Top 2017 Monthly Pay Dividend SML Dogs: Capitala Finance, Whitestone REIT, And Student Transportation

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Includes: AGNC, ARR, BRG, CEFL, CLDT, CPTA, DMO, EDF, GAIN, GLAD, GNL, IRT, MORL, NCV, OCSI, OCSL, ORC, PCI, PCN, PDI, PKO, PSEC, PTY, SJT, STB, WSR
by: Fredrik Arnold

Summary

58 monthly paying dividend (MoPay) Small, Mid, & Large cap (SML) equity yields ranged 0.99%-14.7%. 63 SML CEIC, Fund & Note yields were 6.41%-19.48% January 10.

Top ten US Exchange Equities mixed down as Canadians charged, averaging 11.2% & 8.76% yields, respectively. Ten MoPay Funds mixed up averaging 14.68%. Ten Dow Dogs charged, averaging 3.67% yield.

Analyst 1yr. targets showed 30 MoPay equities averaging 1.43% upsides but posting 9.35% net gains. Funds, though not targeted by analysts, averaged 11.24% top 30 gains.

Top yield equities were: GLAD; GNL; FSFR; ARR; AGNC; CPTA; SJT; PSEC; FSC; with ORC leading. Top Funds: PCN; NCV; DMO; PCI; PTY; EDF; PTI; PKO; MORL CLM; CEFL leading.

Ten top yield SML equities projected 16.47% more gain from $5k invested in the lowest priced five than from $5K in all ten.

2017 SML MoPays

Yield (dividend / price) results from here verified by Yahoo Finance for 58 monthly dividend paying Small, Mid, & Large cap (MoPaySML) equities as of market closing prices 1/10/17 revealed 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. The same scale was used to select funds, trusts, and notes based on total assets under management.

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, best called, "underdogs".

SML MoPays Of January

See my most recent 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.

Dog Metrics Uncovered Bargains

58 small, mid, and large cap monthly dividend paying equities were pulled from 1080 equities of all sizes for this article. Closed End Funds, ETFs and ETNs were excluded here and preferred shares are no longer showing up. Real Estate Investment Trusts [REITs], Master Limited Partnerships [MLPS], Royalty Trusts [RTs], and Business Development Companies [BDCS] populated the equity list along with common shares.

The equity list is no longer split between USA exchanges and Canadian stock exchanges. However a top ten list from Canadian exchanges is shown for comparison purposes

Again, real estate and financial firms dominated the top 10 equity list and loaded the master list of fifty-eight with twenty-six REITs, and twelve financial service firms, along with ten energy issues, two consumer cyclical, three industrials, one consumer defensive, one utility, one healthcare, one communication services, and one basic materials firm represented. Only the technology sector was missing from the monthly dividend equity SML payor list.

The Top Ten Equity Lists

Ten top monthly pay SML Cap dividend equities this week by yield included four real estate firms, five financial services, and one energy firm to cover three of the eleven Morningstar business sectors.

After January 1, 2017 top ten MoPay equity dogs mixed down as dividend and price fell, but the Canadian top ten MoPaySML dogs charged as dividend full but price popped up.

Actionable Conclusion: (1) Top 10 Equities Mixed Down

Top Ten MoPay equity dividend fell 1.8%, while aggregate single share price of the ten dropped 0.4%.

A diversified REIT led the top ten list by yield again, Orchid Island Capital (NYSE:ORC) [1]. Three other real estate entities followed in sixth, seventh, and ninth places, American Capital Agency (NASDAQ:AGNC) [6], ARMOUR Residential REIT (NYSE:ARR) [7], and Global Net Lease (NYSE:GNL) [9].

Five financial services representatives put themselves in second, third, fifth, eighth, and tenth places: Fifth Street Finance (NASDAQ:FSC) [2]; Prospect Capital Corporation (NASDAQ:PSEC) [3]; Capitala Finance (NASDAQ:CPTA) [5]; Fifth Street Senior Floating Rate Corp. (NASDAQ:FSFR) [8]; Gladstone Investment (NASDAQ:GAIN) [10].

Finally, the lone energy member placed fourth, San Juan Basin Royalty Trust (NYSE:SJT) [4] to complete the January 10 MoPay SML top yield ten dog list.

Canada Top Ten MoPay Equities

This week's ten top Canadian exchange monthly pay SML Cap dividend stocks by yield included two financial service firms, one utility and, seven real estate firms, to cover three of the eleven Morningstar business sectors.

Actionable Conclusion: (2) Canadian 10 SML Charged;

Canadian equities dividend fell and price rose to set the charge. Dividend dropped 7%, while aggregate single share price of the ten rose 2.7%.

Two financial service firms placed first and eighth for Canada, Dividend 15 Split Corp (DFN.TO) [1], and Timbercreek Financial (TF.TO) [8]. The lone utility placed second, Crius Energy (KWH-UN.TO) [2].

The first of seven REITs led that RE procession from the third spot, Slate Office REIT (SOT-UN.TO)[3]. The rest of the REITs placed fourth through seventh, ninth and tenth. Artis REIT (AX-UN.TO) [4], Dream Global REIT (DRG-UN.TO) [5], Dream Industrial REIT (DIR-UN.TO) [6], American Hotel Income (HOT-UN.TO) [7], Northview Apartment REIT (NVU-UN.TO) [9], and OneREIT (ONR-UN.TO) [10], to complete the Canadian exchanges January 10th MoPay SML top yield ten dog list.

MoPay SML Funds by Yield

58 small Closed Ended Investment Companies [CEICs], plus two mid cap CEICs, two small ETNs and two small ETFs were culled from nearly 800 monthly dividend paying (MoPay) funds, trusts and notes by yields calculated as of January 10 to determine the top ten.

Actionable Conclusion (3) SML Funds Mixed Up

MoPay Fund top ten dogs mixed higher after January 1. Dividend from $10K invested as $1k in each Fund dog increased 8%, while aggregate single share price of those ten equities soared 66%.

Ten monthly SML Funds showing the biggest yields (revealed by YCharts.com and verified using Yahoo Finance data) this week consisted of eight Closed Ended Investment Companies, and two ETNs.

Those ETNs took the top two spots, BS ETRACS Mthly Py 2xLvg Closed-End ETN (NYSEARCA:CEFL) [1], and UBS E-TRACS Mthly Pay 2x Mortgage REIT ETN (NYSEARCA:MORL) [2]. Leader of the nine CEICs was third, PIMCO Income Opportunity (NYSE:PKO) [3].

Fourth through tenth belonged to the remaining seven CEICs: PIMCO Dynamic Income (NYSE:PDI) [4]; Stone Harbor Emerging Mkts Income (NYSE:EDF) [5]; PPIMCO Corporate & Income Opps (NYSE:PTY) [6]; PIMCO Dynamic Credit and Mortgage (NYSE:PCI) [7], Western Asset Mortgage Defined Opp (NYSE:DMO) [8]; AllianzGI Convertible & Income (NYSE:NCV) [9]; PIMCO Corporate & Income Strategy (NYSE:PCN) [10], to round out this early-January all Funds top ten list.

Actionable Conclusion(4) Dow Dogs Mixed Up Like Funds

Despite a slight drop in dividend, Dow dogs continued to expand their overbought record.

Actionable Conclusion (5): The Dow Overbought Gap Widened

February, 2016 the Dow price over dividend gap grew to $265 or 65%. Then, through March, grew to $400 or 104% for April.

May moved the price over dividend gap down to $350 or 91%. June put the gap back up to $386 or104%. Then the gap rose to $414 or 114% in July. August gapped to $446 or 125%. September exceeded that mark, pushing the gap to $483 or 132%. October pushed it down to $369 or 97%. November kept the gap down to $363, or 99%. As of December the margin of price over dividend clocked in at $490 or 134%, surpassing the previous September chasm by two points. January, 2017 saw the gap at $497 or 135%, up another point.

This gap between high share price and low dividend per $1k invested shows an overbought condition. Meaning, these are low risk and low opportunity Dow dogs. The Dow top ten average price per dollar of annual dividend January 9 was $27.84.

Actionable Conclusion (4): MoPay Price Advantage Goes To Closed End Investment Funds, and Exchange Traded Funds & Notes

MoPay dog charts for either stocks or Funds show those dogs to be volatile, high risk, and potentially more rewarding than those of the Dow. The January 10 SML MoPay equity top ten average price per dollar of annual US exchange dividend was $8.96. Canada was $11.44

The opportunity gaps, and price per dividend dollar, point to an advantage for funds, trusts and preferred stocks in the MoPay universe. The MoPay SML Funds top ten average price per dollar of annual dividend was $6.74. That $2.22 to $4.70 difference below equity share dividend cost of the MoPay equities is likely due to the trust and fund ability to return capital to investors in addition to dividends.

Actionable Conclusion (5) One Lowly Industrial Dog on MoPay Upside Lists Is Joined By A Consumer Cyclical Against 3 Financial Services and 5 REITs For Gains

Actionable Conclusion (6) Wall St. Analysts Assert A 7.72% Average 1 yr. Upside for Top 10 MoPaySML Dogs Come January 10, 2018

One-year median target price set by brokerage analysts multiplied by the number of shares in a $1k investment revealed ten stocks that showed the greatest upside price potential into 2018 out of 30 selected by yield in 2017.

Actionable Conclusion (7) Yields Averaged 14.66% Annually For MoPay SML Funds Top 10 List As Of January 10

Top ten closed end funds, ETFs, & ETNs paying monthly dividends showed yields ranging from 11.68% to 19.48% promising investors strong returns, not counting price appreciation.

Actionable Conclusions: Wall St. Brokers Forecast (8) A 1.43% Average 1 yr. Upside With (9) A 9.08% Average Net Gain for Top 30 MoPay SML Stocks As Of January 10, 2018

Top 30 dogs on the MoPay stock list graphed above show relative strengths by dividend and price as of January 10, 2017 and those projected by analyst mean target price estimates to the same date in 2018.

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 applied to gauge each stock's upside to 2018.

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 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 on the chart below: green for price and blue for dividend.

Yahoo reported Thomson/First Call analyst survey numbers predicting little change in dividend and price in MoPay equities for the coming year. They expected a 1.3% lower dividend from $10K invested as $1k in the average ten of this group, with aggregate single share price of those ten estimated to increase 0.66% 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 have the better track record for predicting upsides. Estimates provided by one analyst were seldom 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. Since no Canadian equities provided analyst upside estimates, a list of all US Exchange stocks resulted.

Actionable Conclusion (10): Wall St. Brokers Estimate 15.83% Average Net Gains For Top 10 MoPaySML MoPay Dogs As Of January 10, 2018

This period, six of the ten top dividend yielding MoPaySML dogs were verified as being among the top ten by upside and gain for the coming year based on analyst 1-year target prices. So, for this period, dog methodology graded by Wall St. wizards was 60% accurate.

A financial services equity again led the ten probable profit generating trades revealed by Thomson/First Call in Yahoo Finance for January 10, 2017:

Capitala Finance was projected to net $225.20 based on dividend plus the median target price estimate from ten analysts less broker fees. A Beta number was not available for CPTA.

Whitestone REIT (NYSEMKT:WSR) was projected to net $123.83 based on the median target estimate from six analysts plus dividends less broker fees. The Beta number showed this estimate subject to volatility 10% more than the market as a whole.

Student Transportation (NASDAQ:STB) was projected to net $162.65 based on a median target price estimate from five analysts combined with its projected annual dividend less broker fee. A Beta number was not available for STB.

Bluerock Residential (NYSEMKT:BRG) was projected to net $154.86 based on dividends plus the median of annual price estimates from seven analysts less broker fees. A Beta number was not available for BRG.

AGNC Investment was projected to net $145.87 based on the median target price estimate from eleven analysts plus dividends less broker fees. The Beta number showed this estimate subject to volatility 83% less than the market as a whole.

Fifth Street Finance was projected to net $145.49 based on dividends plus the median of annual price estimates from five analysts less broker fees. FSC.

Independence Realty Trust (NYSEMKT:IRT) was projected to net $143.33 based on dividends plus the median of annual price estimates from six analysts less broker fees. A Beta number was not available for IRT.

Fifth Street Senior was projected to net $119.10 based on the median target price estimate from three analysts plus dividends less broker fees. A Beta number was not available for FSFR.

Global Net Lease was projected to net $118.82 based on the median target price estimate from one analyst plus dividends less broker fees. A Beta number was not available for GNL.

Prospect Capital was projected to net $113.41 based on the median target price estimate from six analysts plus dividends less broker fees. A Beta number was not available for PSEC.

The average net gain in dividend and price was 15.53% on $10k invested as $1k in each of these ten MoPay dogs. The averaged Beta number was not available with only two of ten recorded.

Actionable Conclusion (11): (Bear Alert) Analysts Projected Two MoPay Dogs To Show Losses Of -6.36% & -10.72% By 2018

Two probable losing trade revealed by Thomson/First Call in Yahoo Finance in 2018 were:

Chatham Lodging Trust (NYSE:CLDT) was projected to lose $64.56 based on dividend and a median target price estimates from five analysts including $20 of broker fees. The Beta number showed this estimate subject to volatility 15% more than the market as a whole.

Gladstone Capital (NASDAQ:GLAD) was projected to lose $107.15 based on dividend and a median target price estimates from seven analysts including $20 of broker fees. The Beta number showed this estimate subject to volatility 57% more than the market as a whole.

The average net loss in price and fees including dividends collected was 8.54% on $2k invested as $1k in each of these two dogs. This loss estimate was subject to average volatility 21% less than the market as a whole.

Analyst Estimated Lowest Downside MoPay Equity Surpassed The Highest Upside Equity In Price Gains Over The Past 6 Months

Six month price performance of Capitala Finance Corp. versus Gladstone Capital , the two extreme ends of Monthly Pay upside results this week, show a more positive 21.10% gaining path for the red-lined "low dog" GAIN and a clearly negative -5.17% trend for the analyst-favored CPTA in blue July 13, 2016 to January 13, 2017.

Three month graphic history, however, confirms analyst expectations for a decline in the fortunes for Gladstone Capital.

Dog Metrics Found 16.47% More Gain In Lowest Price Highest Yield MoPay Dividend Dogs

Ten top monthly pay SML Cap dividend stocks this week by yield included four real estate firms, five financial service firms, and one energy company, covering three of the eleven Morningstar business sectors. As of market close, January 10, MoPay leaders by yield were charted above and graphed below by price gains.

Actionable Conclusion (12): Analysts Asserted 5 Lowest Priced of Top Ten High Yield MoPay SMLs Would Deliver 11.86% VS. (13) 10.18% Net Gains from All Ten

$5,000 invested as $1k in each of the five Lowest priced stocks in the top ten MoPaySML kennel by yield were predicted by analyst 1 year targets to deliver 16.47% more net gain than $0.5k invested in each of all ten. The eighth lowest priced MoPaySML dog, Capitala Finance , was projected to deliver the best net gain of 22.52%.

Lowest priced five MoPaySML dogs as of January 10 were: Fifth Street Finance; San Juan Basin Royalty Trust; Global Net Lease; Prospect Capital; Fifth Street Senior Capital, whose prices ranged from $5.68 to $9.13.

The higher priced five MoPaySML dogs for January 10 were: Gladstone Capital; Orchid Island Capital; Capitala Finance; AGNC Investment; Armour Residential REIT, whose prices ranged from $9.41 to $22.24.

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. It mostly works well for teasing low price bargains out of this list of top yielding MoPay equities, as you see this week.

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 Dow stocks per Yahoo from this article from Seeking Alpha of January 27, 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" top ten annual analyst accuracy score for The Top Ten Monthly Pay Stocks by yield between January 25, 2016 and January 11, 2017, was two price losses, and eight price gains. Five of the gainers were high price dogs for the year. This group of MoPays showed a 80% positive price result for the year. However only nine of these ten MoPays continued to pay any dividends, and of those nine, four paid lower dividend and five were unchanged. These 2016 MoPays almost performed to analyst expectations.

Stocks listed above were suggested only as decent starting points for a MoPay dog dividend stock investment research process into mid-January, 2017. These were not recommendations.

Net gain and 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.

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

Three of these monthly paying dividend pups qualify as valuable catches! They are listed with the now 52 Dogs Of The Week (DOTW) found on The Dividend Dog Catcher premium site. Click here to subscribe or get more information.

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!

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 photo:money-banks.co.uk

Disclosure: I am/we are long ARR, FSC, 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.