Followers Send Tickers
December to January invitations to readers at the bottom of my Seeking Alpha articles requested an e-mail address, favorite dividend stock, and favorite team. In exchange for these answers, a summary describing my best SA Marketplace performing Dogs Of The Week (DOTW) was offered. A full complement of 52 ace DOTWs revealed 12 top monthly dogs, 4 top quarterly winners and a dog of the year that were honored in an on-line celebration November 16, 2015.
(That list of winners is yours in exchange for your e-address, favorite stock ticker and team. Click the message link at the top of this article or e-mail me at email@example.com. You're now eligible to contribute to the January survey. Remember to include all three: e-mail; ticker; team.)
Now here are the tangible results from the 15 Safe follower favorites for January...
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. So, the highest yielding stocks in any collection have become affectionately known as "dogs." More precisely, these are, in fact, best called, "underdogs".
What Sectors Show Up As "Safe" Among the Follower Favorites For January?
Of eleven sectors, seven were represented by the 15 stocks with cash margins greater than their announced annual dividends. These included: real estate; financial services; industrials; consumer cyclical; utilities; communication services; consumer defensive. Not represented were basic materials; technology; healthcare, and energy.
The count of 15 safe follower favorite safe sector dogs by industry showed: (1) real estate had three; (2) financial services had three; (3) industrials showed three; (4) consumer cyclical showed one; (5) utilities had one; (6) communication services had two; (7) consumer defensive named two. The first six were represented in the top ten by yield.
Periodic Safety Check
A previous article discussed the 30 follower favorite stocks from which these fifteen were sorted. You see above the tinted green list that passed the dividend "stress" test. These 15 follower favorite dogs report sufficient annual cash flow yield to cover their anticipated annual dividend yield. The margin of excess is shown in the bold face "Safety Margin" column.
Financial guarantees however are easily over-ruled by a cranky board of directors or company policy canceling or varying the payout of dividends to shareholders. For example, Orchid Island Capital, Inc. (NYSE:ORC) on the list below cut its monthly dividend from $18 to $.15 in June, 2015. Also Prospect Capital Corporation (NASDAQ:PSEC) chopped its monthly dividend from $0.111 to $0.083 in February 2015, to suit it's cash flow.
Three additional columns of reported cash data listed after the Safety Margin figures reveal payout ratios (lower is better), total annual returns, and dividend growth levels for each stock. This data is provided to reach beyond yield to select reliable payout stocks.
Dog Metrics Dug For Bargains In Follower Favorite "Safe" Stocks
Ten "Safe" top follower favorite firms showing the biggest yields January 13 per YCharts data ranked themselves by yield as follows:
Ten top FFave dividend paying stocks were culled by Yield (dividend / price) results verified by Yahoo Finance.
As noted above, top ten FFave "Safe" dogs included firms from seven of eleven sectors in the top ten.
Actionable Conclusion: (1) Analysts Speculated 5 Lowest Priced of Top Ten High Yield FFave "Safe"Dogs Would Deliver 7.27% VS. (2) 9.89% Net Gains for All Ten by January 13, 2018
$5000 invested as $1k in each of the five Lowest priced stocks in the top ten "follower favorite" January kennel by yield were predicted by analyst 1 year targets to deliver 26.5% LESS net gain than $5,000 invested as $.5k in each of all ten.
The ninth lowest priced "follower favorite" dog, NextEra Energy Partners (NYSEMKT:NEP), was projected to deliver the best net gain of 26.15%.
Ten FFave "Safe" Dogs Showed 26.5% LESS Gain From 5 Highest Yield, Lowest Priced
Lowest priced five "follower favorite" safe dogs as of January 13 were: Prospect Capital Corporation ; Gladstone Capital (NASDAQ:GLAD); Orchid Island Capital, Inc.; Harvest Capital Credit (NASDAQ:HCAP); New Media Inv Group (NYSE:NEWM), with prices ranging from $8.63 to $16.01.
Higher priced five "follower favorite" safe dogs for January 13 were: New Residential Investment (NYSE:NRZ); AGNC Investment (NASDAQ:AGNC); Golar LNG Partners (NASDAQ:GMLP); NextEra Energy Partners; AT&T, Inc (NYSE:T), whose prices ranged from $16.03 to $40.96.
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.
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-December, 2016. These were not recommendations.
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.
Six of the 30 follower favorite sector dividend pups qualify as valuable catches! Find them as three of the now 52 Dogs of the Week found on The Dividend Dog Catcher premium site. Click here to subscribe or get more information.
Get In On The Fun!
The next Dividend Dogcatcher Shindig is February 15 at 2PM EST. Here's your link to register.
If you registered online for the first Shindig in November you have a free pass to the next four. For others a $9.97 cover charge buys access to all four upcoming 2017 DDC Shindigs.
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: firstname.lastname@example.org. Remember: E-mail, ticker, team!
Root for the Underdog.
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 ycharts.com; indexarb.com; finance.yahoo.com; analyst mean target price by Thomson/First Call in Yahoo Finance. Dog photo: flickr.com
Disclosure: I am/we are long T.
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.