'Safer' Dividend Follower Favorites Led By RAIT Financial & Seadrill For July Gain Estimates

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Includes: ADRNY, AI, BAK, BGSF, CIM, CYS, HCAP, M, ORC, PMD, RAS, SDLP
by: Fredrik Arnold

Summary

Reader comments and suggestions between June 15 and July 14 focused on 36 unique underdog tickers. I read every comment.

20 of those 36 equities were deemed "safer" dividend dogs by showing positive annual-returns, and free cash-flow yields greater than dividend yields 7/14/17.

Ten "safer" analyst-target-augured top-net-gain follower favorites ("Safer" Dividend FoFaves), BGSF, M, AI, PMD, ORC, FRU.TO, CBL.TO, ADRNY, SDLP, were led by RAS to average 34.59% net.

Dividend yields ranged 6.75%-17.31% from the ten named above. Their free cash flow yields ranged 7.05%-272.27%.

Payout-ratios (lower is better), total annual returns, and dividend growth, further quantified the 36 'safer' financial status. Three of the 36 FFave stocks was disqualified by negative 1-year returns and three more reported as funds disclosing no such data.

Follower Selection Process

From now on, when readers send me a message or comment on any of my new posts, any dividend stock mentioned may be included in a future follower favorite feature like this one.

Here are the tangible results for the follower favorites as of July, 2017...

Actionable Conclusions (1-10): Analysts Predicted 18.43% To 71.56% Net Gains For Top Ten "Safer" Dividend FFave Dogs By July 2018

Six of ten top dividend-yielding "Safer" Follower Favorite dogs were verified as the top ten gainers for the coming year based on analyst 1-year target prices. (They were tinted in the chart above). So, this yield-based forecast for the "Safer" FFave dogs graded by Wall St. wizards was 60% accurate.

Ten probable profit-generating trades were revealed in YCharts for July 2018:

RAIT Financial Trust (RAS) was projected to net $715.58, based on dividends, plus mean target price estimates from two analysts, less broker fees. The Beta number showed this estimate subject to volatility 25% more than the market as a whole.

Seadrill Partners (SDLP) netted $610.09 based on target price estimates from two analysts, plus dividends, less broker fees. The Beta number showed this estimate subject to volatility 189% more than the market as a whole.

Koninklijke Ahold (OTCQX:ADRNY] was projected to net $467.70, based on dividends, and median target price from one analysts, less broker fees. The Beta number showed this estimate subject to volatility 70% more than the market as a whole.

Callidus Capital (CBL.TO) was projected to net $280.48, based on dividends plus a median target estimate from three brokers, less broker fees. The Beta number showed this estimate subject to volatility 222% more than the market as a whole.

Freehold Royalties (FRU.TO) was projected to net $274.21, based on a median target price estimate from thirteen analysts plus the projected annual dividend, less broker fees. The Beta number showed this estimate subject to volatility 25% less than the market as a whole.

Orchid Island Capital, Inc. (ORC) was projected to net $261.85, based on dividends plus a median target estimate from two brokers, less broker fees. The Beta number showed this estimate subject to volatility 67% less than the market as a whole.

Psychemedics (PMD) was projected to net $239.17, based on one analyst, plus annual dividend, less broker fees. The Beta number showed this estimate subject to volatility 2% less than the market as a whole.

Arlington Asset Investment (AI) was projected to net $224.60, based on dividends, plus a mean target price estimate from five analysts, less broker fees. The Beta number showed this estimate subject to volatility 11% more than the market as a whole.

Macy's (M) was projected to net $201.38, based on a median target price estimate from eighteen analysts plus the projected annual dividend, less broker fees. The Beta number showed this estimate subject to volatility 33% less than the market as a whole.

BG Staffing (BGSF) was projected to net $184.28, based on a target price estimate from two analysts plus dividends, less broker fees. The Beta number showed this estimate subject to volatility 75% less than the market as a whole

The average net gain in dividend and price was estimated at 34.6% on $10k invested as $1k in each of these ten dogs. This gain estimate was subject to average volatility 18% more than the market as a whole.

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 Are Represented By "Safer" July Dividend Follower Favorites?

Of eleven sectors, ten were represented by the 20 stocks with past year positive returns and current cash margins greater than their announced annual dividends. These included: real estate; financial services; energy; basic materials; consumer cyclical; consumer defensive; industrials; communication services; healthcare; technology. Not represented were utilities.

The count of twenty 'safer' dividend follower favorite dogs by sector showed: real estate (4); financial services (4); energy (2); basic materials (1); consumer cyclical (1); consumer defensive (1); industrials (3); communication services (1); healthcare (1); technology (2); utilities (0).

Periodic Safety Check

A previous article discussed the attributes of the 36 follower favorites from which these twenty were sorted. You see above the tinted green list that passed the dividend "stress" test. These 20 follower favorite dogs report positive annual returns and sufficient cash flow yield to cover their anticipated dividend yield, the margin of cash flow excess being shown in the bold face "Safety Margin" column. Three of the 36 was disqualified due to negative returns in the past year and another three were funds, with different reporting methods.

Financial guarantees however are easily over-ruled by any board of directors directing company policy cancelling or varying the payout of dividends to shareholders. For example, Orchid Island Capital, Inc. (ORC) on the list below cut its monthly dividend from $18 to $.14 in June, 2015.

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. The one year total returns column was used here to eliminate three stocks exhibiting tumbling prices.

Actionable Conclusions: Wall St. Wizards Estimated (11) A 15.74% Median Target Price Upside and (12) 19.74% Net Gain From 20 "Safer" FFaves Upside Dogs Come June 2018

"Safer" FFave top ten stocks were graphed below to show relative strengths by dividend and price as of July 14, 2017, and those projected by analyst mean price target estimates to the same date in 2018.

A hypothetical $1,000 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 gauged the stock price upsides and net gains including dividends, less broker fees, as of 2018.

Historic prices and actual dividends paid from $10,000 invested as $1k in each of the top ten stocks and the aggregate single share prices of those ten stocks created data points for 2017. Projections based on estimated dividend amounts from $1,000 invested in the ten stocks and aggregate 1-year analyst target share prices from Yahoo Finance created the 2018 data points green for price and blue for dividend.

YChart analysts' median 1-year targets projected a 13.9% lower dividend from $10k invested as $1k in ten dogs in this group while aggregate single share price for 9.4% in the coming year. Notice, price $200 below dividend forecasts no overbought condition for these 10 "Safer' Dividend Follower Favorite top yield dogs. This is unlike the Dow and S&P500 aristocrats top ten in their over-bought/over-priced condition.

The number of analysts contributing to the target price estimate for each stock was noted in the next to the last column on the charts. Three to nine analysts was optimal for a valid projection estimate. Estimates provided by one analyst were generally 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 stock's movement opposite of market direction.

Dog Metrics Uncovered Lower Price Bargains In 5 Follower Favorite "Safe" Dividend Stocks To July, 2018

Ten "Safe" dividend top follower favorite firms showing the biggest yields July 14 per YCharts data ranked themselves by yield as follows:

Ten top "Safer" FFave dividend paying stocks were culled by Yield (dividend / price) results verified by Yahoo Finance.

Actionable Conclusions: Analysts Concluded 5 Lowest Priced of Top Ten High Yield FFave "Safer"Dogs Would Deliver (14) 37.12% VS. (15) 26.39% Net Gains for All Ten by July 14, 2018

$5000 invested as $1k in each of the five Lowest priced stocks in the top ten "follower favorite" July kennel by yield were predicted by analyst 1 year targets to deliver 40.67% more net gain than $5,000 invested as $.5k in each of all ten.

The very lowest priced "follower favorite" dog, RAIT Financial Trust (RAS), was projected to deliver the best net gain of 71.56%.

Ten FFave "Safer" Dividend Dogs Saw 40.67% more Gain From 5 Highest Yield, Lowest Priced

Lowest priced five "follower favorite" safe dogs as of July 14 were: RAIT Financial Trust (RAS); Seadrill Partners (SDLP); CYS Investments (CYS); Orchid Island Capital (ORC); Arlington Asset Investements (AI), with prices ranging from $2.08 to $13.90.

Higher priced five follower favorite "safer" dividend dogs for July 14 were: Harvest Capital Credit (HCAP); Callidus Capital (CBL.TO), Chimera Investment (CIM); Macy's (M); Braskem (BAK); whose prices ranged from $13.99 to $22.68.

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 "safer" dividend dog stock purchase/sale research process in mid-July, 2017. These were not recommendations.

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

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.

Two of the 10 "safer" follower favorite sector dividend pups qualify as valuable catches! They are helping make investing fun again! Find two among the 52 Dogs of the Week (DOTW)I and also check out the 48 DOTWII for the other also found on The Dividend Dog Catcher premium site. Click here to subscribe or get more information.

Make investing fun

Suggest a favorite stock for my next follower favorite article. Message me with your favorite stock ticker. I will include it in that article. Just send the ticker symbol for your favorite dividend stock (or two) by clicking on the envelope icon next to my name below the headline of this article, or simply add a comment in the comments sector below. Submit your top ticker, and remember: Root for the Underdog.

Stocks listed above were suggested only as possible reference points for your FFave dog 'safer' 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; www.indexarb.com; finance.yahoo.com; analyst mean target price by Thomson/First Call in Yahoo Finance. Dog photo from: incrediblethings.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.

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