Memorial Production Partners Leads 'Follower Favorite' Dividend Dogs With 56.6% Yield, 41.5% Upside, And 96% Net As Of December 2016

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Includes: BDCL, CLM, CORR, CVRR, EPD, EVOL, MEMP, MORL, NS, NTI, OKE, ORC, PNNT, PSEC, RCII, ROYT
by: Fredrik Arnold

Summary

Arnold "followers" polled through Seeking Alpha messaging produced a list of 48 "follower favorite" (FFAVE) stocks, funds, and notes. Their yields ranged from 0.13% to 56.6% as of December 11.

10 FFAVE leaders by yield averaged 24.38% which retreated sharply after the Fall Quarter while Dow dogs mixed down.

Top yields were cast by PSEC, NTI, PNNT CORR, ORC, CVRR, BDCL, CLM, MORL, & MEMP.

30 FFAVE equities showed upsides averaging 30.66% and net gains averaging 42.2%. These upside gainers added BX, OKS, EPD, EVOL, NS, RCII, & ROYT to the FFAVE topper list.

$5k invested in the lowest-priced five top yield FFAVEs showed 8.7% more net gain than $5k invested in all 10. Use these lists as guides for your mid-December research.

How Followers Voted

Around noon Wednesday, December 9, I sent a group message to all 5,600 registered "followers" of Fredrik Arnold through the Seeking Alpha messaging system. I repeated my September 21 invitation for all to "participate in an informal follower survey and tell me [their] favorite dividend stock."

In exchange, I offered to e-mail a pdf of my top performing of the (then) 17 "dog of the week" (DOTW) articles to any respondent furnishing their e-address. My DOTW selections are published every Sunday exclusively on my Seeking Alpha premium page.

As the responses came in, some listed more than one ticker symbol. Only the first was accepted. Also followers named many duplicate favorites. Verizon (NYSE:VZ), AT&T (NYSE:T), Southern Co. (NYSE:SO), Starbucks (NASDAQ:SBUX), Prospect Capital (NASDAQ:PSEC), Philip Morris (NYSE:PM), Orchid Island (NYSE:ORC), Realty Income (NYSE:O), Northern Tier (NYSE:NTI), UBS ETRACS Monthly Pay 2x Leveraged Mortgage REIT ETN (NYSEARCA:MORL), Altria Group (NYSE:MO), Procter & Gamble (NYSE:PG), Johnson & Johnson (NYSE:JNJ), Dow Chemical (DOW), Cornerstone Strategic Value Fund (NYSEMKT:CLM) and UBS ETRACS 2X Leveraged Long Wells Fargo Business Development Company ETN (NYSEARCA:BDCL) had multiple nominations. Most popular was O. After a week of replies, the following list of 48 emerged.

48 For the Money

Yield (dividend/price) results from here verified by Yahoo Finance for "follower favorite" stocks as of market closing prices 12/11/15 revealed the actionable conclusions discussed below. See Dow 30 article for an explanation of the term "dogs" for stocks reported based on Michael B. O'Higgins's book "Beating The Dow" (HarperCollins, 1991), now named Dogs of the Dow. O'Higgins's 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 Parsed "Follower Favorite" Stocks by Yield

48 companies listed above were sorted by yield as of December 11 to reveal the top 10 "follower favorite" dogs that promised top yields. The result revealed firms from two of nine possible business sectors plus one fund and two exchange traded notes.

Actionable Conclusion: (1): MEMP, Led FFAVEs By Yield

Top FFAVE stock by yield, Memorial Production Partners LP (NASDAQ:MEMP) [1] was one of three basic materials firms. The other basics firms placed fifth and ninth: CVR Refining, LP (NYSE:CVRR) [5], and Northern Tier Energy LP (NTI) [9].

Two exchange traded notes placed second and fourth, UBS ETRACS Mthly Py 2xLvg Mortg REIT ETN [2], and UBS ETRACS 2xLvg Lng WF Busn Dev Co ETN [4].

One closed end fund placed third, Cornerstone Strategic Value Fund, Inc. [3].

Four financial firms placed sixth, through eighth, and tenth: Orchid Island Capital, Inc. [6], CorEnergy Infrastructure Trust, Inc. (NYSE:CORR) [7], The PennantPark Investment Corporation (NASDAQ:PNNT), and Prospect Capital Corporation (PSEC) an actual Business Development Company [BDC], [10] to complete the representation of market sectors in the "follower favorite" top 10 by yield.

FFAVE Dividend vs. Price Results Compared to Dow Dogs

Periodic strength of 10 top "follower favorite" dogs by yield was graphed below as of market closing prices through 12/11/2015 and compared to those of the Dow. Projected annual dividend history from $10k invested as $1k in each of the 10 highest yielding stocks and the total single share price history of those 10 stocks created the data points shown in green for price and blue for dividend.

Actionable Conclusions: (2) FFAVE Dogs Retreated, While (3) Dow Dogs Were Mixed Down Into December

"Follower favorite" top 10 dividend payers went nearly vertical in dividend while their aggregate single share price sagged since September. Annual dividend from $10k invested as $1k in each stock soared 39.5% while aggregate single share price of the 10 dropped 4.9%. The result continued a very bearish retreat.

Dow dogs mixed down this time as both aggregate single share price and dividend decreased. Total single share price for the 10 fell 7% between September 30 and December 11, while annual dividend from $10k invested as $1K in each of the top 10 Dow dogs declined 3.7% for the period.

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

[I invite you to sign on to my premium site, The Dividend Dog Catcher, to share my discussion about how the Dow (short of tossing out IBM (NYSE:IBM)) could return to a normal balance where dividends from 10 $1k investments can again exceed the aggregate single share price of those top 10 stocks.]

Actionable Conclusion (4): Dow Dogs Remain Overbought

Historically, the overhang of price over dividend was a record $311 or 81% in January, went to $299 or a new record 82% come March, and widened the gap further to a new 2015 record $318 or 89% in May. As of August 21, the gulf between price over dividend dropped to a low $258 or 62%. September 30 saw the Dow overprice indicator widen to a spread of $264 or 63%. December's gap shrank to the lowest for the year at $233 or 58%. Hardly dramatic but compared to the follower favorites, the Dow dividends are very overpriced.

This gap between high share price and low dividend per $1k invested shows an overbought condition. Meaning, no matter which chart you read, these are low risk and low opportunity Dow dogs.

Conversely, the "follower favorite" chart shows those dogs to be made of volatile, high risk, and potentially highly profitable pups.

Actionable Conclusion: 38.79% To 122.22% Median Target Price Upsides To December 2016

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 Conclusion (5): Wall St. Wizards Declared A 30.66% Average Upside and 43.06% Net Gain for Top 30 FFAVE Dogs As Of December 11, 2016

A hypothetical $1k investment in each equity was divided by the current share price to find the number of shares purchased. The share 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 2016.

Historic prices and actual dividends paid from $30k invested as $1k in each of the highest yielding stocks and the aggregate single share prices of those 30 stocks divided by three created data points for 2015. Projections based on estimated increases in dividend amounts from $1k invested in the 20 highest yielding "follower favorite" stocks and aggregate one-year analyst target share prices from Yahoo Finance divided by two created the 2016 data points green for price and blue for dividend.

Analysts quoted by Yahoo forecast a 19.6% lower dividend from $30K invested as $1k in each stock in this group of 30 while aggregate single share price was projected to increase 28.3% 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 one meant the stock's price would move with the market. Less than one showed lower than market movement. Higher than one showed greater than market movement. A negative beta number indicated the degree of a stock price's movement opposite of market direction.

Actionable Conclusion (6): Analysts Alleged FFAVE" Top 10 Dogs Would Net 42.06% to 128.37% By December 11, 2016

Four of the 10 top dividend yielding "follower favorite" dogs were verified as being among the 10 net gainers for the coming year based on analyst one-year target prices. So this period the dividend dog strategy as graded by Wall St. wizards was 40% accurate for the "follower favorite" top 10.

10 probable profit generating trades revealed by Yahoo Finance for 2016 were:

Pacific Coast Oil Trust (NYSE:ROYT) was projected to net $1,283.70 based on the lowest target price estimate from three analysts combined with projected annual dividend less broker fees. The Beta number showed this estimate subject to volatility 2% less than the market as a whole.

CorEnergy Infrastructure Trust, Inc. was projected to net $1,263.65 based on the median target price estimate from four analysts combined with projected annual dividend less broker fees. The Beta number showed this estimate subject to volatility 46% more than the market as a whole.

Memorial Production Partners LP was projected to net $961.13 based on dividends plus the lowest target price estimate from 10 analysts less broker fees. The Beta number showed this estimate subject to volatility 51% more than the market as a whole.

NuStar Energy L.P. (NYSE:NS) was projected to net $719.57 based on dividends plus the median target price estimate from seven analysts less broker fees. The Beta number showed this estimate subject to volatility 30% greater than the market as a whole.

Evolving Systems Inc. (NASDAQ:EVOL) was projected to net $665.71 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 71% less than the market as a whole.

Rent-A-Center, Inc. (NASDAQ:RCII) was projected to net $662.44 based on a median target price estimate from six analysts combined with projected annual dividend less broker fees. The Beta number showed this estimate subject to volatility 92% less than the market as a whole.

ONEOK Partners, L.P. (OKS) was projected to net $636.77 based on a median target price estimate from 15 analysts combined with projected annual dividend less broker fees. The Beta number showed this estimate subject to volatility 12% less than the market as a whole.

Enterprise Products Partners (NYSE:EPD) was projected to net $611.98 based on dividends plus a median target price estimate from 21 analysts less broker fees. The Beta number showed this estimate subject to volatility 2% less than the market as a whole.

Prospect Capital Corporation was projected to net $561.33 based on a median target price estimate from nine analysts combined with projected annual dividend less broker fees. The Beta number showed this estimate subject to volatility 78% less than the market as a whole.

PennantPark Investment Corporation was projected to net $514.29 based on a median target price estimate from 10 analysts combined with projected annual dividend less broker fees. The Beta number showed this estimate subject to volatility 22% more than the market as a whole.

The average net gain in dividend and price was calculated to be 78.8% on $10k invested as $1k in each of these 10 dogs. This gain estimate was subject to average volatility 7% less than the market as a whole.

10 FFAVE Dogs Get 8.7% More Gain From Five Highest Yield, Lowest Priced

10 top FFAVE dividend paying stocks as of market closing December 11 were culled by Yield (dividend/price) results verified by Yahoo Finance.

These top FFAVE dogs included firms representing just two of nine Yahoo market sectors. (Seven financials and three basic materials were listed.)

Actionable Conclusion: (7) Analysts Alleged Five Lowest Priced of Top 10 High Yield FFAVE Dogs Will Deliver 55.03% Vs. (8) 50.63% Net Gains for All 10 by December 11, 2016

$5k invested as $1k in each of the five lowest priced stocks in the top 10 "follower favorite" kennel by yield were predicted by analyst one-year targets to deliver 8.70% more net gain than $5k invested as $.5k in each of all 10.

The third highest priced "follower favorite" dog, CorEnergy Infrastructure Trust, Inc., was projected to deliver the best net gains of 126.37%.

Lowest priced five "follower favorite" dogs for December 11 were Memorial Production Partners LP, The PennantPark Investment Corporation, Prospect Capital Corporation, Orchid Island Capital, Inc., and UBS ETRACS Mthly Py 2xLvg Mortg REIT ETN, with prices ranging from $2.12 to $12.28.

Higher priced five "follower favorite" dogs for December 11 were UBS ETRACS 2xLvg Lng WF Busn Dev Co ETN, Cornerstone Strategic Value Fund, Inc., CorEnergy Infrastructure Trust, Inc., CVR Refining, LP, and Northern Tier Energy LP, whose prices ranged from $15.34 to $24.45.

This distinction between five low priced dividend dogs and the general field of 10 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. It's 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 December 2015. 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.

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 the same.

Graphs and charts were compiled by Rydlun & Co., LLC from data derived from www.indexarb.com, www.dividend.com, finance.yahoo.com, and analyst mean target price by Thomson/First Call in Yahoo Finance.

Disclosure: I am/we are long 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.