Real Estate Industry 2017 Leaders
Yield (dividend / price) results from here verified by Yahoo Finance were calculated as of January 6, 2017 for Real Estate Industry Leaders. XN Micro-cap firms showed values below $200M(illion). 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. Those yield results led to the actionable conclusions discussed below.
The Dividend Dogs Rule
The "dog" moniker was earned in three steps: (1) any stock paying a reliable, repeating dividend (2) whose price fell to a point where its yield (dividend/price) (3) grew higher than its peers (such as this Industrials collection), is so tagged. Thus, the highest yielding stocks in any collection became known as "dogs." More specifically, these are, in fact, "Underdogs".
Forty five REIT Dogs For The Money
Since late 2011 this report series has applied dog dividend methodology to uncover possible buy opportunities in each of eight major market sectors listed by Yahoo Finance. In the past few years the series expanded to report (1) dividend yield; (2) price upside; (3) net gain results based on analyst 1 yr. target projections.
The series was recently revised to report on 11 sectors as defined by Morningstar and tracked here: Basic Materials, Communication Services, Consumer Cyclical, Consumer Defensive, Energy, Financial Services, Healthcare,Industrials, Real Estate,Technology, and Utilities.
This article intended to reveal bargain stocks to buy and hold up to 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. 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 Parsed Real Estate Stocks In 9 Industries
Top nine plus one runner-up leading dogs January 6, 2017 represented nine real estate component industries: (1) general; (2) services; (3) diversified; (4) residential; (5) lodging; (6) office; (7) healthcare; (8) industrial; (9) retail.
One runner-up (second highest yield) diversified stock was selected to make a top ten list.
Top real estate sector stock by yield was diversified RE leader, NSI (OTCPK:NIUWF) . The runner-up diversified RE leader placed second, Orchid Island Capital (NYSE:ORC) . In the third slot was Residential RE leader, New York Mortgage Trust (NASDAQ:NYMT) . Fourth place went to retail REIT leader, Wheeler Real Estate IT (NASDAQ:WHLR) . Fifth position went to industrial RE industry leader, FIBRA Macquarie (DBMBF) .
In sixth place, was general RE leader, Agile Group Holdings (OTCPK:AGPYY) . RE healthcare facilities leader placed seventh, Care Capital Properties (CCP) . The office RE top dog took eighth place, Inovalis Real Estate (INO-UN.TO) . The Services RE top dog placed ninth, Foxtons Group (OTCPK:FXTGY) . The last slot in the top ten by yield were claimed by the hotel & motel RE leader, American Hotel Income (HOT-UN.TO) . This completed the top ten January real estate sector leader board by yield.
Real Estate Leader Dividend vs. Price Results Compared To Dow Dogs
A Dow industrial index graph below as of 1/9/2017, compared the relative strengths of the top ten real estate sector leader dogs (plus one) above as of market close 1/6/2017. Annual dividend history from $10,000 invested as $1k in each of the ten highest yielding stocks along with the total single share price of those ten stocks made the data points shown in green for price and blue for dividends.
Actionable Conclusions: (2) Real Estate Leader Dogs Mixed Down As (3) Dow Dogs Charged
Real estate sector dogs shown above mixed lower as dividend fell as price continued to tumble since September. Dividend from $10k invested as $1k in each of the top nine plus one RE Leader dogs dropped 5.6% after November/December while total single share price fell 29% for the period, completing the mix-down.
In contrast to the RE dogs, Dow dogs charged as their dividend from $1k in each of ten fell as aggregate single share price of those ten stocks soared after December. Projected annual dividend from $10k invested as $1K in each of the top ten dropped 1.1%. Meanwhile, their aggregate share price rose 3% continuing the expansion of the Dow overbought condition.
That overbought status (in which aggregate single share price of the ten exceeds projected annual dividend from $1k invested in each of the ten) set a new 2016-17 record gap.
Actionable Conclusion (4): Dow Dogs Expand Record Gap
The overbought overhang in February, 2016 put the gap at $208 or 48%. March saw $293 or 73%. April widened it to $394 or 102%. In May/June the overbought gap shrank to $364 or 95%. July price exceeded dividend by $438 or 122%. August widened the chasm to $479 or 131%. September cut it to $368 or 98%. October showed $362 or 95%. November/December widened the mark to $467 or 126%. January, 2017 toasted $497 or 136%, ten points higher!
This gap between high share price and low dividend per $1k invested defines the Dow over-bought condition. Meaning these are low risk and low opportunity Dow dog stocks. The Dow top ten November average price per dollar of annual dividend was $27.84.
Conversely, the real estate dog chart shows those dogs to be both higher risk and higher yield. Furthermore, the realities show greater likely price gains at far higher risk compared to the Dow this month. The real estate sector leader top ten average price per dollar of annual dividend is $9.53, or about 2.9 times less than of the Dow price.
Wall Street Wizards Wonder
One-year mean 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 2018 out of 30 selected by yield. The number of analysts providing price estimates was noted after the name for each stock on the second list below. Three to nine analysts have usually provided the most accurate mean target price estimates.
Actionable Conclusion: (5) Analysts Expected A 18.9% Average Price Upside For Ten January Real Estate Sector Leader Dogs
To quantify top dog rankings, analyst price target estimates provided a "market sentiment" gauge of upside potential. Added to the simple high yield "dog" metrics, analyst target estimates were another tool to dig out bargains.
Actionable Conclusions: Wall St. Analysts Predicted (7) A 11.77% Average Upside, & (8) A 15.54% Average 1 yr. Net Gain from Top 30 January Real Estate Leaders
Real estate sector industry leader dogs were graphed below to show relative strengths by dividend and price as of January 6, 2017 and those projected by analyst mean price target estimates to 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 median target price was used to gauge the stock upside to 2018.
Historic prices and actual dividends paid from $1000 invested in each of the thirty highest yielding stocks and the aggregate single share prices of those thirty stocks divided by 3 created the data points for 2017. 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 2018 data points green for price and blue for dividends.
Analyst targets reported by Yahoo! Finance forecast 4.6% less dividend from $10K invested as $1k in ten dogs in this group while aggregate single share price for those ten was projected to increase by 6.1% 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 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 of 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 stocks movement opposite of market direction.
Actionable Conclusion (9): Analysts Estimated 16.99% to 57.4% Net Gains for Ten Real Estate Leaders As Of January, 2018.
Four of the ten top dividend yielding real estate dogs were verified as being among the ten gainers for the coming year based on analyst 1 year target prices. So this month the dog strategy for the real estate sector leaders as graded by Wall St. wizards was 40% accurate.
Ten probable profit generating trades were revealed by Thompson/First Call in Yahoo Finance for 2018:
Wheeler Real Estate was projected to net $574.12 based on dividends plus a median target price estimate from two analysts less broker fees. The Beta number showed this estimate subject to volatility 23% more than the market as a whole.
Five Oaks Investment (OAKS) was projected to net $441.54 based on dividends plus a median target price estimate from eight analysts less broker fees. A Beta number showed this estimate subject to volatility 28% more than the market as a whole.
Communications Sales & Leasing (CSAL) was projected to net $300.03 based on a median target price estimate from eight analysts combined with projected annual dividend less broker fees. A Beta number was not available for CSAL.
Landmark Infrastructure (NASDAQ:LMRK) was projected to net $299.62 based on dividends plus a median target price estimate from six analysts less broker fees. A Beta number was not available for LMRK.
Global Medical REIT (NYSEMKT:GMRE) was projected to net $203.70 based on dividends plus median target price estimates by four analysts less broker fees. A Beta number was not available for GMRE.
Care Capital Properties was projected to net $194.20 based on dividends plus median target price estimates from four analysts less broker fees. A Beta number was not available for CCP.
Ladder Capital (NYSE:LADR) was projected to net $192.38 based on a median target price estimate from seven analysts combined with projected annual dividend less broker fees. A Beta number was not available for LADR.
CYS Investments (NYSE:CYS) was projected to net $179.49 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 28% less than the market as a whole.
CBL & Associates (NYSE:CBL) was projected to net $179.31 based on a median target price estimate from thirteen analysts combined with projected annual dividend less broker fees. The Beta number showed this estimate subject to volatility 31% more than the market as a whole.
NorthStar Realty Finance (NRF) was projected to net $169.89 based on a median target price estimate from three analysts combined with projected annual dividend less broker fees. A Beta number was not available for NRF.
The average net gain in dividend and price was estimated at 27.34% on $10k invested as $1k in each of these ten dogs. This gain estimate was subject to average volatility 14% more than the market as a whole.
A Real Estate Industry Leader Three Month Price Comparison Showed the Big Loser To Be The Winner
A side by side price performance chart showed the Broker deemed real estate "loser" in purple, New York Mortgage Trust price history being 17.47% up, compared to the 0.58% down trajectory charted for this month's Broker selected real estate star stock, Wheeler Real Estate. Three months of price momentum confounds the broker predictions.
Dog Metrics Charted No Bargains
Nine plus one runner-up small, mid, and large cap real estate sector industry leaders equities were selected from 45 choices. Yield (dividend / price) results verified by Yahoo Finance did the ranking.
As previously noted, top nine plus one runner-up real estate sector leader dogs showing the biggest dividend yields as of market close November 23, 2016 represented nine RE industries: (1) general; (2) services; (3) diversified; (4) residential; (5) lodging; (6) office; (7) healthcare; (8) industrial; (9) retail.
Actionable Conclusions: (11) Analysts Show 5 Lowest Priced of Ten Highest Yield Real Estate Sector Leader Dogs Disappoint With 12.89% VS. (12) 20.36% Net Gains by All Ten by January 6, 2018
Analyst target prices suggest $5000 invested as $1k in each of the five Lowest priced stocks from the top ten real estate sector dividend kennel by yield could produce 19.89% more net gain than $5,000 invested as $.5k in each of all ten. The very highest priced real estate dividend dog, Agile Group Holdings, was projected to deliver the best net gain of 57.41%.
Lowest priced five real estate dividend dogs for January 6 were: FIBRA Macquarie; Wheeler Real Estate; Foxtons Group; NSI; New York Mortgage Trust, with prices ranging from $1.00 to $6.66.
Higher priced five real estate dividend dogs for January 6 were: Inovalis Real Estate; American Hotel Income; Orchid Island Capital; Care Capital Properties; Agile Group Holdings, whose prices ranged from $9.28 to $26.00.
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 same technique, you now see, could also be used to find the more rewarding dogs in the real estate sector under different market conditions.
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.
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.
Annual Analyst Accuracy
You see below the one year result of ten analyst target estimates for Top Yield REIT stocks per this SA article January 18, 2016. These were applied to the "basic method" Michael B. O'Higgins employed for beating the Dow. The key shows: losses in a reddish tint; poor results tinted yellow; gains tinted green; no tint means no difference.
The "basic method" analyst accuracy score for top ten Real Estate Investment Trust stocks by yield between January 14 2016 ,and January 10, 2017, was ten price gains, with three dividend losses, one dividend gain and six dividends unchanged. So, his group of ten-industry REITs showed a 100% positive price result since 2016 with sagging dividends.
Note how analysts still hype expectations for Wheeler to exceed a $2.00 price point which it hasn't seen since 2015. The gains documented here covered five low price REITs and five high priced.
The net gain 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.
The stocks listed above were suggested only as possible reference points for a small, mid, and large cap financial equities dog dividend stock investment research process in late-November, 2016. 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.
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Root for the Underdog.
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; dividend.com; finance.yahoo.com; analyst mean target price by Thomson/First Call in Yahoo Finance. Dog Houses Photo: parolio.com
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.
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.