Fredrik Followers Find Dividend Payers With High Gains: X; DHT; STO; NRF; SBUX Tops In September

|
Includes: APTS, CCI, CG, CLDT, CPTA, CRF, DHT, GE, KNOP, KO, MCD, NCV, NHF, NLY, NRF, NRZ, PSEC, SBUX, STO, X
by: Fredrik Arnold

Summary

Arnold "followers" surveyed September 13 returned 31 replies producing a list of 30 Follower Favorite (FFave) dividend dogs. One duplicate nomination was received for CPTA.

FFave yields ranged from 1.26% to 22.88% September 16. Ten yield leaders, FSC, NNA, NRZ, AINV, BDCL, AMZA, CEFL, FRO CLM, & MORL charged bullishly as Dow dogs retreated bear-like.

Analyst upsides for 10 Top FFaves of 30 averaged 39.35% by EPR, CLDT, NRF, KO, CCI, APTS, SBUX, STO, DHT, & X.

A worst to first description fit US Steel (X) for September analyst upside readings. X had the lowest yield of 30 at 1.26% but recorded top analyst upside near 200%.

$5k invested in the lowest-priced five top yield FFaves showed 17.71% more net gain than from $5k invested in all ten.

Follower Votes

A September 13 message blast to all 6,700 Arnold Seeking Alpha followers requested their e-mail address, favorite dividend stock, and favorite team. In exchange for their answers, I offered a summary and quarterly reports describing the 3 best performing dogs of the week (DOTW). Similar offers went out in September, & December 2015, plus March, April, May and June, July and August this year. DOTW selections and updates are published every Sunday or Monday exclusively in my Seeking Alpha premium pages. That site now lists its full complement of 52 ace DOTWs.

Follower responses mentioned just one stock more than once, CPTA got two votes. For teams, college football teams became popular again but pro football and baseball entities dominated this September survey as the Olympic preferences and basketball picks died out.

The polls are always open. Anytime works to e-mail me your favorite dividend stock at fredrika120@gmail.com. You're now eligible to contribute to the October survey. Remember to include all three: dividend stock ticker; e-mail address; team.

I'll be send the Quarterly top money DOTW mentions. The biggest loser, or maybe, a most promising newcomer.

Now here are the tangible financial back-to-school results for September:

The Dividend Dogs Rule

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 affectionately known as "dogs."

Click to enlarge

Thirty For the Money

Yield (dividend / price) results verified by Yahoo Finance for "follower favorite" stocks as of market closing prices 9/16/16 revealed actionable conclusions discussed below. See 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.

By Yield,"Follower Favorite" Stock Actionable Conclusions Were: (1) CRF, Led 30 September FFaves, Which (2) Included A Dozen Monthly Payers

Click to enlarge

Thirty follower favorites sorted by yield calculated as of market close 9/16/16 showed two of nine Yahoo sectors and closed end funds represented in the top ten.

Top dog was one of three closed end funds (CEFs), followed by services (2), and financials (5) (including three real estate firms). Five of the top ten favorite dogs paid monthly dividends.

The whole pack was led by the top closed end fund, by yield, Cornerstone Total Return Fund (NYSEMKT:CRF) [1]. The other two funds placed third and eighth, NexPoint Credit Strategies Fund (NYSE:NHF) [4], and AllianzGI Convertible & Income Fund (NYSE:NCV) [8]. All three of these funds paid monthly dividends.

Second FFave stock by yield, DHT Holdings, Inc. (NYSE:DHT) [2] was joined by one more service sector stock this month, KNOT Offshore Partners LP (NYSE:KNOP) [10].

Two financial business development companies [BDCs] placed fourth and sixth, Capitala Finance (NASDAQ:CPTA) [4], and Prospect Capital Corporation (NASDAQ:PSEC) [6]. Both pay monthly dividends.

Finally, three real estate investment trusts placed fifth, seventh, and ninth, New Residential Investment (NYSE:NRZ) [5], NorthStar Realty Finance Corp (NYSE:NRF) [7], and Annaly Capital Management, Inc. (NYSE:NLY) [9] to complete the representation of market sectors in the September "follower favorite" top ten by yield.

FFave September Dividend vs. Price Results Charged As Dow Dogs Did the Opposite

Periodic strength of ten top "follower favorite" dogs by yield graphed below as of market closing prices through 9/16/2016 was compared to the strength of the Dow ten. Forecast annual dividend history from $10,000 invested as $1k in each of the ten highest yielding stocks and the total single share price history of those ten stocks created the data points shown in green for price and blue for dividend.

Click to enlarge

Actionable Conclusions: (3) FFave Dogs Charged, As (4) Dow Dogs Retreated After August

"Follower favorite" top ten yielder dividend from $10k invested as $1k in each dropped while aggregate single share price soared. Annual dividend fell 14.5% lower after August while aggregate single share price of the ten rose 8.4%.

Dow dogs, however, retreated after August as aggregate single share price dropped while dividend increased. Total single share price for the Dow ten fell 13.9% between August 15, and September 16 while annual dividend from $10k invested as $1K in each of the top ten Dow dogs rose 3.75% for the period.

As a result, the Dow dogs overbought condition (in which aggregate single share price of the ten exceeded projected annual dividend from $10k invested as $1k each in those ten) retreated from the annual record gap.

Click to enlarge

Actionable Conclusion (5): Dow Dogs Get Less Overbought

Historically, the overhang of price over dividend in January saw the gap at $275 or 65%. March put the chasm at $361 or 91%, and April expanded the new record gap for the year to $397 or 106%. May narrowed the chasm to $345 or 89% but June brought the pack kicking and screaming to $380 or 102%. July widened the gap to $446 or 125%, then August added McDonald's (NYSE:MCD) huge price and dividend to the top ten to push the price over dividend chasm to $486 or 133%. September put little dog, General Electric (NYSE:GE) in tenth to replace MCD and the whole pack retreated to $354 or 94%.

Compared to the follower favorites, Dow dividends are highly overpriced. The Dow top ten September 16 average price per dollar of annual dividend was $26.05.

Conversely, the "follower favorite" chart shows those dogs to be made of volatile, high risk, and potentially highly profitable pups. The FFave September top ten average price per dollar of annual dividend was $7.20, just 28% of the Dow price per dividend dollar. The Arnold followers do find bargain stocks!

Actionable Conclusion (6) Analyst Targets Cast FFave Top Ten Dogs To See 13.22% To 196% Price Upsides, And (7) Predicted Six Dogs Down 0.14% To 2.76% By September, 2017

Click to enlarge

To quantify top dog rankings, analyst mean price target estimates provided a "market sentiment" gauge of upside potential. Added to the simple high yield "dog" metrics, analyst mean price target estimates were another tool used to dig out bargains.

Actionable Conclusions: Wall St. Brokers Estimated (8) A 15.57% Average Upside and (9) 20.38% Net Gain for Top 30 FFave Dogs As Of September 16, 2017

A hypothetical $1000 investment in each equity was divided by the current share price to find the number of shares purchased. The shares number was then multiplied by projected annual per share dividend amounts to find the dividend return. Thereafter the analyst mean target price was used to gauge the stock price upsides and net gains including dividends less broker fees as of 2017.

Historic prices and actual dividends paid from $30,000 invested as $1k in each of the highest yielding stocks and the aggregate single share prices of those thirty stocks divided by 3 created data points for 2016. Projections based on estimated increases in dividend amounts from $1000 invested in the thirty highest yielding "follower favorite" stocks and aggregate one year analyst target share prices from Yahoo Finance divided by 3 created the 2017 data points green for price and blue for dividend.

Click to enlarge

Analysts as quoted by Yahoo, forecast a 7.8% lower dividend from $30K invested as $1k in each stock in this group of 30 while aggregate single share price was projected to increase 12.9% 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 were considered more accurate for valid mean target price estimates.

A beta (risk) ranking for each analyst rated 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 opposite of market direction.

Actionable Conclusion (10): Analysts Assert FFave Top Ten Dogs Net 18.79% to 195.3% By September 16, 2017

Three of the ten top dividend yielding "follower favorite" dogs were verified as being among the ten net gainers for the coming year based on analyst 1 year target prices. So this period the dividend dog strategy as graded by Wall St. wizards was 30% accurate for the "follower favorite" top ten.

Ten probable profit generating trades revealed by Yahoo Finance for 2017 were:

Click to enlarge

United States Steel Corp. (NYSE:X) was projected to net $1,952.97 based on dividends plus the median target price estimate from five analysts less broker fees. The Beta number showed this estimate subject to volatility 245% more than the market as a whole.

DHT Holdings, Inc. was projected to net $631.44 based on median target price estimates from twelve analysts plus on projected annual distributions less broker fees. The Beta number showed this estimate subject to volatility 25% less than the market as a whole.

Statoil ASA (NYSE:STO) was projected to net $295.68 based on the median target price estimate from six analysts combined with projected annual dividend less broker fees. The Beta number showed this estimate subject to volatility 1% more than the market as a whole.

NorthStar Realty Finance was projected to net $279.92 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% more than he market as a whole.

The Carlyle Group LP (NASDAQ:CG) was projected to net $209.14 based on median target price estimates from thirteen analysts plus on projected annual distributions less broker fees. The Beta number showed this estimate subject to volatility 94% more than the market as a whole.

Starbucks Corporation (NASDAQ:SBUX) was projected to net $241.63 based on the median target price estimate from twenty-three analysts combined with projected annual dividend less broker fees. The Beta number showed this estimate subject to volatility 31% less than the market as a whole.

Preferred Apartment Communities Inc. (NYSEMKT:APTS) was projected to net $231.65 based on dividends plus a median target price estimate from eight analysts less broker fees. The Beta number showed this estimate subject to volatility 65% less than the market as a whole.

Capitala Finance was projected to net $223.39 based on the median target price estimate from ten analysts combined with dividend while subtracting broker fees. No Beta number was available for CPTA.

Chatham Lodging Trust (NYSE:CLDT) was projected to net $218.69 based on a median target price estimate from four analysts, plus annual dividend less broker fees. The Beta number showed this estimate subject to volatility 4% more than the market as a whole.

Crown Castle International (NYSE:CCI) was projected to net $203.19 based on a median target price estimate from seventeen analysts, plus annual dividends less broker fees. The Beta number showed this estimate subject to volatility 66% less than the market as a whole.

Coca-Cola Co. (NYSE:KO) was projected to net $187.88 based on a median target price estimate from eighteen analysts, plus annual dividends less broker fees. The Beta number showed this estimate subject to volatility 20% less than the market as a whole.

The average net gain in dividend and price was calculated to be 44.66% on $10k invested as $1k in each of these ten dogs. This gain estimate was subject to average volatility 12% more than the market as a whole.

FFAVE Top and Bottom Analyst Pick Price Histories Show YTD Momentum Backs Brokers

Click to enlarge

The top dog has a higher history than the bottom dog on the follower favored analyst upside scale. The lowest FFave "loser" in red, Prospect Capital Corporation, shows less price upside year to date than the analyst upside star stock, United States Steel Corporation in blue. Upside momentum backs up these Wall Street Wizard picks. This evidence goes against Michael O'Higgins and similar contrarian pundits.

Ten FFave Dogs Show 17.71% Gain From 5 Highest Yield, Lowest Priced

Ten top FFave dividend paying stocks as of market closing September 16 were culled by Yield (dividend / price) results verified by Yahoo Finance.

These top FFave dogs included firms, as noted above, from two of nine sectors in the top ten: financials (8); service (2).

Actionable Conclusion: (12) Analysts Assessed 5 Lowest Priced of Top Ten High Yield FFave Dogs To Deliver 24.69% VS. (13) 20.98% Net Gains for All Ten by September 16, 2017

Click to enlarge

$5000 invested as $1k in each of the five Lowest priced stocks in the top ten "follower favorite" September kennel by yield were predicted by analyst 1 year targets to deliver 17.71% more net gain than $5,000 invested as $.5k in each of all ten.

The very lowest priced "follower favorite" dog, DHT Holdings, Inc. , was projected to deliver the best net gain of 63.14%.

Lowest priced five "follower favorite" dogs for September 16 were: DHT Holdings, Inc.; AllianzGI Convertible & Income Fund; Prospect Capital Corporation; Annaly Capital Management, Inc.; NorthStar Realty Finance Corp, with prices ranging from $4.16 to $12.77.

Higher priced five "follower favorite" dogs for September 16 were: New Residential Investment; Capitala Finance; Cornerstone Total Return Fund; KNOT Offshore Partners LP; NexPoint Credit Strategies Fund, whose prices ranged from $14.36 to $21.63.

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.

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.

The stocks listed above were suggested only as decent starting points for a "follower favorite" dog dividend stock purchase/sale research process in mid-September, 2016. These were not recommendations.

See my instablog for specific instructions about how to best use the dividend dog data featured in this article.

The net gain/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.

Three of these healthcare sector dividend pups qualify as valuable catches! Find them as three of 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. A third quarter winner was announced August 22.

For a free copy of both previous quarterly reports Q1, & Q2 and analysis of the new winning Arnold the Q3 August 22 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!

Stocks listed above were suggested only as possible reference points for your FFave dog dividend stock purchase or 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 ycharts.com; indexarb.com; dividend.com; finance.yahoo.com; analyst mean target price by Thomson/First Call in Yahoo Finance. Dog photo: peoplepets.com.

Disclosure: I am/we are long APTS, GE, 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.