Russell 1000 And 2000 Combo Dividend Dogs: 4.62% Edge For Lowest-Priced High Yielders In December

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Includes: AI, ARR, CYS, DX, IVR, MITT, MTGE, NYMT, RSO, WMC
by: Fredrik Arnold

Summary

Top ten combined Russell 1000/2000 stocks by yield showed 4.62% higher net gain from a $5k investment in the lowest-priced five than from that amount invested in all ten.

Annual dividends divided by closing stock prices as of December 8 determined yields. Analyst median targets were used to calculate gains one year hence.

The five lowest-priced, highest-yield stocks of the Russell 2000 small cap index were: ARR; RSO; NYMT; DX; CYS.

The five higher-priced stocks of the ten were: WMC; IVR; MITT; MTGE; AI.

Consider these stocks as starting points for your December Russell 2000 smal- cap index stock investment research.

Top Ten For the Money

This article refines and distinguishes an earlier report that revealed Combined Russell 1000/2000 small-cap index bargain stocks to buy and hold for December to June, or perhaps as long as one year. See Dow 30 article for 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.

Dog Metrics Extracted Combined Russell 1000/2000 Index Bargains

Ten dividend-paying stocks as of market closing December 8 were culled from the equities that constitute the best of both the Russell 1000 large cap and Russell 2000 small cap indices. Yield (dividend/price) results verified by Yahoo Finance did the ranking. As you see, all the top ten stocks by yield were from the Russell 2000 index.

Russell Investments, publisher of the Russell 2000 small cap index states:

"The Russell 2000 Index measures the performance of the small-cap segment of the U.S. equity universe. The Russell 2000 is a subset of the Russell 3000® Index representing approximately 10% of the total market capitalization of that index. It includes approximately 2000 of the smallest securities based on a combination of their market cap and current index membership.

The Russell 2000 Index is constructed to provide a comprehensive and unbiased small-cap barometer and is completely reconstituted annually to ensure larger stocks do not distort the performance and characteristics of the true small-cap opportunity set."

Ten stocks in this index promising the biggest yields in December represented only the financial sector: Leading the pack was Western Asset Mtg Capital Corporation (NYSE:WMC) [1]. The balance of the top ten included: Armour Residential REIT (NYSE:ARR) [2]; Resource Capital (NYSE:RSO) [3]; New York Mortgage Trust Inc (NASDAQ:NYMT) [4]; American Capital Mortgage Investment Corp. (NASDAQ:MTGE) [5]; CYS Investments Inc (NYSE:CYS) [6]; Arlington Asset Investment Corp. (NYSE:AI) [7]; Invesco Mortgage Capital Inc. (NYSE:IVR) [8]; AG Mortgage Investment Trust Inc, (NYSE:MITT) [9]; Dynex Capital Inc (NYSE:DX) [10] to complete the Russell 2000 top ten December dogs.

Actionable Conclusion: (1) Analysts Forecast 5 Lowest-Priced of Top Ten Highest-Yield Combined Russell 1000/2000 Index To Deliver 21.29% vs. (2) 20.35% Net Gains by All Ten by 12/8/15

$5000 invested as $1k in each of the five lowest-priced stocks in the top ten Combined Russell 1000/2000 large/small cap kennel by yield were predicted by analyst 1-year targets to deliver 4.62% more net gain than $5,000 invested as $.5k in each of all ten. The second lowest priced Combined Russell 1000/2000 small-cap dog, Resource Capital Corp., was projected to deliver the best net gains of 27.71%.

The lowest-priced five combined Russell 1000/2000 large/small cap index dogs at market close December 8 were: Armour Residential REIT; Resource Capital Corp.; New York Mortgage Trust Inc.; Dynex Capital Inc.; and CYS Investments Inc., with prices ranging from $3.79 to $9.03.

Higher-priced five combined Russell 1000/2000 large/small-cap index dogs for December 8 were: Western Asset Mortgage Capital; Invesco Mortgage Capital; AG Mortgage Investment Trust Inc.; American Capital Mortgage Investment Corp.; and Arlington Asset Investment, whose prices ranged from $14.91 to $27.53.

This distinction between the five low-priced dividend dogs and the general field of ten reflects Michael B. O'Higgins' "basic method" for beating the Dow. The added scale of projected gains based on analyst targets adds a unique element of "market sentiment" gauging upside potential. It's a here and now equivalent of waiting a year to find out what will happen in the market. It's also the work analysts get paid the big bucks to do.

The stocks listed above were suggested only as decent starting points for a Combined Russell 1000/2000 large/small cap index dog dividend stock purchase/sale research process in early December 2014. These were not recommendations.

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.

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 www.russell.com/indexes; finance.yahoo.com; analyst mean target price by Thomson/First Call in Yahoo Finance.

Disclosure: The author is long ARR.

The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.