.24 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 89% less than the market as a whole.

Student Transportation, Inc. (NASDAQ:STB) was projected to net $123.08 based on dividend plus the median target price estimate from three analysts less broker fees. The Beta number showed this estimate subject to volatility 56% less than the market as a whole.

The average net gain in dividend and price was 18.137% on $10k invested as $1k in each of these ten MoPay dogs. The averaged Beta number showed this estimate subject to volatility 53% less than the market as a whole.

Actionable Conclusion (11): (Bear Alert) Analysts Predicted One MoPay SML Dog To Lose 4.33% By July, 2017

One probable losing trades revealed by Thomson/First Call in Yahoo Finance in 2017 were:

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Stag Industrial REIT (NYSE:STAG) was projected to lose $43.30 based on dividend and a median target price estimate from fourteen analysts including $20 of broker fees. The Beta number showed this estimate subject to volatility 39% more than the market as a whole.

Two Monthly Pay Dividend Dog Price Charts Illustrate Analyst "Contrarian Bias" For FSC vs STAG

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Year to date price histories report how the lowest MoPay "loser", Stag Industrial REIT, showed a positive price history compared to a negative report for the analysts upside star stock, Fifth Street Finance.

This evidence correlates with Michael O'Higgins "media index" admonition. He advises investors to pay close attention to "magazine covers, news headlines, and ads placed by investment advisors, primarily in Barron's." He concludes that "you can make out like a bandit by acting the opposite way." Apparently analyst target price estimates are contrarian indicators.

Dog Metrics Attempted to Find More Gain In Smallest MoPay Dividend Dogs And Failed

As noted above, ten top monthly pay SML Cap dividend stocks this week by yield included three real estate firms, six financial service firms, and one energy firm, covering three of the eleven Morningstar business sectors. As of market close, July 8, MoPay leaders by yield were as follows:

Actionable Conclusions: Analysts Advised (12) 5 Lowest Priced of Top Ten High Yield MoPay SMLs Would Deliver 14.93% VS. (13) 15.18% Net Gains from All Ten

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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 1.62% less 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 26.98%.

Lowest priced five MoPaySML dogs as of July 8 were: Fifth Street Finance; Permian Basin Royalty Trust; Gladstone Investment; Prospect Capital; Fifth Street Senior Floating Rate Corp., whose prices ranged from $5.21 to $8.18.

The higher priced five MoPaySML dogs for June 27 were: Orchid Island Capital; PennantPark Floating Rate; Capitala Finance Corp.; American Capital Agency; Armour Residential REIT, whose prices ranged from $10.26 to $20.26.

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.

Stocks listed above were suggested only as decent starting points for a MoPay dog dividend stock investment research process in mid-July, 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.

Annual Analyst Accuracy?

You see below the one year result of ten analyst target estimates for Dow stocks per Yahoo from this article from July 7, 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; no tint means no difference.

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The "basic method" top ten annual analyst accuracy score for The Top Ten Monthly Pay Stocks by yield between June 30 2015-16 was eight losses, and two gains.

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 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 May 13. For a free copy of both quarterly reports and analysis of the winning Arnold Q1, Q2 & 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!

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, INTC, CSCO, PFE, VZ, GE.

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.