Editors' Note: This article covers a stock 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.
This regular monthly report tallied results from Yahoo Finance for monthly paying (mopay) dividend stocks as of market closing prices December 20 compared with analyst mean target price results one year hence. Three stocks boasted 32.92% to 40.32% price upsides. Pacific Coast Oil Trust (NYSE:ROYT) an Austin, TX headquartered independent oil & gas firm at 32.92% showed the lesser upside of those three. In the middle, Enduro Royalty Trust (NYSE:NDRO) another Austin based independent oil and gas firm exhibited a 39.23% upside. In the end, Atlantic Power Corp (NYSE:AT) a long falling knife, infamous electric utility, loved by bears and analysts but dismissed by stockholders, showed 31.44% price upside to lead the December mopay dogs. Seven more members of the mopay pack showed over 9% to 26% price upsides.
The chart above used the one year mean target price set by brokerage analysts matched against November 17 closing price to compare ten mopay stocks showing the highest upside price potential into 2014 out of 20 selected by yield. The number of analysts providing price estimates was noted after the name for each stock. Three to nine analysts were considered optimal for a valid mean target price estimate.
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. Another list factored December reader comments. January, February, March, April, May, June, July, August, September, October, and November 2013 reader input all contributed to this article which compared and contrasted December MoPay stock upside potential against high yield (and higher risk) buy and hold fund, trust and partnership constituents. Six actionable conclusions were drawn.
Monthly Pay Dividend Pros and Cons
Quarterly, Semi-Annual and Annual dividend stockholders anxiously await announcements from a firm, fund, or analyst 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 countered when companies suddenly cut monthly dividends to save cash and trigger a price crash. So the segment is volatile.
Reader TennisBoy88 in January wrote:
"One other advantage of monthly paying stocks is the way they are slightly protected against traders that buy just before the ex-date and sell after the record date. The brokerage commissions they have to pay for a measly monthly dividend helps keep them away and the stock price doesn't fluctuate so wildly."
Many readers are offended by the term "dividend" applied to REITs, MLPs and hybrid financial institutions. For example, arbtrdr wrote:
"The only 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]."
An August comment from drking reflected another advantage of receiving 12 vs. 4 dividends per year:
"Mopay dividends reinvested will return almost 1% more yearly than quarterly payers as it compounds faster."
Dogs of the Index Metrics Extracted Bargains
For this article fifty two dividend equities plus sixty funds, partnerships, and trusts were culled from over 650 entities listed here paying monthly returns. These were ranked as of December 20, 2013 using the 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.
December Monthly Pay Dividend Stocks
Ten monthly pay dividend equities showing the best yields for December represented just three of the nine Yahoo market sectors, financials (fins), basic materials (bas mat), and utilities (utes). Top three dog stocks revealed by Yahoo Finance data were Five Oaks Investment Corp. (OAKS), Armour Residential REIT (NYSE:ARR), and Javelin Mortgage Investment Corp. (NYSE:JMI). These were three of six financial sector firms that dominated the list. The remaining three financial mopay dogs placed fifth, eighth, and tenth: Full Circle Capital Corp. (FULL); Orchid Island Capital Inc (NYSE:ORC); Prospect Capital Corporation (NASDAQ:PSEC).
The fourth slot in the top ten was filled by one of two basic materials concerns, Pacific Coast Oil Trust. Enduro Royalty Trust, the other basic material firm, placed sixth. Two utilities on the list, Atlantic Power Corp and Just Energy Group Inc. (NYSE:JE). rounded out the mopay top dog list in seventh and ninth places.
MoPay Dividend vs. Price Compared to Dow Dogs
Relative strength for the top ten MoPay dividend dog stocks by yield was graphed below as of December 20, 2013 compared to those of the Dow. Historic projected annual dividend history from $1000 invested in each of the ten highest yielding stocks and the total single share prices of those ten stocks created the data points shown in green for price and blue for dividends.
Actionable Conclusion (1): MoPay & Dow Dogs Retreated from Bears
MoPay dividend dogs retreated after November. Aggregate dividend from $10k invested as $1k in each of the top ten stocks rose at a rate of 2.46% since then while total single share price of those ten dropped at a 9.2% rate for that period.
Bearish sentiment also returned to the dow dogs, as projected annual dividend from $10k invested as $1K in each of the top ten Dow dogs increased nearly 2% since November. Aggregate single share price dropped nearly 3.8% to emphasize the bearish turn. The Dow dogs overbought condition in which aggregate single share price of the ten exceeded projected annual dividend from $1k invested in each of the ten sank some. The overhang was $125 or 33% in August, and expanded to $161 or 43% for September, shrank down to $111 or 30% for October, expanded again to $140 or 38% in November, then closed a bit to $111 or 29% for December. Most of this bear attack was triggered by Microsoft (NASDAQ:MSFT) replacing JPMorgan Chase & Co. (NYSE:JPM) at the tail of the top ten Dow dogs this past month.
To quantify the top dog rankings, analyst mean price target estimates provide a "market sentiment" gauge of upside potential and was added to the simple high yield "dog" metric used to dig out bargains.
Actionable Conclusion Too (2): Wall St. Wizard Wisdom Wished 30.9% 1 yr. Net Gain from Top 10 MoPay Dogs
Top dogs on the MoPay stock list were graphed below to show relative strengths by dividend and price as of December 20, 2013 and those projected by analyst mean price target estimates to the same date in 2014.
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 2013. 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 2014 data points in blue for dividend and green for price. Note: one year target estimated prices from one analyst were not included (n/a).
Yahoo projected a nearly 15% lower dividend from $10K invested as $1k in the top ten mopay dogs while aggregate single share price was projected to increase by over 17% 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 was 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 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 (3): Analysts Forecast 2014 NEXT10 MoPay DiviDog November Net Gains of 13%
Ten monthly dividend equities that showed the next best yields December 20 represented three of the nine Yahoo market sectors: basic materials, financials, and services (svcs). The eleventh dog stock revealed by Yahoo Finance data was Hugoton Royalty Trust (NYSE:HGT) the best of four basic materials sector stocks on this list. The three remaining basic materials firms placed twelfth, fourteenth and fifteenth: LinnCo LLC (LNCO); Linn Energy, LLC (LINE); Cross Timbers Royalty Trust (CXT).
In slot thirteen, Wheeler Real Estate Investment Trust Inc, was the best of five financial firms that also dominated the next ten list of mopay pups. The other four financials were Huntingdon Capital Corp (NASDAQ:HCAP) in sixteenth place; Mesa Royalty Trust Units Ben Int (NYSE:MTR) in seventeenth; Gladstone Investment (NASDAQ:GAIN) in nineteenth; Gladstone Land Corporation (NASDAQ:LAND) was twentieth. The lone services dog, Student Transportation Inc. (NASDAQ:STB) placed eighteenth and completed the NEXT ten December mopay dividog list.
The NEXT ten dogs showed a 6% 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 by over 8.3% in the coming year.
The number of analysts contributing to the mean target price estimate for each stock is noted in the next to the last column on the above charts. Three to nine analysts was considered optimal for a valid projection estimate. Estimates provided by one analyst were not applied (n/a).
A beta (risk) ranking for each analyst rated stock was provided in the far right column on that 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 (4): Analysts Project Ten MoPay Dogs to Net 18% to 51% Gains by December, 2014
Seven of the ten top dividend yielding mopay dogs were verified as being among the Top ten gainers for the coming year based on analyst 1 year target prices. So as of December 20 the dog strategy for this mopay group as graded by Wall St. wizards was 70% accurate.
Ten probable profit generating trades revealed by Yahoo Finance for 2014 were:
Atlantic Power Corp netted $507.10 based on a mean target price estimate from five analysts combined with projected annual dividend less broker fees. The Beta number showed this estimate subject to volatility 69% less than the market as a whole.
Enduro Royalty Trust netted $500.07 based on dividends plus mean target price estimate from four analysts less broker fees. The Beta number showed this estimate subject to volatility 2% less than the market as a whole.
Pacific Coast Oil Trust netted $446.77 based on dividends plus a mean target price estimate from three analysts less broker fees. A Beta number was not available for ROYT.
Five Oaks Investment Corp netted $403.78 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 136% opposite the market as a whole.
Armour Residential REIT netted $394.44 based on estimates from nine analysts plus dividends less broker fees. A Beta number was not available for ARR.
LinnCo, LLC netted $294.45 based on dividends plus the mean of annual price estimates from nine analysts less broker fees. A Beta number was not available for LNCO.
Full Circle Capital Corporation netted $263.08, based on dividend plus mean target price estimates from two analysts less broker fees. A Beta number was not available for FULL.
Orchid Island Capital Inc netted $196.73 based on estimates from two analysts plus dividends less broker fees. A Beta number was not available for ORC.
Linn Energy LLC. netted $289.97, based on dividend plus mean target price estimates from twelve analysts less broker fees. The Beta number showed this estimate subject to volatility 20% less than the market as a whole.
Student Transportation Inc. netted $177.75 based on dividends plus the mean of annual price estimates from four analysts less broker fees. The Beta number showed this estimate subject to volatility 10% less than the market as a whole.
The average net gain in dividend and price was 33.7% on $1k invested in each of these ten mopay dogs. This gain estimate was subject to average volatility 7% more than the market as a whole.
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.
The stocks listed above were suggested only as decent starting points for your mopay dividend stock purchase research process. These were not recommendations.
December Monthly Pay Dividend Funds and Trusts
The sixty top monthly dividend paying (MoPay) funds and trusts listed above were culled from over 600 candidates then ranked by yields calculated as of December 20 to determine the Top Ten.
Ten monthly dividend funds, trusts and partnerships showing the biggest yields for November featured three exchange traded notes, six closed-end funds, and one trust. Top dog was one of the three ETNs, ETRACS Monthly Pay 2XLeveraged Mortgage REIT ETN (NYSEARCA:MORL). Other ETNs, Credit Suisse AG - Credit Suisse Silver Shares Covered Call Exchange Traded Notes (NASDAQ:SLVO), and Credit Suisse Gold Shrs Cov Call Exc ETN (NASDAQ:GLDI), placed sixth and eighth. Four closed-end funds as revealed by Yahoo Finance data placed second through fifth: Cornerstone Progressive Return Fund (NYSEMKT:CFP); Cornerstone Total Return Fund, Inc (NYSEMKT:CRF) Gabelli Global Gold Natural Resources & Income Trust (NYSEMKT:GGN); Cornerstone Total Return Fund, Inc. . Two other closed-end funds placed seventh, and tenth: Pimco High Income Fund Com Shs (NYSE:PHK); Western Asset High Income Fund II Inc (NYSE:HIX). The lone trust, Invesco Municipal Premium Income Trust (NYSE:PIA) placed ninth.
Fund & Trust Dividend & Price Results vs. MoPay Top Ten Stocks
Below relative strengths for the top ten MoPay Dividend F&T Dogs by yield was graphed as of December 20, 2013 and compared to those of the top ten 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.
Actionable Conclusion (5): MoPay Top Ten DiviDog Funds & Trusts Retreated from Bears; Stocks Also
Charts showed MoPay dividend dog funds and trusts increased markedly in dividend while price dropped since November. Projected dividend from 10k invested as $1k in each of the top ten funds and trusts inclined 15% while aggregate single share price of the top ten over the same period fell 8%.
A gap between aggregate single share price of top ten mopay funds and trusts and their projected dividend from $1k invested in those ten equities increased from 854% in June to 1114% in September 2013, rocketed to 1173% in October, fell to 1148% in November, and shot up again to 1458% for December
MoPay dividend stock dogs also retreated after November. Aggregate dividend from $10k invested as $1k in each of the top ten stocks surged up at a rate of 2.5% since then while total single share price of those ten declined 9.2% for that period.
The gap between aggregate single share price and dividend from $1k invested in each for the ten mopay stocks surged above 1300%. In July that gap was 790%. In August it expanded to 970%. In September the gap narrowed to 864%. In October the gap was 1205%. In November the gap became 1184% and surged to 1348% in December.
As of December 20 the top MoPay fund and trust dogs showed $290 or 22% more dividend at a $6 or 6% higher aggregate single share price than the MoPay stocks top ten.
Actionable Conclusion (6): Buy and Hold Monthly Dividend Paying Funds & Trusts, If You Dare
Stock analysts don't hazard guesses as to when or how much fund and trust prices will rise or fall. They are paid to gauge individual stocks, and a few funds and partnerships. Hence this monthly pay F&T dog diligence only revealed a list of funds and trusts to buy and hold if you dare.
Furthermore, the risk for an investment in mopay dividend funds and trusts, which dropped since the first of the year, is approaching 30% again. An investment in mopay stocks has also increased in risk but funds and trusts are 24% more risky.
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.
Disclosure: I am long ARR, AT, ERF, FSC, HRZN, PGH, GE, INTC, MCD, MSFT, 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.