Arnold Follower Favorite Dog O Shunned By Analysts

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Includes: AMZA, BDCL, BPT, CG, DHT, DLR, EPD, FRO, KKR, MFIN, MO, MORL, NRZ, O, OHI, PSEC, SXCP
by: Fredrik Arnold

Summary

Arnold "followers" surveyed June 7 returned 49 replies revealing a list of 32 favorite (FFave) dividend dogs. Five followers recommended MO; four favored O; three liked DHT.

Yields ranged from 1.44% to 31.05% June 14. Ten yield leaders, PSEC, NRZ, MFIN, BDCL, AMZA, FRO, DHT, BPT, SXCP, & MORL retreated bearishly as Dow dogs charged bullishly.

Analyst upsides for 30 FFaves averaged 9.37% with 17.54% net gains. Top upsides and gains were from BA, HASI, OHI, EPD, CG, NRZ, MORL, KKR, FRO, SXCP, DHT, & MFIN.

$5k invested in the lowest-priced five top yield FFaves showed 18.67% more net gain than from $5k invested in all ten.

These lists are suggested guides. Consider these stocks as reference points for your mid-June stock investment research.

Follower Votes

My June 7, message blast to all 6,200 Arnold Seeking Alpha followers requested their e-mail address, favorite dividend stock, and favorite team. In exchange for their answers, I offered a summary and quarterly report describing my 2 best performing dogs of the week (DOTW) and 1 worst performer. The results came from my first 26 monthly DOTW selections on my premium site, The Dividend Dogcatcher™. Similar offers went out in September, December, March, April and May. DOTW selections are published every Sunday exclusively in the Seeking Alpha premium pages. That site now lists forty-three ace DOTWs plus that one poor pick.

Ten dividend dog favorites were named more than once by followers. They were (from most to least mentions: MO(5); O(4); DHT(3); NRZ(3); with AGNC, BDCL, PSDEC, and SXCP each getting two votes. For teams, "none" was again the top response. After none, cowboys, packers, seahawks and warriors were frequent follower favorites.

The polls are always open. Try again to e-mail me your favorite dividend stock at fredrika120@gmail.com. You're now eligible to contribute to the July survey. Remember to include all three: dividend stock; e-mail address; team.

I'll be sending more top money DOTW mentions. Maybe, even, a most promising newcomer.

Now, the tangible financial results for June follow...

Thirty-two For the Money

Yield (dividend / price) results verified by Yahoo Finance for "follower favorite" stocks as of market closing prices 6/14/16 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.

"Follower Favorite" Stocks Were Ranked by Yield. Actionable Conclusions, (1) MORL, led June FFaves; (2) The Pack Included Seven Monthly Payers

Thirty two follower favorites above were sorted by yield calculated as of market close 6/14/16. Three of nine Yahoo sectors were represented in the top ten and notes: basic materials (2); financials (6) (including closed end and exchange traded funds); services (2). Two of the ten paid dividends monthly.

The six financial entities and the rest of the pack were led by an exchange traded note, UBS ETRACS Mthly Py 2xLvg Mortg REIT ETN (NYSEARCA:MORL) [1]. The rest of the financials were sixth, through tenth by yield: InfraCap MLP ETF (NYSEARCA:AMZA) [6]; UBS ETRACS 2xLvg Lng WF Bus Dev Co ETN (NYSEARCA:BDCL) [7]; Medallion Financial (formerly TAXI) (NASDAQ:MFIN) [8]; New Residential Investment (NYSE:NRZ) [9]; Prospect Capital Corporation (NASDAQ:PSEC) [10]. Two of these financial entities paid the monthly dividends.

Second FFave stock by yield, SunCoke Energy Partners (NYSE:SXCP) [2] was joined by another basic materials stock this month, BP Prudhoe Bay Royalty Trust (NYSE:BPT) [3].

Finally, two service firms made the top echelon in fourth and fifth places, DHT Holdings, Inc. (NYSE:DHT) [4], and Frontline Ltd. (NYSE:FRO) [5] to complete the representation of market sectors in the June "follower favorite" top ten by yield.

FFave Dividend vs. Price Results Opposed The Dow Dogs

Periodic strength of ten top "follower favorite" dogs by yield graphed below as of market closing prices through 6/14/2016 was matched against 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.

Actionable Conclusions: (3) FFave Dogs Retreated, As (4) Dow Dogs Charged Into June

"Follower favorite" top ten yielders rose in dividend after May while aggregate single share price dropped. Annual dividend from $10k invested as $1k in each stock soared 22% after May while aggregate single share price of the ten dropped 0.68%.

Dow dogs, however charged after May as aggregate single share price rose while dividend dropped. Total single share price for the Dow ten increased 2.75% between May 18 and June 14, while annual dividend from $10k invested as $1K in each of the top ten Dow dogs fell 3.8% 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) widened their gap.

Actionable Conclusion (5): Dow Dogs Grow More Overbought

Historically, the overhang of price over dividend as of August 21, 2015, 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%. January brought the gap back up to $275 or 65%. March put the chasm at $361 or 91%, and April expanded the new record gap for the past year to $397 or 106%. May narrowed the chasm to $345 or 89% but June brought the pack kicking and screaming to $380 or 102%.

Compared to the follower favorites, Dow dividends are highly overpriced. The Dow top ten June 14 average price per dollar of annual dividend was $26.61.

Conversely, the "follower favorite" chart shows those dogs to be made of volatile, high risk, and potentially highly profitable pups. The FFave June top ten average price per dollar of annual dividend was $5.15, just 19.35% of the Dow price per dividend dollar. The followers do find those bargain stocks!

Actionable Conclusion (6) Analysts Targets Estimates Cast FFave Top Ten Dogs With 13.41% To 53.46% Price Upsides, And (7) Showed Five Dogs Down 3.76% To 9.85% By June, 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.

Actionable Conclusions: Wall St. Wizards Estimated (8) A 9.37% Average Upside and (9) 17.54% Net Gain for Top 30 FFave Dogs As Of June 14, 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 8.3% lower dividend from $30K invested as $1k in each stock in this group of 30 while aggregate single share price was projected to increase 8% 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.

Actionable Conclusion (10): Analysts Alleged FFave Top Ten Dogs Would Net 19.2% to 65.6% By June 14, 2017

Six 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 60% accurate for the "follower favorite" top ten.

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

Medallion Financial was projected to net $655.60 based on dividends plus the median target price estimate from two analysts less broker fees. The Beta number showed this estimate subject to volatility 52% more than the market as a whole.

DHT Holdings, Inc. was projected to net $548.44 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 7% less than the market as a whole.

SunCoke Energy Partners was projected to net $544.00 based on the median target price estimate from four analysts combined with dividend while subtracting broker fees. The Beta number showed this estimate subject to volatility 137% more than the market as a whole.

Frontline Ltd. was projected to net $474.66 based on the median target price estimate from six analysts combined with projected annual dividend less broker fees. The Beta number showed this estimate subject to volatility 115% more than the market as a whole.

KKR & Co. LP (NYSE:KKR) was projected to net $327.48 based on dividends plus a median target price estimate from twelve analysts less broker fees. The Beta number showed this estimate subject to volatility 38% more than the market as a whole.

UBS ETRACS Mthly Py 2xLvg Mortg REIT ETN was not given a target price estimate from analysts. However, the projected annual dividend less broker fees came to $290.50 No Beta number was available for MORL.

New Residential Investment was projected to net $248.07 based on the median target price estimate from eleven analysts combined with projected annual dividend less broker fees. No Beta number was available for NRZ.

The Carlyle Group LP (NASDAQ:CG) was projected to net $199.73 based on dividends plus the median target price estimate from thirteen analysts less broker fees. The Beta number showed this estimate subject to volatility 94% more than the market as a whole.

Enterprise Products (NYSE:EPD) was projected to net $197.11 based on a median target price estimate from twenty-six analysts combined with projected annual dividend less broker fees. The Beta number showed this estimate subject to volatility 19% less than the market as a whole.

Omega Healthcare Investors (NYSE:OHI) was projected to net $192.18 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 50% less than the market as a whole.

The average net gain in dividend and price was calculated to be 36.78% on $10k invested as $1k in each of these ten dogs. This gain estimate was subject to average volatility 45% more than the market as a whole.

Actionable Conclusion (11): (Bear Alerts) Analysts Predicted Two FFave Dogs With Net Losses Averaging 6.5% By June, 2017

Two probable losing trades revealed by Thomson/First Call in Yahoo Finance in 2017 was:

Digital Realty Trust Inc. (NYSE:DLR) was projected to lose $48.30 based on dividend and a median target price estimate from seventeen analysts including $20 of broker fees. The Beta number showed this estimate subject to volatility 3% opposite the market as a whole.

Realty Income Corporation (NYSE:O) was projected to lose $81.42 based on dividend and a median target price estimate from fifteen analysts including $20 of broker fees. The Beta number showed this estimate subject to volatility 78% less than the market as a whole.

The average net loss in dividend and price was calculated to be 6.49% on $2k invested as $1k in each of these two dogs. This loss estimate was subject to average volatility 90% less than the market as a whole.

A Graphic Comparison of FFAVE Price Histories Prompts the Query, "What're they thinking?"

Three price histories repeat the same news no matter what date range is used, year to date, one year, or five year: the lowest FFave "loser" , and the unheralded consumer staple (NYSE:MO) are much higher than the analysts upside star stock DHT. Upside momentum is fundamentally lacking in the Wall Street Wizard target estimated understudy to the top dog. (MFIN would be graphed but the symbol change parsed the available history down to just two months.)

This evidence correlates with Michael O'Higgins "media index" admonition. He advises investors to pay close attention to "magazine covers, news headlines, and ads placed by investment advisors, primarily in Barron's." He concludes that "you can make out like a bandit by acting the opposite way." Apparently analyst target price estimates can be similarly used as contrarian indicators.

Ten FFave Dogs Show 18.67% Gain From 5 Highest Yield, Lowest Priced

Ten top FFave dividend paying stocks as of market closing June 14 were culled by Yield (dividend / price) results verified by Yahoo Finance.

These top FFave dogs included firms, as noted above, from three of nine sectors in the top ten: basic materials (2); financials (6); service (2).

Actionable Conclusion: (12) Analysts Estimated 5 Lowest Priced of Top Ten High Yield FFave Dogs Will Deliver 39.38% VS. (13) 33.18% Net Gains for All Ten by June 14, 2017

$5000 invested as $1k in each of the five Lowest priced stocks in the top ten "follower favorite" June kennel by yield were predicted by analyst 1 year targets to deliver 18.67% more net gain than $5,000 invested as $.5k in each of all ten.

The second lowest priced "follower favorite" dog, Medallion Financial, was projected to deliver the best net gain of 65.56%.

Lowest priced five "follower favorite" dogs for June 14 were: DHT Holdings, Inc.; Medallion Financial Corp.; Prospect Capital Corporation; Frontline Ltd.; InfraCap MLP ETF, with prices ranging from $6.26 to $10.96.

Higher priced five "follower favorite" dogs for June 14 were: SunCoke Energy Partners, New Residential Investment; UBS ETRACS Mthly Py 2xLvg Mortg REIT ETN; BP Prudhoe Bay Royalty Trust; UBS ETRACS 2xLvg Lng WF Bus Dev Co ETN, whose prices ranged from $11.11 to $15.73.

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-May, 2016. 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.

Three of these follower favorite dividend pups qualify as valuable catches! They are listed with the now 43 Dogs Of The Week (DOTW) found on The Dividend Dog Catcher premium site. Click here to subscribe or get more information.

A top performing DOTW dog for the first quarter has been named. A second quarterly winner was discovered May 13. For a free copy of both quarterly reports and analysis of the winning Arnold Q1 & Q2 picks, plus a surprise bonus bottom dog report, send your e-mail address, ticker symbol for your favorite dividend stock, and name of your favorite team of any type 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 indexarb.com; dividend.com; finance.yahoo.com; analyst mean target price by Thomson/First Call in Yahoo Finance.

Disclosure: I am/we are long CSCO, INTC, 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.

Editor's Note: This article covers one or more stocks 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.