6 Monthly Pay Dividend Dogs See 73.5% To 113.7% Late December Upsides

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Includes: ARP, ARR, BBEPQ, BTE, CPG, ERF, LNCOQ, LNGG, NDRO, OCSL, PGH, PSEC, ROYT, VNR
by: Fredrik Arnold

Summary

10 monthly pay (MoPay) Small, Medium, & Large (SML) cap dividend dogs 1 yr. upsides averaged 77.9% as of December 26 (ranked by analyst targets).

MoPay SML top dividend dogs by yield resumed their bear retreat in force since November while the Dow dogs continued their bullish charge.

Analysts projected average 93.5% 1 yr. net gains for BBEP, ERF, CPG , ARP, LNCO, ROYT, LINE, PGH, BTE, & PSEC: 9 basic materials representatives; 1 financial sector dog.

Consider these as starting points for your late-December MoPaySML dividend dog investment research.

Actionable Conclusion (1) Analyst Estimated Upsides Moderate As Energy Dogs Kept Leading the MoPaySML Dividend Pack

Three stocks showed 100% or greater upsides as of December 26 based on Wall Street wizard forecasts. Those stocks were: BreitBurn Energy Partners (BBEP) at 141.25%; Enerplus Corporation (NYSE:ERF) at 120.26%; Crescent Point Energy Corp. (NYSE:CPG) at 111.58%.

Yield (dividend / price) results from here verified by Yahoo Finance for monthly dividend paying Small, Mid, & Large cap (MoPaySML) stocks as of market closing prices December 26 were augmented by analyst 1-yr target projections to reveal four actionable conclusions discussed below. Small cap firms were valued at $200M(illion) to $2B(illion); Mid cap firms were worth $2B to $10B; Large caps were valued above $10B.

Wall Street Wizard Weights

One-year mean or median target price set by brokerage analysts multiplied by the number of shares in a $1k investment revealed ten stocks showing the highest upside price potential into 2015 out of 30 selected by yield. The number of analysts providing price estimates was noted after the name for each stock. Three to nine analysts have repeatedly demonstrated the most accurate mean or median target price estimates.

Forty-Nine For the Money

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.

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.

Dog Metrics Extracted Bargains

Forty-nine small, mid, and large cap monthly dividend paying stocks were culled from hundreds of equities of all sizes for this article. Funds, ETFs and ETNs were excluded here but Real Estate Investment Trusts, Royalty Trusts, and Business Development Companies populated the list along with common stocks.

Ten monthly pay SML Cap dividend equities showing top yields included seven basic materials and three financial firms from the nine Yahoo market sectors. Top dog, BreitBurn Energy Partners LP [1] led the six basic materials dogs.

The remaining six basic materials firms placed second through fifth, seventh, & eighth: Linn Energy LLC. (LINE) [2]; LinnCo LLC. (LNCO) [3]; Atlas Resource Partners, L.P. (NYSE:ARP) [4]; Pacific Coast Oil Trust (NYSE:ROYT) [5]; Pengrowth Energy Corp. (NYSE:PGH) [7]; Vanguard Natural Resources, LLC. (NYSE:VNR) [8].

Placing sixth, Prospect Capital Corporation (NASDAQ:PSEC) [6] was highest of the three financial sector firms listed. The other financials placed ninth, & tenth: Fifth Street Finance (FSC) [9]; Armour Residential REIT (NYSE:ARR) [10]. These completed the December 26th MoPay SML top yield dog list.

Actionable Conclusion (2): MoPay SML Dogs Shrank from Bears As Dow Chased Bulls

After the December solstice and a visit from Santa, MoPaySML top ten dogs spiked 7% in dividend from $10k invested as $1K in each, while total single share price of those ten equities dropped 12% to send a bearish signal as of December 26.

Dow dogs continued to charge last week as projected annual dividend from $10k invested as $1K in each of the top ten fell 1.2% since December 19. At the same time, aggregate single share price increased 1.2% to continue the bullish run.

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) expanded again. Historically, an overhang of $75 or 19% on April 8 widened to $173 or 47% May 1; widened to $193 or 53% June 6; spread to $222 or 62% July 3; shrank to $185 or 49% August 8; widened to $227 or 61% September 12; moved to $229 or 60% October 7; shrank to $202 or 54% as of November 7; bloomed to a record $231 or 62% December 5; shrank to $180 or 46% December 12; expanded to $222 or 59% December 19; then expanded to $234 or a new record of 63%.

To quantify top dog rankings, analyst mean price target estimates are a "market sentiment" gauge of upside potential. Added to the simple high yield "dog" metric, they are another tool to dig out bargains. Projected gains based on analyst targets provide a here and now equivalent of waiting a year to find out what will happen in the market. Analysts are historically 20% to 80% accurate on the direction of change and about 0% to 20% accurate on the degree of the change.

Actionable Conclusion (3): Wall Street Wizards Wonked A 37.5% Average 1 yr. Net Gain for Top 30 MoPaySML Dogs

Top 30 dogs on the MoPay stock list were graphed below to show relative strengths by dividend and price as of December 26, 2014 and those projected by analyst mean price target estimates to the same date in 2015.

A hypothetical $1000 investment in each equity was divided by the current share price to find the number of shares purchased. The number of shares was then multiplied by projected annual dividend amounts to find the dividend return. Thereafter the analyst mean target price was used to gauge the stock upsides to 2015.

Historic prices and actual dividends paid from $1000 invested in each of the highest yielding stocks and the aggregate single share prices of those thirty stocks divided by 3 created the data points for 2014. Projections based on estimated increases in dividend amounts from $1000 invested in the thirty highest yielding stocks and aggregate one-year analyst target share prices from Yahoo Finance divided by 3 created the 2015 data points green for price and blue for dividends.

Yahoo analyst numbers projected a 27% lower dividend from $10K invested as $1k in the average ten of this group of while aggregate single share price of those ten was projected to increase by nearly 32% 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 opposed to market direction.

Actionable Conclusion (4): Wall St. Analysts Augured 39.97% to 141.25% Net Gains for top 10 MoPaySML Dogs by December 26, 2015

Seven of the ten top dividend yielding MoPaySML dogs were verified as being among the top ten gainers for the coming year based on analyst 1-year target prices. So this week the dog methodology for this collection as graded by Wall St. wizards was 70% accurate.

These are the ten probable profit generating trades revealed by Thomson/First Call in Yahoo Finance to December 2015:

Breitburn Energy Partners was projected to net $1,412.48 based on dividends plus the median of annual price estimates from fifteen analysts less broker fees. The Beta number showed this estimate subject to volatility 13% less than the market as a whole.

Enerplus Corporation was projected to net $1,202.67 based on estimates from six analysts plus dividends less broker fees. The Beta number showed this estimate subject to volatility 70% more than the market as a whole.

Crescent Point Energy Corp. was projected to net $1,115.76 based on estimates from six analysts plus dividends less broker fees. The Beta number showed this estimate subject to volatility 29% more than the market as a whole.

Atlas Resource Partners was projected to net $999.296 based on estimates from nine analysts plus dividends less broker fees. The Beta number showed this estimate subject to volatility 63% less than the market as a whole.

LinnCo LLC was projected to net $980.00 based on dividends plus median target price estimate from ten analysts less broker fees. The Beta number showed this estimate subject to volatility 96% less than the market as a whole.

Pacific Coast Oil Trust was projected to net $923.07 based on dividends plus a median target price estimate from four analysts less broker fees. The Beta number showed this estimate subject to volatility 68% less than the market as a whole.

Linn Energy LLC. was projected to net $860.18 based on dividends plus the median of annual price estimates from twelve analysts less broker fees. The Beta number showed this estimate subject to volatility 40% less than the market as a whole.

Pengrowth Energy Corp was projected to net $731.70 based on dividend plus mean target price estimates from eight analysts less broker fees. The Beta number showed this estimate subject to volatility 60% more than the market as a whole.

Baytex Energy Corp (NYSE:BTE) was projected to net $720.17 based on a median target price estimate from eight analysts combined with projected annual dividend less broker fees. The Beta number showed this estimate subject to volatility 21% more than the market as a whole.

Prospect Capital Corporation was projected to net $399.74 based on a median target price estimate from seven analysts combined with projected annual dividend less broker fees. The Beta number showed this estimate subject to volatility 17% less than the market as a whole.

The average net gain in dividend and price was 93.51% on $10k invested as $1k in each of these ten MoPay dogs. This gain estimate was subject to volatility 12% less than the market as a whole.

A note about Enduro Royalty Trust (NYSE:NDRO) which was declassified as a small cap stock to the micro cap category this month as its price slump reduced its market capitalization to less than $200M. Numbers are shown on the upside and net gain charts as a footnote had the stock qualified to be listed with the MoPaySML dogs. NDRO would have placed fourth by net gain and fourth by price upside had it qualified.

The stocks listed above were suggested only as decent starting points for a MoPay dog dividend stock purchase/sale research process for late-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.indexarb.com; www.dividend.com; finance.yahoo.com; analyst mean target price by Thomson/First Call in Yahoo Finance.

Disclosure: The author is long ARR, FSC, PGH, CSCO, GE, PFE, T, VZ.

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.