Russell 2000 Dogs Awash With Shippers & Real Estate In August

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Includes: AI, AMTG, ANH, CMRE, CORR, CVI, DHT, FRO, KRO, MITT, NNA, NRZ, NYMT, ORC, STNG, TNK
by: Fredrik Arnold

Summary

Yields by top dogs MITT, NNA, NRZ, CVI, AMTG, NYMT, ORC, AI, FRO, & DHT averaged 15.18%. Russell 2000 dogs and Dow dogs both charged bullishly through July.

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 top Russell 2000 ten. NNA at 104% & 115.7% led. Lowest Russell dog, CORR, fell 0.30%.

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

Ten top Russell 2000 stocks by yield showed 37.05% more gain from $5k invested in the lowest priced five than from $5k invested in all ten per analyst 1yr. targets.

The Dividend Dogs Rule

Stocks earned the "dog" moniker by 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 August

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

Actionable Conclusion (1): 50 Russell 2000 Dogs Showed 7.47% to 21.46% Yields as of August 1

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; 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 up to one full year. See 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 August represented four of eleven Morningstar (YChart) sectors: industrials, financial services, real estate, and energy.

Three industrial representatives placed first, second, and ninth, DHT Holdings (NYSE:DHT) [1], Frontline (NYSE:FRO) [2], and Navios Maritime (NYSE:NNA) [9]. A lone financial services firm placed third, Arlington Asset Investment (NYSE:AI) [3]. Another single representative from energy placed seventh, CVR Energy (NYSE:CVI) [7].

Five real estate firms took the rest of the slots, fourth through sixth, eighth, and tenth: Orchid Island Capital (NYSE:ORC) [4], New York Mortgage Trust (NASDAQ:NYMT) [5], Apollo Residential (NYSE:AMTG) [6], New Residential Investment (NYSE:NRZ) [8], and AG Mortgage Investment (NYSE:MITT) [10]. These completed the Russell 2000 top 10 August 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 8/1/2016 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 And (3) Dow Dogs Charged Bullishly Through July Into August

Russell 2000 top ten dividend payers edged toward overbought as they fell further in dividend as they rose in price after July. Aggregate single share price soared 13.4%, while aggregate dividend from $10k invested, declined 4.75% to set the charge.

Dow dogs also charged bullishly and expanded their overbought condition again. Aggregate single share price for the ten rose 3.4% between July 1 and August 1, while annual dividend from $10k invested as $1K in each of the top ten dropped 2% according to IndexArb.

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As mentioned, the Dow dogs overbought condition (where aggregate single share price of the ten exceeded projected annual dividend from $10k invested as $1k each in those ten) expanded after June.

Actionable Conclusion (4): Dow Dogs Are Even More Overbought

Historically, 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%. A July surge pushed the gap between aggregate single share price above dividends projected from $10K invested to $401 or 109%. August noted the gap expanded to $434 or 121%.

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 $27.72.

Unlike the DOW, the Russell 2000 ten, remained far away from overbought territory. Despite their movement toward that condition, they are nearly $1,459 away from parity or 1519% removed.

The Russell 2000 dog chart showed how a normal condition of dividends above price should look. The Russell 2000 top ten average price per $1 of dividend was $6.26 as of August 1.

Russell Dog Upsides

Results from YCharts.com tallied for the 50 top Russell 2000 dividend yielders as of market closing prices August 1, 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 28.27% Average Upsides Per Analysts, & (6) Ten Russell 2000 Dogs Averaged A 6% Downside

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Actionable Conclusion (7): Wall St. Wizards Predicted A 8.15% Average 1 yr. Upside & (8) A 20% Average Net Gain for Top 30 Russell 2000 Dogs To August, 2017

Top 30 dogs on the Russell 2000 index stock list showed the relative strengths graphed below for dividend and price as of August 1, 2016 carried to the same date in 2017, based on analyst median price target estimates.

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 shown in green for price and blue for dividend.

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Yahoo reported Thomson/First Call analyst survey numbers predicted a 6% lower dividend from $10K invested as $1k in the average ten of this group, while aggregate single share price of those ten was predicted to increase 1.8% in the coming year. Notice that the 2016-17 graph shows price remaining well below dividend.

Actionable Conclusion (8): Analysts Predicted 10 Russell 2000 Dogs Would Net 20% to 74.5% By July 2017. (Here is where the ships deliver the goods.)

Five 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 50% accurate.

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Navios Maritime was projected to net $744.71 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.

Teekay Tankers (NYSE:TNK) was projected to net $627.46 based on dividends plus median target price estimate from twelve analysts less broker fees. The Beta number showed this estimate subject to volatility 141% greater than the market as a whole.

Scorpio Tankers (NYSE:STNG) was projected to net $555..63 based on dividends plus the mean of annual price estimates from sixteen analysts less broker fees. The Beta number showed this estimate subject to volatility 46% more than the market as a whole.

DHT Holdings was projected to net $482.15 based on dividends plus a median target price estimate from twelve analysts less broker fees. The Beta number showed this estimate subject to volatility 7% less than the market as a whole.

Frontline was projected to net $440.96 based on dividends plus a mean target price estimate from six analysts less broker fees. The Beta number showed this estimate subject to volatility 115% more than the market as a whole.

Kronos Worldwide (NYSE:KRO) was projected to net $325.13 based on dividends plus a mean target price estimate from three analysts less broker fees. The Beta number showed this estimate subject to volatility 114% more than the market as a whole.

Costamare (NYSE:CMRE) was projected to net $222.08 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.

Anworth Mortgage Asset (NYSE:ANH) was projected to net $219.84 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.

New Residential Investment was projected to net $211.89 based on a median target price estimate from ten 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.

Arlington Asset Investment was projected to net $200.39 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 33% 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 notable downside price movement for analyst tagged upside leader, Navios Maritime .

Price momentum remained solidly against this pair of analyst forecasts.

Analyst Metrics Projected Gains From Five Lowest Priced Russell 2000 Highest Yielding Dogs

Yield (dividend / price) results from Yahoo.com for Russell 2000 index August 1 did the ranking.

Actionable Conclusions: (9) 5 Lowest Priced of Top Ten Highest Yield Russell 2000 Dogs Promised 35.8% VS. (10) 26.12% Net Gains by All Ten by August 1, 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 37.05% 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 74.47%.

Lowest priced five Russell 2000 dogs for August 1 were: Navios Maritime; DHT Holdings; New York Mortgage Trust; Frontline; Orchid Island Capital, whose prices ranged from $1.53 to $11.16.

Higher priced five Russell 2000 dogs for August 1 were: Apollo Residential; New Residential Investment; Arlington Asset Investment; CVR Energy; AG Mortgage Investment, whose prices ranged from $13.57 to $14.98.

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. Its also the work analysts got paid big bucks to do.

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.

Annual Analyst Accuracy

You see below the one year result of ten analyst target estimates named in this article for Russell 1000 & 2000 Combined 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; no tint means no difference.

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The "basic method" top ten annual analyst accuracy score for early Mid-May 2015 was nine losses, and one gain. A .100 batting average will not make the cut in any league.

The stocks listed above were suggested only as reference points for a Russell 2000 dividend dog investigation in early-August, 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 50 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 Q1, and Q2 quarterly reports and analysis of the soon to be named winning Arnold Q3 August pick, 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.

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. Photo: spca.bc.ca.com.

Disclosure: I am/we are long PFE, CSCO, VZ, ARR.

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.