Monthly Dividend Dogs: Three Lists For August

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Includes: ACP, ACSF, ARR, CEFL, CLM, CPTA, CRF, EDF, EDI, FSC, FSFR, GAIN, GGN, IGD, JMP, MORL, NHF, OAKS, ORC, PFLT, PSEC, SCM, SLVO, STB, WHLR
by: Fredrik Arnold

Summary

August Monthly Pay (MoPay) dog lists: 1. Stocks by yield (10/76); 2. Stocks by price upside (10/30); 3. Funds, Trusts & Partnerships (FTPs) by yield (10/70).

For August the MoPay stocks list gained four new members and FTPs expanded to 70. Monthly dividend stock collecting is a growth industry. The search for more MoPays is ongoing.

Actionable items: 1. MoPay vs. Dow; 2. Top MoPay gains; 3. Next MoPay gains; 4. Last MoPay gains; 5. Overall best MoPay gainers; 6. FTPs vs. Stocks; 7. FTP risks.

Investing $5k in the lowest priced five of ten top yield monthly pay dividend stocks alleged 38.88% more returns than $5k put in all ten based on analyst annual targets.

Annual analyst accuracy from the week of 7/24/15 showed a .200 batting average for MoPay stock upside price predictions by brokers one year later.

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."

August MoPay Dividend Dog Data

Three buy and hold lists discussed below produced ten actionable conclusions. To draw these conclusions, August 1 closing price and estimated annual dividends were referenced. 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 Qualities

Quarterly, Semi-Annual and Annual dividend investors anxiously await announcements from a firm, fund, or brokerage 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 curtailed when companies suddenly cut monthly dividends to save cash. Some 2016 examples were: GORO cut dividends 80% from $.01 to $.002 per month January 6 then to $.0016 February 6; also HGT declared no cash dividends January 19 and February 19; NASDAQ suspended trading of UDF February 18 (after an FBI raid of UDF offices). In April, Vanguard Resources and Full Circle Capital Corporation suspended their monthly payouts, while,newcomer to this list, Black Diamond Group cut its payout in half. July 27 venerable American Capital Agency announced a reduction to its MoPay dividend from $.20 to $.18. Thus, the segment is volatile.

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Readers said:

"[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." --Hardog

"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

Dog Data Diligence Declared Bargains

For this article seventy-six dividend equities plus seventy funds, trusts and partnership shares were culled from nearly 800 entities (listed here and here) paying monthly returns. All were ranked as of August 1, 2016 using 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 into August represented just two of the eleven Morningstar market sectors, real estate, and financial.

Four of the top ten dogs revealed by YChart data were from the real estate sector. The real estate dogs placed first, fourth, sixth, and seventh: Orchid Island Capital Inc (NYSE:ORC) [1]; Wheeler Real Estate Investment Trust Inc. (NASDAQ:WHLR) [4]; Five Oaks Investment Corp. (NYSE:OAKS) [6]; Armour Residential REIT (NYSE:ARR) [7].

Financial sector stocks filled the remaining six slots, second, third, fifth, and eighth through tenth, to complete the August MoPay top ten dog list by yield: Fifth Street Finance (NYSE:FSC) [2]; Capitala Finance (NASDAQ:CPTA) [3]; Stellus Capital Investment Corporation (NYSE:SCM) [5]; Prospect Capital Corporation (NASDAQ:PSEC) [8]; Avenue Income Credit Strategy (NYSE:ACP) [9]; American Capital (NASDAQ:ACSF) [10].

List Two: Monthly Pay Dividend Stocks by Price Upside

Results from YCharts for monthly paying (MoPay) dividend stocks as of market closing price August 1 were compared with analyst mean target prices one year out as reported by YahooFinance. Ten top stocks displayed 7.66% to 44.51% price upsides for the coming year based on analyst 1 yr. targets.

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Five stocks of ten on the price upside list were not on the top ten list by yield. Three of those five upside performers from outside the top ten by yield were financial service firms which placed second, ninth, and tenth: JMP Group (NYSE:JMP) [2]; PennantPark Floating Rate Capital (NASDAQ:PFLT) [9]; Fifth Street Senior (NASDAQ:FSFR) [10].

One industrial firm and one real estate firm completed this second MoPay top dog list: Student Transportation (NASDAQ:STB) [7], and Gladstone Investment (NASDAQ:GAIN) [8].

Price upside, of course, is defined as the discrepancy between the current price and analyst target one-year median price for each stock.

Ten MoPay stocks showing the highest upside price potential into 2017 were gleaned from 30 selected by yield. Three to nine analysts have historically provided the most accurate mean target price estimates.

List Three: Monthly Pay Dividend Funds, Trusts, & Partnerships by Yield

Seventy top monthly dividend paying (MoPay) fund, trust and partnership equities listed below were culled from nearly 800 candidates by yields calculated as of August 1 to determine the Top Ten.

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Ten monthly dividend funds, trusts & partnerships showing the biggest yields for August as revealed using YChart & YahooFinance data featured seven closed-end funds [CEFs], and three exchange traded notes [ETNs].

At top were two closed end funds, Cornerstone Total Return Fund, Inc. (NYSEMKT:CRF) [1], and Cornerstone Strategic Value Fund, Inc. (NYSEMKT:CLM) [2].

Three exchange traded notes captured the remaining top five slots, ETRACS Monthly Pay 2X Leveraged Mortgage REIT ETN (NYSEARCA:MORL) [3]; UBS E-TRACS Mthly Pay 2xLvg Closed-End ETN (NYSEARCA:CEFL) [4]; Credit Suisse X-Links Silver CovCall ETN (NASDAQ:SLVO) [5].

Four remaining CEFs followed in sixth, through tenth places: Stone Harbor Emerging Market Total Income Fund (NYSE:EDF) [6]; NexPoint Credit Strategies Fund (NYSE:NHF) [7], , Stone Harbor Emerging Mkt Total Incom FD (NYSE:EDI) [8], GAMCO Global Gold Natural Res & Income (NYSEMKT:GGN) [9], & Voya Global Equity Dividend & Premium Opportunity (NYSE:IGD) [10], to round out the top ten FTP list.

Notice in the graph below how preferred stocks on this list pushed dividends up to another level beginning in January. The demise of two preferred share dividends after March dropped the dividend vector back toward earth. And the fall of the preferred shares was finished in May when the last one listed retired.

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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, February, March, April, May, June, July, and again 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 August 1, 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.

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Actionable Conclusions: (1) MoPay Dogs Charged, & (2) Dow Did Too

Ten top MoPay dogs dropped in dividend and rose in price after July to continue a four-month bullish charge. Aggregate dividend from $10k invested as $1k in each of the top ten stocks fell 7.6% while total single share price of those ten increased 9.5% for the period.

Meanwhile, Dow dogs charged to a new level of overbought condition as they showed less annual dividend from $10k invested as $1K in each of the top ten, falling 2.9% after July, while aggregate single share price rose 6.7%.

As a result, the Dow dogs overbought condition (where aggregate single share price of the ten exceeded projected annual dividend from $10k invested as $1k in each) moved to a higher level.

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%.

The Overbought Dow

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 put the gap between aggregate single share price of ten dogs above dividends projected from $10K invested as $1K per each of the ten at $401 or 109%. August finds the overbought condition measured at $423 or 116%

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 $27.37.

In marked contrast to the Dow, MoPay stock dividend dog top ten average price per dollar of annual dividend was a low $8.01 as of August 1. That's over 3 times less than the price of a dollar of Dow annual dividends.

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 18.03% 1 yr. Average Net Gain from Top 10 August MoPay Stocks

Top dogs on the MoPay stock list were graphed below to compare relative strengths by dividend and price as of August 1, 2016 with 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).

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Yahoo projected a 5.7% lower dividend from $10K invested as $1k in the top ten August MoPay dogs while aggregate single share price was projected to increase by 1,6% in the coming year.

Actionable Conclusion (4): Analysts Predicted Average NEXT10 MoPay Net Gains of 10% to August, 2017

Ten monthly dividend equities that showed the next best yields August 1 represented four of the eleven Morningstar market sectors: financials, energy, real estate, and consumer cyclical.

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The NEXT ten dogs showed 1.2% 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 1.5% in the coming year.

Actionable Conclusion (5): Analysts Forecast LAST10 MoPay DiviDog Average Net Gains of 12.76% to August, 2017

Ten LAST monthly dividend equities July 1 also represented four of the eleven Morningstar market sectors: financial services, real estate, industrials, and consumer cyclical.

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These ten dogs showed 4% 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 3.2% 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. 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 Augur Ten MoPay Dog Stocks to Net 15.6% to 55% Gains To August, 2017

Five of the ten top dividend MoPay dogs (shaded in the chart blow) 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 graded by analyst estimates in August proved 50% accurate.

Ten probable profit generating trades revealed by YCharts analytics for 2017:

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Wheeler Real Estate netted $549.94 based on estimates from three analysts plus dividends less broker fees. The Beta number showed this estimate subject to volatility 23% more than the market as a whole.

JMP Group netted $460.23 based on a mean target price estimate from two analysts combined with projected annual dividend less broker fees. The Beta number showed this estimate subject to volatility 37% less than the market as a whole.

Five Oaks Investment Corp. netted $281.84 based on estimates from three analysts plus dividends less broker fees. The Beta number showed this estimate subject to volatility 32% more than the market as a whole.

American Capital Senior Floating netted $249.43 based on dividends plus median target price estimate from three analysts less broker fees. A Beta number was not available for ACSF.

Fifth Street Finance netted $222.42, based on dividend plus median target price estimates from eight analysts less broker fees. The Beta number showed this estimate subject to volatility 95% less than the market as a whole.

Stellus Capital Investment netted $205.69 based on estimates from five analysts plus dividends less broker fees. The Beta number showed this estimate subject to volatility 41% less than the market as a whole.

Student Transportation netted $193.56 based on dividends plus the median of annual price estimates from four analysts less broker fees. The Beta number showed this estimate subject to volatility 16% less than the market as a whole.

Gladstone Investment netted $180.00, based on dividend plus mean target price estimates from two analysts less broker fees. The Beta number showed this estimate subject to volatility 27% less than the market as a whole.

PennantPark Floating Rate Capital netted $174.95 based on mean target price estimates from three analysts plus dividends less broker fees. The Beta number showed this estimate subject to volatility 41% less than the market as a whole.

Fifth Street Senior Floating netted $155.77 based on mean target price estimates from three analysts plus dividends less broker fees.. The Beta number showed this estimate subject to volatility 65% less than the market as a whole.

Average net gain in dividend and price was 26.74% on $1k invested in each of these ten MoPay dog stocks. This gain estimate was subject to average volatility 30% less than the market as a whole.

Actionable Conclusion (7): (Bear Alert) Analysts Spotted Three MoPay Dogs For A Net Losses Of 2.8% to 8.75% By 2017

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

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ARMOUR Residential REIT was projected to lose $28.70 based on dividend and a median target price estimate from seven analysts including $20 of broker fees. The Beta number showed this estimate subject to volatility 36% less than the market as a whole.

Prospect Capital was projected to lose $51.98 based on dividend and a median target price estimate from seven analysts including $20 of broker fees. The Beta number showed this estimate subject to volatility 62% less than the market as a whole.

DirectCash Payments Inc. (DCI.TO) was projected to lose $87.47 based on dividend and no target price estimate from any analysts but including $20 of broker fees. The Beta number showed this estimate subject to volatility 38% less than the market as a whole.

Average net loss after dividends and broker fees was 5.6% on $1k invested in each of these three MoPay dog stocks. This loss estimate was subject to average volatility 39% less than the market as a whole.

Top Ten Dividend & Price Results For Funds, Trusts, & Partnerships (FTPs) vs. MoPay Stocks

Below relative strengths for the top ten MoPay FTP Dogs by yield was graphed as of August 1, 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).

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Actionable Conclusion (7): MoPay Top Ten DiviDog Funds Trusts, & Partnerships Mixed Down While MoPay Stocks Charged Bullishly Into August

The chart above shows MoPay FTPs dropped in dividend as price also fell to mix down after July. Projected dividend from $10k invested as $1k in each of the top ten funds and trusts declined 12.5% while aggregate single share price of the top ten over the same period went down 4.2%.

As of August 1, the top MoPay fund, trust and partnership dogs showed $310 or 25% more dividend at a $28 or 24% higher aggregate single share price than the MoPay stock top ten.

In further contrast to the Dow, Ten top MoPay FTP dividend dog average price per dollar of annual dividend was the lowest of the three at $6.32 as of August 1. That's about 4.3 times less than a Dow dollar of dividend.

Actionable Conclusion (8): 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, if you choose to go there.

How Does The Lowest Loser MoPay Stock Compare to The Highest Yield FTP (ETF )In Price History In the Most Recent Quarter?

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Price performance of Cornerstone Total Return Fund versus DirectCash, Inc. (DCI.TO), the two extreme ends of Monthly Pay yield results, show a positive path for both the red-lined "low dog" DCI.TO and a less robust uptrend for the highest yield fund, CRF in blue year t date (Jan 1 to August 1).

Perhaps it is reassuring that whether you buy the highest rated MoPay performer or the lowest, either has a certain amount of upside momentum going for it.

Dog Metrics Revealed More Returns From Five Lowest Priced Highest Yield Monthly Pay Stocks

Ten monthly pay stock equities were culled by yield. These results, verified by YCharts and YahooFinance, produced the following rankings.

Actionable Conclusions: (9) Analysts Allege 5 Lowest Priced of Top Ten Highest Yield MoPay Dividend Stocks Generated 25.03% VS. (10) 18.02% Net Gains from All Ten by August, 2017

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$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 38.88% more net gain than $5,000 invested as $.5k in all ten. The very lowest priced MoPay dividend dog, Wheeler Real Estate Investment Trust Inc. , was projected to deliver the best net gain of 54.99%.

Lowest priced five MoPay dividend dogs estimated August 1 were: Wheeler Real Estate Investment Trust Inc; Fifth Street Finance; Five Oaks Investment Corp.; Prospect Capital Corporation. ; American Capital Floating Senior, with prices ranging from $1.73 to $10.37.

Higher priced five MoPay dividend dogs estimated August 1 were: Stellus Capital Investment Corporation; Orchid Island Capital Inc; Avenue Income Credit Strategy; Capitala Finance; ARMOUR Residential REIT Inc., whose prices ranged from $10.90 to $21.83.

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 some rewarding dogs in the MoPay Stock 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.

Annual Analyst Accuracy

You see below the one year result of ten analyst target estimates for MoPay stocks from this article 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 late-July 2015 was seven losses, and one poor performance, against two gains over a one year period. The one year buy and hold strategy proved just 20% positive for this MoPay collection of ten.

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.

Stocks listed above were suggested only as decent starting points for your MoPay dividend stock purchase or sale research process. These were not recommendations.

Three of these sector leading dividend pups qualify as valuable catches! They are listed with the now 45 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!

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. Photo: freerangecomm.com

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

Editor's Note: This article covers one or more stocks trading at less than $1 per share and/or with less than a $100 million market cap. Please be aware of the risks associated with these stocks.