Dividend Power Dogs: High Earnings Plus High Dividend Yields

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Includes: ASC, CMRE, CYS, DL, EARN, EURN, FBR, FRO, MTGE, NAP, NAT, ORC, SAR, SFL, SUN, SXCP
by: Fredrik Arnold
Summary

35 equities, named "Dividend Power Dogs", were recently stumbled upon while browsing the YCharts Stock Screener.

Defining power dogs: (1) fetching higher earnings yield; (2) ranked by dividend yield as of December 19.

Top ten "Dividend Power Dogs" by yield, EARN, NAT, SXCP, SFL, CYS, FBR, SUN, ORC, NAP, and EURN were singled out as of December 19.

Top ten "Dividend Power Dogs" gainers per analyst targets were:SFL; CYS; MTGE; NAP; FRO; SUN; DL; ASC; CMRE, with FBR leading.

Top ten "Dividend Power Dogs" by yield projected 55.47% more net gain from $5k invested in the lowest priced five than from $5K in all ten.

The Dividend Dogs Rule

The "dog" moniker was earned by stocks exhibiting three traits: (1) paying reliable, repeating dividends, (2) their prices fell to where (3) yield (dividend/price) grew higher than their peers. Thus, the highest yielding stocks in any collection became known as "dogs." More precisely, these are, in fact, "underdogs".

Meet the 2017 Dividend Power Dogs

Thirty-five stocks from seven of eleven Morningstar sectors sourced by YCharts in December were parsed by the dividend plus earnings yields to reveal the actionable conclusions discussed below.

See Dow 30 article for a more detailed 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

The thirty-five Wiz dogs were culled by virtue of their prominent earnings and dividend yields. Their metrics were sourced from the Y Charts database as of December 19.

Top ten dividend power dogs by yield were from four sectors: four from industrials, three from real estate, plus two from basic materials, and one from energy.

Tops of "Dividend Power Dogs" were two industrials, Euronav (NYSE:EURN) [1] and Navios Maritime Midstream (NYSE:NAP) [2]. The remaining two industrials placed seventh, and ninth: Ship Finance International (NYSE:SFL) [7], and Nordic American Tankers (NYSE:NAT) [9].

Three real estate dividend power dogs gave chase and placed third, sixth, and tenth: Orchid Island Capital (NYSE:ORC) [3]; CYS Investments (NYSE:CYS) [6]; Ellington Residential (NYSE:EARN) [10].

The lone energy sector dividend power dog representative placed fourth, Sunoco (NYSE:SUN) [4].

Finally two basic materials "Dividend Power Dogs" placed fifth and eighth by yield, Fibria Celulose (NYSE:FBR) [6], and SunCoke Energy Partners (NYSE:SXCP) [8], to complete the top ten list for December.

Actionable Conclusions: (1) Top Ten of 30 Dividend Power Dogs Pursue 48.65% Average Upsides Cast Produced Downsides Averaging -2.71%

To quantify top dog rankings, analyst mean price target estimates provide a "market sentiment" gauge of upside potential. Added to the simple high yield "dog" metrics, analyst mean price target estimates, these provided another tool to dig out bargains.

Actionable Conclusions: Wall St. Wizards Wished (3) 17.04% Average Upsides, & (4) 26.15% Average Net Gain from Top 30 Dividend Dividend Power Dogs By December, 2017

Top thirty dogs from the "Dividend Power Dogs" list were graphed below as of December 19, 2016 as compared to analyst mean price target estimates for the same date in 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 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 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.

Analyst data reported by Yahoo finance projected a nearly 8% lower dividend from $30K invested as $1k in each stock in this group while aggregate single share price was projected to increase 12.3% 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 had a better history of estimate accuracy .

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 (5): Analysts Alleged Ten Top Gain "Dividend Power Dogs" Would Net 9.5% to 27.7% By December 2017

Five of the ten top dividend yielding "Dividend Power Dogs" were among the ten gainers for the coming year based on analyst 1 year target prices. So this month the dog strategy as graded by Wall St. wizards was 50% accurate.

Ten probable profit generating trades were revealed by Thomson/First Call in Yahoo Finance into 2017:

Fibria Celulose was projected to net $2,703.59 based on dividends plus a median target price estimate from nine analysts less broker fees. The Beta number showed this estimate subject to volatility 22% opposite the market as a whole.

Costamare (NYSE:CMRE) was projected to net $453.68. based on dividend plus median target price estimates from six analysts less broker fees. The Beta number showed this estimate subject to volatility 137% more than the market as a whole.

Ardmore Shipping (NYSE:ASC) was projected to net $420.58 based on dividends plus a median target price estimate from eleven analysts less broker fees. The Beta number showed this estimate subject to volatility 61% more than the market as a whole.

China Distance Education (NYSE:DL) was projected to net $418.88 based on dividends plus median target price estimates from two analysts less broker fees. The Beta number showed this estimate subject to volatility 13% more than the market as a whole.

Sunoco was projected to net $405.09 based on estimates from eighteen analysts plus dividends less broker fees. The Beta number showed this estimate subject to volatility 46% less than the market as a whole.

Frontline (NYSE:FRO) was projected to net $344.923 based on dividends plus a median target price estimate by six analysts less broker fees. The Beta number showed this estimate subject to volatility 60% more than the market as a whole.

Navios Maritime Midstream was projected to net $264.24 based on estimates from four analysts plus dividends less broker fees. A Beta number was not available for NAP.

MTGE Investment (NASDAQ:MTGE) was projected to net $205.00 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 58% less than the market as a whole.

CYS Investments was projected to net $198.59 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% less than the market as a whole.

Ship Finance International was projected to net $190.88 based on dividends plus median target price estimates from seven analysts less broker fees. The Beta number showed this estimate subject to volatility 46% more than the market as a whole.

The average net gain in dividend and price was 55.97% on $10k invested as $1k in each of these ten dogs. This gain estimate was subject to average volatility 4% less than the market as a whole.

Analyst Projected Price Histories of Highest and Lowest Upside Stocks Reveal Brokers Getting Real

Analyst designated and red-lined "loser" Saratoga Investments (NYSE:SAR) shows a mediocre horizontal 9% three month price upside. Meanwhile, analyst upside star stock, Fibria Celulose shows a solid 36% gain since late September, turning in a 4X superior trajectory. Upside momentum backs the Dividend Powered top dog.

This evidence contradicts 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." Analyst target price targets are not always contrarian indicators.

"Dividend Power Dogs" Analysts Find 55.47% more Return From 5 Lowest-Priced Come December 2017

"Dividend Power Dogs" stocks to buy and hold for at least one year were reported based on: (1) Yields over 4%; (2) Minimum $100M Market Capitalization; (3) Price Upside to 2017; (4) Analyst Rated 1.8-3.5; (5) Analyst 1yr. target upsides;

As mentioned above, four of eleven Morningstar sectors placed dogs in the top ten "Dividend Power Dogs" list for December: industrials, real estate, energy, and basic materials.

Actionable Conclusions: (6) 5 Lowest-Priced of the Top Ten Highest-Gaining "Dividend Power Dogs" Were Estimated to Deliver 69.68% Vs. (7) 44.82% Net Gains for All Ten as of December 19, 2016

$5000 invested as $1k in each of the five lowest-priced stocks in the top ten "Wiz Dogs" kennel by gains were predicted by analyst 1-year targets to deliver 55.47% more net gain than the same amount invested in all ten. The fourth lowest-priced of the "Dividend Power Dogs", Fibria Celulose, was projected to deliver the best net gain of 270.36%.

The five lowest-priced "Dividend Power Dogs" for December 19 were: Euronav; CYS Investments; Nordic American Tankers; Fibria Celulose; Navios Maritime Midstream, whose prices ranged $7.45 to $10.66.

The higher-priced "Dividend Power Dogs" for December 19 were: Orchid Island Capital; Ellington Residential; Ship Finance Intl; SunCoke Energy Partners; Sunoco, whose prices ranged from $10.84 to $24.07.

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. It's also the work analysts got paid big bucks to do.

Caution is advised, however, as analysts are historically 20-80% accurate on the direction of change and about 0-20% accurate on the degree of the change.

The stocks listed above were suggested only as reference points for a "Dividend Power Dogs" stock investment research process into December 2016. These were not recommendations.

See my instablog for specific instructions about how to best apply the dividend dog data featured in this article.--Fredrik Arnold

None of these "Dividend Power Dogs" are listed among the now 52 Dogs of the Week discoveries on The Dividend Dog Catcher™ premium site. Click here to learn more and subscribe.

It's about time to make investing fun again. For a free copy of the monthly top dogs, the quarterly reports, and the dog of the year winner and runner-up underdog from the 52 Dogs of the Week I portfolio, send your e-mail address, ticker symbol for your favorite dividend stock, and name of your favorite team of any sport or activity to: fredrika120@gmail.com. Remember: E-mail, ticker, team!

The 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 ycharts.com; finance.yahoo.com; analyst mean target price by Thomson/First Call in Yahoo Finance. Big Dog Photo: petparent.me.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. 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.