Monthly Paying Dividend Dogs: Three Lists For September

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Includes: ACP, AGNC, ARR, BRG, CEFL, CJREF, CLM, CPTA, CRF, EDF, EDI, FSC, FSFR, GGN, HCAP, IGD, NHF, OAKS, ORC, PFLT, PHK, PSEC, SCM, SLVO, STB, WHLR, WSR
by: Fredrik Arnold

Summary

September Monthly Pay (MoPay) dog lists are: 1. Stocks by yield (10/77); 2. Stocks by price upside (10/30); 3. Funds, Trusts & Partnerships (FTPs) by yield (10/70).

For September the MoPay stocks list gained one new member and FTPs stayed at 70. Monthly dividend stock collecting is a growth industry. The search for more MoPays continues.

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 26.34% more returns than $5k put in all ten based on analyst annual targets.

Annual analyst accuracy from the week of 9/4/15 showed a .300 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."

September 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: Gold Resource (NYSEMKT:GORO) cut dividends 80% from $.01 to $.002 per month January 6 then to $.0016 February 6; also Hugoton Royalty Trust (NYSE:HGT) declared no cash dividends January 19 and February 19; NASDAQ suspended trading of United Development Funding (NASDAQ:UDF) February 18 (after an FBI raid of UDF offices).

In April, Vanguard Natural Resources (NYSE:VNR) and Full Circle Capital Corporation (FULL) suspended their monthly payouts, while,newcomer to this list, Black Diamond Group (OTC:BDIMF) cut its payout in half. July 27 venerable American Capital Agency (NASDAQ:AGNC) announced a reduction to its MoPay dividend from $.20 to $.18. Top yield dog for September, Orchid Island Capital (ORC) released this cautionary note with its most recent August monthly dividend announcement, "The Company has not established a minimum distribution payment level and is not assured of its ability to make distributions to stockholders in the future." Thus, the segment is volatile.

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 Dividend Data Diligence Declared Bargains

For this article seventy-seven 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 September 2, 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 September represented just two of the eleven Morningstar market sectors, real estate, and financial.

Five of the top ten dogs revealed by YChart data were from the real estate sector. The real estate dogs placed first, second, fourth, sixth, and tenth: Orchid Island Capital Inc (NYSE:ORC) [1]; Wheeler Real Estate Investment Trust Inc. (NASDAQ:WHLR) [2]; Five Oaks Investment Corp. (NYSE:OAKS) [4]; Armour Residential REIT (NYSE:ARR) [6]; American Capital Agency (AGNC) [10].

Financial sector stocks filled the remaining five slots, third, fifth, and seventh through ninth, to complete the September MoPay top ten dog list by yield: Capitala Finance (NASDAQ:CPTA) [3]; Stellus Capital Investment Corporation (NYSE:SCM) [5]; Prospect Capital Corporation (NASDAQ:PSEC) [7]; Fifth Street Finance (NYSE:FSC) [8]; Avenue Income Credit Strategy (NYSE:ACP) [9].

List Two: Monthly Pay Dividend Stocks by Price Upside

Results from YCharts for monthly paying (MoPay) dividend stocks as of market closing price September 2 were compared with analyst mean target prices one year out as reported by YahooFinance. Ten top stocks displayed 5.70% to 37.93% price upsides for the coming year based on analyst 1 yr. targets.

Seven 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 third, seventh, and eighth: Harvest Capital Credit (NASDAQ:HCAP) [3]; PennantPark Floating Rate Capital (NASDAQ:PFLT) [7]; Fifth Street Senior (FSFC) [8].

Two real estate firms in fourth and fifth positions, one industrial firm in ninth, and one consumer cyclical company in tenth, completed this second MoPay top dog list: Whitestone REIT (NYSEMKT:WSR) [4]; Bluerock Residential (NYSEMKT:BRG) [5]; Student Transportation (NASDAQ:STB) [9], and Corus Entertainment (OTCPK:CJREF) [10].

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 September 2 to determine the top ten.

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

At top was one closed end fund, Cornerstone Total Return Fund, Inc. (NYSEMKT:CRF) [1]. Two exchange traded notes captured the second and fourth positions, Credit Suisse X-Links Silver CovCall ETN (NASDAQ:SLVO) [2], and UBS E-TRACS Mthly Pay 2xLvg Closed-End ETN (NYSEARCA:CEFL) [4].

Seven remaining CEFs placed third, and fifth, through tenth places: Cornerstone Strategic Value Fund, Inc. (NYSEMKT:CLM) [3]; Stone Harbor Emerging Market Total Income Fund (NYSE:EDF) [5]; GAMCO Global Gold Natural Res & Income (NYSEMKT:GGN) [6]; NexPoint Credit Strategies Fund (NYSE:NHF) [7]; Voya Global Equity Dividend & Premium Opportunity (NYSE:IGD) [8]; PIMCO High Income Fund (NYSE:PHK) [9]; Stone Harbor Emerging Mkt Total Income Fund (NYSE:EDI) [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 was retired.

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, August, 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 September 2, 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 Mixed Down, As (2) Dow Mixed Up

Ten top MoPay dogs dropped in dividend but fell in price again after August to end a five-month bullish charge with a mixed down move. Aggregate dividend from $10k invested as $1k in each of the top ten stocks fell 0.67% while total single share price of those ten tumbled 2.4% for the period.

Meanwhile, Dow dogs mixed up to a new level of overbought condition as they showed a little more annual dividend from $10k invested as $1K in each of the top ten, rising 1.9% after August, while aggregate single share price rose 6.3%.

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.

The Overbought Dow

As of 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 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 found the overbought condition measured at $423 or 116%. September grew that gap again to $465 or 126%.

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 $27.04.

In contrast to the Dow, MoPay stock dividend dog top ten average price per dollar of annual dividend was a low $8.26 as of September 2. 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 15.36% 1 yr. Average Net Gain from Top 10 September MoPay Stocks

Top dogs on the MoPay stock list were graphed below to compare relative strengths by dividend and price as of September 2, 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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Analysts projected a 3.4% lower dividend from $10K invested as $1k in the top ten August MoPay dogs while aggregate single share price was projected to increase by 0.77% in the coming year.

Actionable Conclusion (4): Analysts Predicted Average NEXT10 MoPay Net Gains of 12.75% to September, 2017

Ten monthly dividend equities that showed the next best yields September 2 represented three of the eleven Morningstar market sectors: financials, consumer cyclical, and real estate.

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The NEXT ten dogs showed 4.2% 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 4.9% in the coming year.

Actionable Conclusion (5): Analysts Forecast LAST10 MoPay DiviDog Average Net Gains of 6.11% to September, 2017

Ten LAST monthly dividend equities September 2 represented four of the eleven Morningstar market sectors: financial services, real estate, energy, and consumer cyclical.

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These ten dogs showed 2.5% higher dividend from $10k invested as 1k in each stock while aggregate single share price for the last ten was projected by analysts to decrease 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 Estimated Ten MoPay Dog Stocks to Net 14.46% to 48.35% Gains To September, 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 were revealed by YCharts analytics for 2017:

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Wheeler Real Estate netted $483.45 based on estimates from two analysts plus dividends less broker fees. The Beta number showed this estimate subject to volatility 40% more than the market as a whole.

Five Oaks Investment Corp. netted $299.66 based on estimates from three analysts plus dividends less broker fees. The Beta number showed this estimate subject to volatility 42% more than the market as a whole.

Harvest Capital Credit netted $208.72 based on a mean target price estimate from four analysts combined with projected annual dividend less broker fees. The Beta number showed this estimate subject to volatility 29% less than the market as a whole.

Stellus Capital Investment netted $208.72 based on estimates from four analysts plus dividends less broker fees. The Beta number showed this estimate subject to volatility 41% less than the market as a whole.

Bluerock Residential netted $184.47 based on dividends plus median target price estimate from nine analysts less broker fees. A Beta number was not available for BRG.

Orchid Island Capital netted $179.62, based on dividend plus median target price estimates from three analysts less broker fees. The Beta number showed this estimate subject to volatility 27% less than the market as a whole.

Whitestone REIT netted $177.66 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 equal to the market as a whole.

Fifth Street Senior Floating Rate (NASDAQ:FSFR) netted $153.81, based on dividend plus mean target price estimates from three analysts less broker fees. The Beta number showed this estimate subject to volatility 65% less than the market as a whole.

Capitala Finance netted $152.72 based on mean target price estimates from ten analysts plus dividends less broker fees.. A Beta number was not available for CPTA.

PennantPark Floating Rate Capital netted $144.62 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.

Average net gain in dividend and price was 22.04% on $1k invested in each of these ten MoPay dog stocks. This gain estimate was subject to average volatility 25% less than the market as a whole.

Actionable Conclusion (7): (Bear Alert) Analysts Spotted Two MoPay Dogs For A Net Losses Of 8% & 17.5% By 2017

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

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Prospect Capital was projected to lose $80.40 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 57% less than the market as a whole.

Veresen (VSN.TO) was projected to lose $174.80 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 112% more than the market as a whole.

Average net loss after dividends and broker fees was 12.76% on $1k invested in each of these two MoPay dog stocks. This loss estimate was subject to average volatility 28% more 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 Retreated Mixed Down Into September

The chart above shows MoPay FTPs increased in dividend as price dropped to make a bearish retreat after August. Projected dividend from $10k invested as $1k in each of the top ten funds and trusts rose 10% while aggregate single share price of the top ten over the same period went down 4%.

As of September 2, the top MoPay fund, trust and partnership dogs showed $334 or 27% more dividend at a $25 or 22% 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 $6.20 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 Veresen (VSN.TO), the two extreme ends of Monthly Pay yield results, show a positive path for the red-lined "low dog" VSN.TO and a mostly horizontal track for the highest yield fund, CRF in blue year to date (Jan 1 to September 2).

This comparison cast doubt on the validity of analyst forecasts relative to recent real price moves.

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.

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Actionable Conclusions: (9) Analysts Assert 5 Lowest Priced of Top Ten Highest Yield MoPay Dividend Stocks Will Produce 19.41% VS. (10) 15.36% Net Gains from All Ten by September, 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 26.34% 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 48.34%.

Lowest priced five MoPay dividend dogs estimated as of September 2 were: Wheeler Real Estate Investment Trust Inc; Five Oaks Investment Corp.; Fifth Street Finance; Prospect Capital Corporation.; Orchid Island Capital Inc, with prices ranging from $1.74 to $10.57.

Higher priced five MoPay dividend dogs estimated September 2 were: Stellus Capital Investment; Avenue Income Credit Strategy; Capitala Finance; American Capital Agency; ARMOUR Residential REIT Inc., whose prices ranged from $11.28 to $21.21.

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 September, 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 September 2015 was seven price losses, against three gains over a one year period. The one year buy and hold strategy proved just 30% positive for this MoPay collection of ten. For reference, one low price MoPay Dog was a gainer against two higher priced.

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 52 Dogs of the Week 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. The third quarter top gaining dog was announced August 22.

For a free copy of both previous quarterly reports Q1 and Q2 and analysis of the new winning Arnold the Q3 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: family album.

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.