4 Follower Favorite Dividend Stocks Cast 20% Gains Per November Targets

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Includes: BLX, DHT, EDF, EVA, FSC, KO, NRZ, O, OHI, ORC, PSEC, RDS.B, SMLP, SXCP, T, TIS, TNK
by: Fredrik Arnold

Summary

Between September 16 and November 16, Arnold "followers" turned in 34 choices for a list of 30 Follower Favorite (FFave) dividend dogs. Four duplicates were PSEC, T, OHI &, FSC.

FFave yields ranged from 0% to 15.56%. Ten yield leaders, EVA, AGNCF, OHI, SMLP, SXCP, FSC, PSEC, NRZ, EDF, & ORC charged bullishly and Dow dogs joined the charge.

Analyst augured upsides for 10 Top FFaves of 30 averaged 22.77% by BLX, ORI, SMLP, RDS-B, KO, O, TNK, TIS, OHI, & DHT. The last four posted above average upsides.

On the downside, analysts cast negative numbers for PSEC, ADC, SXCP, & MAIN whose dividends more than covered the estimated shortfall.

$5k invested in the lowest-priced five top yield FFaves showed 16.29% LESS net gain than from $5k invested in all ten.

Follower Votes

September to November invitations at the bottom of my Seeking Alpha articles requested an e-mail address, favorite dividend stock, and favorite team. In exchange for these answers, I offered a summary and quarterly reports describing my 3 best performing dogs of the week (DOTW). In the meantime, full complement of 52 ace DOTWs revealed 12 top monthly dogs, 4 top quarterly winners and a dog of the year that were honored in an on-line celebration November 16.

(That list of winners is yours in exchange for your e-address, favorite stock ticker and team. Click the message link at the top of this article. You're now eligible to contribute to the December survey. Remember to include all three: e-mail; ticker; team.)

Now here are the tangible results from the follower favorites for November...

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. So, the highest yielding stocks in any collection have become affectionately known as "dogs."

FFAV Y(0) NODOG Click to enlarge NO/16 barkpost.com

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.

Actionable Conclusion (1): By Yield,"Follower Favorite" Stock Was OHI, Led 30 November FFaves, Which Included (2) Seven Monthly Payers

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Thirty follower favorites sorted by yield calculated as of market close 11/17/16 showed four of nine Yahoo sectors and closed end funds represented in the top ten.

Top dog was one of six financials (including three real estate firms), followed by closed end funds (CEFs) (1), basic materials (2), and industrial goods (1). Four of the top ten favorite dogs paid monthly dividends.

The whole pack was led by the top financial, by yield, Orchid Island Capital, Inc. (NYSE:ORC) [1]. A lone closed end fund placed second, Stone Harbor Emerging Markets Income Fund (NYSE:EDF) [2]. Two more financials placed fourth and fifth, Prospect Capital Corporation (NASDAQ:PSEC) [4], and Fifth Street Finance Corp. (NYSE:FSC) [5]. All four of those top dogs paid monthly dividends.

Third FFave stock by yield, New Residential Investment (NYSE:NRZ) [3] was joined by two more real estate investment trusts this month, in eighth and ninth place Omega Healthcare Investors (NYSE:OHI) [8], and AGNC Investment Corp. (AGNCP) [9]

Two basic materials companies placed sixth and seventh, SunCoke Energy Partners (NYSE:SXCP) [6], and Summit Midstream Partners LP (NYSE:SMLP) [7]. Finally, an industrial goods firm placed tenth, Enviva Partners ,LP (NYSE:EVA) [10] to complete the representation of market sectors in the November "follower favorite" top ten by yield.

FFave November Dividend vs. Price Results Charged With Dow Dogs

Periodic strength of ten top "follower favorite" dogs by yield graphed below as of market closing prices through 11/17/2016 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.

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Actionable Conclusions: (3) FFave Dogs Charged, As (4) Dow Dogs Did After October

"Follower favorite" top ten yielder dividend from $10k invested as $1k in each declined while aggregate single share price rose. Annual dividend fell 6% lower after October while aggregate single share price of the ten rose 8.8%.

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Dow dogs, also charged after October as aggregate single share price soared while dividend fell. Total single share price for the Dow ten increased 10.6% between October 16 and November 17, while annual dividend from $10k invested as $1K in each of the top ten Dow dogs dropped 0.83% 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) headed back toward an annual record gap.

Actionable Conclusion (5): Dow Dogs Push Overbought Status

Historically, January saw the gap at $275 or 65%. March had the chasm at $361 or 91%, and April expanded the gap for the year to $397 or 106%. May narrowed the chasm to $345 or 89% but June brought it to $380 or 102%. July widened the gap to $446 or 125%, then August pushed the price over dividend chasm to $486 or 133%. In September the whole pack retreated to $354 or 94%. October widened the gap to $368 or 97% and November brought the rift back to triple digits, at $450 or 120%.

Compared to the follower favorites, Dow dividends are highly overpriced. The Dow top ten September 16 average price per dollar of annual dividend was $27.31.

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 $9.41, just 34% of the Dow price per dividend dollar. The Arnold followers do find bargains!

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Actionable Conclusion (6) Analyst Targets Saw FFave Top Ten Dogs At 12.48% To 58.3% Price Upsides, And (7) Showed Four Dogs Down 3.61% To 6.33% By October, 2017

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.

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Actionable Conclusions: Wall St. Brokers Estimated (8) A 8.97% Average Upside and (9) 13.76% Net Gain for Top 30 FFave Dogs As Of November 17, 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.

Analysts as quoted by Yahoo, forecast a 5.7% lower dividend from $30K invested as $1k in each stock in this group of 30 while aggregate single share price was projected to increase 5.5% 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.

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Actionable Conclusion (10): Analysts Alleged FFave Top Ten Dogs To Net 14.8% to 58.4% By November 17, 2017

Two 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 20% accurate for the "follower favorite" top ten.

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

DHT Holdings, Inc. (NYSE:DHT) was projected to net $584.22 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 42% less than the market as a whole.

Omega Healthcare Investors. was projected to net $381.40 based on dividends plus the median target price estimate from eight analysts less broker fees. The Beta number showed this estimate subject to volatility 76% less than the market as a whole.

Orchids Paper Products Co. (NYSEMKT:TIS) was projected to net $317.61 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 5% less than the market as a whole.

TeeKay Tankers Ltd. (NYSE:TNK) was projected to net $269.26 based on the median target price estimate from twelve analysts combined with projected annual dividend less broker fees. The Beta number showed this estimate subject to volatility 147% more than the market as a whole.

Summit Midstream Partners was projected to net $209.73 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 89% more than the market as a whole.

Realty Income Corporation (NYSE:O) was projected to net $208.72 based on the median target price estimate from fifteen analysts combined with projected annual dividend less broker fees. The Beta number showed this estimate subject to volatility 89% less than the market as a whole.

Coca-Cola (NYSE:KO) was projected to net $181.36 based on dividends plus a median target price estimate from eighteen analysts less broker fees. The Beta number showed this estimate subject to volatility 20% less than the market as a whole.

Royal Dutch Shell plc (NYSE:RDS.B) was projected to net $180.23 based on the median target price estimate from three analysts combined with dividend while subtracting broker fees. No Beta number was available for RDS-B.

Banco Latinoamericano de Comercio (NYSE:BLX) was projected to net $158.91 based on a median target price estimate from two analysts, plus annual dividend less broker fees. The Beta number showed this estimate subject to volatility 70% more than the market as a whole.

AT&T, Inc. (NYSE:T) was projected to net $148.16 based on a median target price estimate from twenty-three analysts, plus annual dividends less broker fees. The Beta number showed this estimate subject to volatility 72% less than the market as a whole.

The average net gain in dividend and price was calculated to be 26.4% on $10k invested as $1k in each of these ten dogs. This gain estimate was subject to average volatility equal to the market as a whole.

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

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The top dog has a very negative history than the bottom dog on the follower favored analyst upside scale. The lowest FFave "loser" Prospect Capital Corporation shows a 13.47 positive price upside year to date than the analyst upside star stock, DHT Holdings, Inc. , which was down 53%. Upside momentum contradicts these Wall Street Wizard picks. This evidence supports Michael O'Higgins and similar contrarian pundits.

Ten FFave Dogs Show 16.29% Loss From 5 Highest Yield, Lowest Priced

Ten top FFave dividend paying stocks as of market closing November 17 were sorted by Yield (dividend / price) results verified by Yahoo Finance.

These top FFave dogs included firms, as noted above, from four of nine Yahoo sectors and a closed end fund representing in the top ten.

Actionable Conclusion: (12) Analysts Argued That 5 Lowest Priced Top Ten High Yield FFave Dogs Will Deliver 13.13% VS. (13) 15.68% Net Gains for All Ten by November 17, 2017

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$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 16.29% LESS net gain than $5,000 invested as $.5k in each of all ten.

The very highest priced "follower favorite" dog, Omega Healthcare Investors , was projected to deliver the best net gain of 38.14%.

Lowest priced five "follower favorite" dogs for November 16 were: Fifth Street Finance Corp. ;Prospect Capital Corporation ; Orchid Island Capital, Inc. ; Stone Harbor Emerging Markets Income Fund ; New Residential Investment , with prices ranging from $5.69 to $12.77.

Higher priced five "follower favorite" dogs for September 16 were: SunCoke Energy Partners ; Summit Midstream Partners LP ; AGNC Investment Corp. (AGNCP); Enviva Partners, LP ; Omega Healthcare Investors , whose prices ranged from $19.80 to $28.50.

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 apply the dividend dog data featured in this article and this instablog to aid your safe investing. --Fredrik Arnold

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.

Six of these Follower Favorite dividend stocks 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.

For a free copy of 4 previous quarterly reports and the dog of the year winner, 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: barkpost.com.

Disclosure: I am/we are long FSC, CSCO, PFE, T, 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.