The Dividend Dogs Rule
Stocks earned the "dog" moniker by 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 specifically, these are, in fact, best called "underdogs."
March MoPay Dividend Dog Data
Three buy-and-hold lists produced numerous actionable conclusions and several more un-numbered issues. To draw these conclusions and issues, February 28 closing prices and estimated annual dividends were referenced. Monthly pay (MoPay) equity (1) yield and (2) upside potential lists were compared and contrasted against (3) a high yield (and higher risk) MoPay CEICs/ETFs/ETNs list.
Monthly Pay Dividend Qualities
Quarterly, semi-annual and annual dividend investors anxiously await announcements from a firm, fund, or brokerage to learn if their next dividend will be higher, lower, or paid at all. Monthly pay stocks, funds, trusts, and partnerships inform the holder every four-and-one-third weeks by check and/or statement. If the entity reduces or suspends a payment, the holder can sell out of the investment immediately to cut future losses.
This advantage has been curtailed when companies suddenly cut monthly dividends to save cash. Some 2017 examples were: Three prominent MoPay firms declared dividend slicing between December 2016 and March 2017. First, Five Oaks Investment Corp. (OAKS) declared a cut from $.06 to $.05 per month December 27. Second, February 9, Fifth Street Finance Corporation (FSC) declared a decrease from $0.06 to $0.02 in March, but thereafter paying the $0. 02 Quarterly. Simultaneously, sister firm, Fifth Street Floating Rate Corp. (FSFR) declared a cut from $0.075 per month down to $0.04 for March, and thereafter paying $0.19 quarterly beginning in June. Top yield dog for October 2016, Orchid Island Capital (ORC) released this cautionary note with its monthly dividend announcements, "The Company has not established a minimum distribution payment level and is not assured of its ability to make distributions to stockholders in the future." The MoPay segment is volatile.
[A] problem with this analysis is you are comparing companies of VERY different varieties. REITs pay no taxes and their distributions are classified as ordinary income and thus not subject to the 15% or 20% tax rate. MLPs also pay little no taxes at the corporate level, but instead have "distributions"... Comparing REITs, MLPs and regular corporations thus requires a financial analysis...not include[d]." - arbtrdr
"[Y]ou list a few issues here whose distributions are rife with RETURN OF CAPTAL [ROC] at its most destructive form, funds that pay you back your own money each and every month in their distributions with no regard to what they truly earn...- these should not be included in any list containing the word "dividend". - NYer1
"I can enter or exit a position and still reap dividends for at least 2/3s of the quarter. They also smooth the income stream so I have cash at any given time to make a purchase at dips." - Ed Invests
"Dividend dog investing really works well for income in my experience. I have been seriously invested in dogs the more unloved the better." - Urbannek
"...Nice to see another contrarian strategy. This one seems to take a lot of attention in comparison [to Dow dogs], but I like the monthly rebalance." - colodude
"At this level of risk, I'm only buying monthly dividend payers. Dividend if cut only [sits] for a month and not a quarter." - Sinjjn Smythe
"...love those monthly payers." - Hardog
"Some of us are comfortable investing in Dog stocks because we feel the reward is worth the risk. As long as [my sin stock] continues to pay and raise the dividend like it has for 16 years now, it will have a spot in my portfolio." - Miz Magic DiviDogs
"One thing to point out: These stocks are not buy & hold. If you buy any of these stocks, set a price where you will sell... trailing stops work real good & with mopays you can get out & get back in without losing a whole quarter of dividends..." - drking
"I don't know how many times I've kicked myself for not investing in a beaten down group only to find it spring back up months later." --User 13258352
Dividend Dog Data
For this article, sixty-nine dividend equities from US exchanges, plus one hundred and forty three from Canada's exchanges, plus eighty funds, trusts and partnership shares were culled from nearly 900 entities (listed here) paying monthly returns. All were ranked as of February 28, 2017, using two key dog performance metrics: (1) stock price and (2) annual dividend. Dividing the annual dividend by the price declared the percentage yield by which each dividend dog stock was ranked.
List One [A]: US Monthly Pay Dividend Equities by Yiel
Top ten of these US exchange traded monthly pay dividend equities showing the best yields into March represented just two of the eleven Morningstar market sectors, with representative firms split equally between real estate and financial services pups.
Top dog for March was one of the five real estate representatives, Orchid Island Capital , a stalwart in the MoPay kennel. The remaining four real estate sector stocks filled slots, two, four, five, and eight: Wheeler Real Estate IT (WHLR); Five Oaks Investment Corp. ; AGNC Investment (AGNC); and ARMOUR Residential REIT (ARR).
Finally, five financial sector dogs placed second, third, sixth, seventh, ninth, and tenth: Capitala Finance (CPTA) ; Prospect Capital Corporation (PSEC) ; Horizon Tech Finance (HRZN) ; Stellus Capital Investment (SCM) ; and Harvest Capital Credit (HCAP) , to complete the March MoPay top ten dog list by yield.
List One [B]: Canada Monthly Pay Dividend Equities by Yield
Top ten of these Canadian exchange traded monthly pay dividend equities showing the best yields into March represented the same two of the eleven Morningstar market sectors, real estate, and financial services. Top Canadian dog for March was one of eight financial service dogs, Financial 15 Split (OTC:FNNCF) [FTN.TO] .
The remaining seven YChart-listed financial sector dogs placed second, through seventh, and ninth: Brompton Oil Split [OSP.TO] ; Energy Leaders Plus Inc [HPF-UN.TO] ; Energy Leaders Income [HEN-UN.TO] ; Marquest Canadian Equity [MIF-UN.TO] ; Dividend 15 Split Corp (OTC:DVSPF) [DFN.TO]; Trez Capital Senior [TZS.TO]; Dividend Select 15 [DS.TO] .
Real Estate sector stocks filled the two remaining Canadian slots, eighth, and tenth: PRO REIT (PRV-UN.V)) , and Cominar REIT [CUF-UN.TO] , to complete the March MoPay top ten Canada MoPay top dog list by yield.
List Two: Monthly Pay Dividend Stocks by Price Upside
Results from YCharts for monthly paying (MoPay) dividend stocks as of market closing price February 28 were compared with analyst mean target prices one year out as reported by YahooFinance. Ten top stocks displayed 6.6% to 40.5% price upsides for the next year based on analyst 1-year targets.
Four stocks of ten (tinted) on this price upside list were members of the top ten list by yield. One of those top upside performers by yield made this upside list in the first place: Wheeler Real Estate IT . The other top yielders showed top to mid-list gains, Five Oaks Investment , Orchid Island Capital  and Capitala Finance .
Firms outside the top ten by yield placed third, fifth and seventh through, tenth by price upsides: Bluerock Residential (BRG) ; Student Transportation (STB) ; Whitestone (WSR) ; Gladstone Commercial (GOOD) ; PennantPark Floating Rate (PFLT) ; and Independence Realty Trust (IRT) .
Price upside, of course, was defined as the difference between the current price and analyst target one-year median price for each stock.
Those ten MoPay stocks showing the highest upside price potential into 2018 were gleaned from 30 selected by yield. Three to nine analysts have historically provided the most accurate mean target price estimates.
List Three: Monthly Pay Dividend Closed-End Investment Companies, Exchange Traded Funds, and Notes, by Yield
Eighty top monthly dividend paying (MoPay) Closed-end funds, exchange traded funds and notes listed below were culled from nearly 1200 candidates. Yields greater than 6.9% calculated as of February 28 determined the top ten.
Ten monthly paying dividend investment companies, funds, and notes showing the biggest yields for March by YChart & YahooFinance data featured five exchange traded notes [ETNs], and five closed-end investment companies [CEICs].
The three other ETNs placed seventh, through ninth: UBS ETRACS M Py 2xLvg WF MLP Ex-Engy ETN (LMLP) , UBS ETRACS M Py 2xLvg US Sm Cp HiDiv ETN (SMHD) , and UBS ETRACS M Py 2xLvg Divers Hi Inc ETN (DVHL) .
The five CEICs placed third, through sixth, and tenth: PIMCO Dynamic Income (PDI) ; PCM Fund (PCM) ; Western Asset Mortgage Defined Opp (DMO) ; Stone Harbor Emerging Mkts Income (EDF) ; PIMCO Dynamic Credit and Mortgage (PCI) . This rounded out the top ten closed-end investment companies, exchange traded funds and notes list for March 2017.
Background and Actionable Conclusions
Since June 2012 reader suggestions to include funds, trusts, and partnerships, a list of MoPay equities to buy and hold in September 2012 resulted from those reader suggestions supplemented with a high yield collection from here. That list was supplemented by an upside potential article in October and a upside vs. buy & hold in November. Another list factored December 2012 reader comments.
In January, February, and again this month, the 2017 articles continue to compare and contrast MoPay equity upside potential to high yield (and higher risk) buy and hold closed-end investment companies, as well as exchange traded funds and notes constituents.
MoPay Equity Dividend Vs. Price Compared To Dow
Ten top MoPay dividend dog stocks by yield were graphed below as of 2/28/17 and compared to those of the Dow. Annual dividend history from $1000 invested in each of the ten highest yielding stocks and their aggregate single share price created the data points shown in green for price and blue for dividends.
Actionable Conclusions: (1) MoPay Equities And (2) Dow Dogs Charged Into March
Ten top MoPay dogs continued their drop in dividend and rise in price after February to continue their charge. Aggregate dividend from $10k invested as $1k in each of the top ten stocks fell 8%, while total single share price of those ten inclined 10% for the past month.
Meanwhile, Dow dogs reversed their retreat and charged up to a new level of overbought. The Dow 10 showed decreasing annual dividend from $10k invested as $1K in each of the top ten, down 2.7% after February, while aggregate single share price jumped up 3.4%.
As a result, the Dow dogs overbought condition (where aggregate single share price of the ten exceeded projected annual dividend from $10k invested as $1k in each) grew greater.
The Overbought Dow
Since March 2016, when the overbought gap between low dividend from $1k investments and high aggregate top ten price was $293 or 73%, the chasm grew to $499 or 137% by January 2017. The February gap retreated to $441 or 119%. March expanded to $479 or 133% just 4% away from equaling the January high.
The Dow Dogs remain overbought and overpriced. Meaning, these are low risk and low opportunity Dow dogs. The Dow top ten average price per dollar of annual dividend was $28.41 February 28. Top ten Dow dog aggregate single share price exceeded annual dividends from $1k invested in each by 70%.
In marked contrast to the Dow, MoPay Stock dividend dog top ten average price per dollar of annual dividend was $9.05 as of 2/28/17. That's over 3 times less than the price of a dollar of Dow annual dividends. Top ten MoPay dog aggregate single share price was just 10% of the annual dividends derived from $1k invested in each.
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" metric, analyst mean price target estimates provided another tool to dig out bargains.
Actionable Conclusion (3): Wall St. Analysts Estimated A 4.5% 1-year Average Upside and 12.8% Net Gain For Top 30 March MoPay Stocks
Top dogs on the MoPay stock list were graphed above to compare relative strengths by dividend and price as of February 28, 2017, with those projected by analyst mean price target estimates to the same date in 2018.
Historic prices and actual dividends paid from $10,000 invested as $1K in each of the ten highest yielding stocks and the aggregate single share prices of those ten stocks created the data points applied to 2017. Projections based on estimated increases in dividend amounts from $1000 invested in the ten highest yielding stocks and aggregate one-year analyst mean target prices as reported by Yahoo Finance created the 2018 data points in blue for dividend and green for price. Note: one-year target prices from one analyst were not applied (n/a).
Analysts projected a 3.75% lower dividend from $10K invested as $1k in the top ten March MoPay dogs, while aggregate single share price was projected to increase by 2.6% 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 above chart. Three to nine analysts were considered optimal for a valid projection estimate. Estimates provided by one analyst were usually not applied (n/a).
A beta (risk) ranking for each stock was provided in the far right column. 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.
Actionable Conclusion (4): Analysts Cast Top Ten MoPay Dog Stocks to Net 12.4% to 50.6% Gains To March 2018
Four of the ten top dividend MoPay dogs (shaded in the chart above) were verified as being among the Top ten gainers for the coming year based on analyst 1-year target prices. Thus the dog strategy for this MoPay group as graded by analyst estimates for March proved 60% accurate.
Ten probable profit generating trades were illustrated by YCharts analytics for 2018:
Wheeler Real Estate IT netted $505.84 based on estimates from four analysts, plus dividends less broker fees. The beta number showed this estimate subject to volatility 20% more than the market as a whole.
Five Oaks Investment netted $435.94 based on dividends plus median target price estimate from one analyst less broker fees. The beta number showed this estimate subject to volatility 32% more than the market as a whole.
Bluerock Residential netted $298.91 based on a mean target price estimate from eight analysts combined with projected annual dividend less broker fees. A beta number was not available for BRG.
Orchid Island Capital netted $296.70 based a target estimate from one analyst, plus dividends less broker fees. The beta number showed this estimate subject to volatility 35% less than the market as a whole.
Student Transportation netted $271.15 based on estimates from six analysts plus dividends less broker fees. The beta number showed this estimate subject to volatility 23% less than the market as a whole.
Capitala Finance netted $200.34 based on mean target price estimates from eleven analysts plus dividends less broker fees. The beta number showed this estimate subject to volatility 3% more than the market as a whole.
Whitestone netted $183.39 based on dividends plus the median of annual price estimates from eight analysts less broker fees. The Beta number showed this estimate subject to volatility 6% less than the market as a whole.
Gladstone Commercial netted $181.35 based on target price estimates from two analysts, plus dividends less broker fees. The beta number showed this estimate subject to volatility 6% less than the market as a whole.
PennantPark Floating Rate netted $146.79, based on dividend, plus a median target price estimate from five analysts less broker fees. The beta number showed this estimate subject to volatility 42% less than the market as a whole.
Independence Realty Trust netted $124.72, based on dividend plus mean target price estimates from nine analysts less broker fees. The beta number showed this estimate subject to volatility 14% more than the market as a whole.
Average net gain in dividend and price was 26.45% on $1k invested in each of these ten MoPay dog stocks. This gain estimate was subject to average volatility 6% less than the market as a whole.
Actionable Conclusion (5): (Bear Alert) Analysts Expected One MoPay Dog To Lose 14.25% By March 2018
Two probable losing trades revealed by Thomson/First Call in Yahoo Finance by 2018 were:
Gladstone Capital (GLAD) projected a loss of $60.17 based on dividend and a median target price estimate from three analysts including $20 of broker fees. The beta number showed this estimate subject to volatility 17% more than the market as a whole.
Prospect Capital projected a loss of $63.76 based on dividend and a median target price estimate from eight analysts including $20 of broker fees. The beta number showed this estimate subject to volatility 56% less than the market as a whole.
Average net loss in dividend and price was 6.2% on $1k invested in both of these MoPay dog stocks. This loss estimate was subject to average volatility 19% less than the market as a whole.
Top Ten Dividend & Price Results For MoPay Closed-End Investments, Exchange Traded Funds, And Notes By Yield Vs. Equities
Below relative strengths for the top ten MoPay "Fund" Dogs by yield was graphed as of February 28, 2016 and compared to those of the ten top equities. Twelve periods of projected annual dividend history from $10,000 invested as $1k in each of the ten highest yielding equities and the total single share prices of those ten equities created the data points for each period (shown in blue for dividend and green for price).
Actionable Conclusion (6): MoPay Top Ten DiviDog Closed-End Investments, Exchange Traded Funds, And Notes Mixd Up Into March
The chart above shows MoPay closed-end Investments, and exchange traded funds and notes increased in both dividend and price to redirect a bullish charge in place since December. After February, this dithering move put projected dividend from $10k invested as $1k in each of the top ten funds and trusts up 1.6%, while aggregate single share price of the top ten over the same period rose 1%.
As of February 28, the top closed-end investments, exchange traded funds, and notes dogs showed $292 or 25% more dividend at a $74 or 61% higher aggregate single share price than the MoPay equity top ten.
In further contrast to the Dow, ten top MoPay closed-end investments, exchange traded funds, and notes average price per dollar of annual dividend was the lowest of the three at $7.05 as of February 28. That's over 4 times less than a Dow dollar of dividend. Nevertheless, the top ten MoPay fund dividends are priced 2% higher than those of the top ten equities. The pie chart shows fund aggregate single share price is 12% of the dividends derived from $10k invested as $1k in each of those ten shares.
Actionable Conclusion (7): Buy-and-Hold Monthly Dividend Paying Closed-End Investments, Exchange Traded Funds, and Notes, If You Dare (And If The Deviation From NAV Is OK)
Stock analysts don't hazard guesses as to when or how much closed-end investments, exchange traded funds, and notes prices will rise or fall. They are paid to gauge individual stocks, and a few funds and partnerships. Hence this monthly pay dog diligence only revealed a list of funds and notes to buy and hold based on yield, if you choose to go there. As a consolation, the lists of 80 such investments above show deviations up or down from net asset value for these MoPay closed-end investments, exchange traded funds, and notes.
Dog Metrics Revealed Best Returns To Come From Five Lowest Priced High Yield MoPay Equities
Ten monthly pay stock equities were culled by yield. These results, verified by YCharts and YahooFinance, produced the following rankings.
Actionable Conclusions: (8) Analysts Estimated 5 Lowest Priced of Top Ten Highest Yield MoPay Dividend Stocks Will Produce 25.55% Vs. (9) 16.4% Net Gains From All Ten By March 2018
$5000 invested as $1k in each of the five Lowest priced stocks of the top ten MoPay dividend dog kennel by yield were predicted by analyst 1-year targets to deliver 55.77% more net gain than $5,000 invested as $.5k in all ten. The very lowest priced MoPay dividend dog, Wheeler Real Estate Investment Trust was predicted to deliver the best net gain of 50.58%.
Lowest priced five MoPay dividend dogs estimated as of February 28 were: Wheeler Real Estate Investment Trust; Five Oaks Investment; Prospect Capital; Orchid Island Capital Inc; and Horizon Technology Finance, with prices ranging from $1.78 to $11.40.
Higher priced five MoPay dividend dogs estimated December 30 were: Capitala Finance; Stellus Capital Investment; Harvest Capital Credit; AGNC Investment; and ARMOUR Residential REIT, whose prices ranged from $13.57 to $22.49.
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, can also be used to find some rewarding dogs in the MoPay Stock kennel.
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% 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 above the one-year result of ten analyst target estimates for MoPay stocks from this article in March 7, 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; and no tint means no difference.
The "basic method" top ten annual analyst accuracy score for early March 2016 was six price losses, with two from firms no longer in business against four gains over a one-year period. The one-year buy-and-hold strategy proved just 40% positive for this MoPay collection of ten. For reference, one low price MoPay Dog was a gainer. Three higher priced dogs also gained. However, the Mo Pay dog record for annual sustainable gains is not bolstered by this report.
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.
Stocks listed above were suggested only as decent starting points for your MoPay dividend stock purchase or sale research process. These were not recommendations.
Three of these MoPay dividend pups qualify as valuable catches! Find them among the now 52 Dogs of the Week (DOTW)I or among 28 and growing DOTWII 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 winners, and the dog of the year and runners-up from the 52 Dogs of the Week (DOTW) I portfolio, plus a glimpse at the top dogs in DOTW II, send your e-mail address, ticker symbol for your favorite dividend stock, and name of your favorite team of any sport or activity to: email@example.com, or click "send message" below my name under the headline above this article. 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 www.ycharts.com; www.dividend.com; finance.yahoo.com; analyst mean target price by Thomson/First Call in Yahoo Finance. Dog Photos: coed.com; barfworld.com
Disclosure: I am/we are long arr, fsc, CSCO, GE, PFE, VZ,.
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. 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.