Actionable Conclusion (1-10): Analysts Alleged Top Ten Real Estate "Safer" Dog Stocks to Net 11% to 38.5% Gains To August, 2018
Four of the ten top Real Estate dogs by yield (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 Real Estate group as graded 40% accurate.
Ten probable profit generating trades were illustrated by YCharts analytics for 2018:
CoreCivic (CXW) netted $384.72 based on estimates from four analysts, plus dividends, less broker fees. The Beta number showed this estimate subject to volatility 8% less than the market as a whole.
Orchid Island Capital (ORC) netted $304.97 based on mean target price estimates from two analysts plus dividends less broker fees. The Beta number showed this estimate subject to volatility 49% less than the market as a whole.
RLJ Lodging (RLJ) netted $205.19 based on estimates from nine analysts plus dividends less broker fees. The Beta number showed this estimate subject to volatility 16% more than the market as a whole.
EPR Properties (EPR) netted $201.85 based on dividends plus a median target price estimate from ten analysts less broker fees. The Beta number showed this estimate subject to volatility 43% less than the market as a whole.
Capstead Mortgage (CMO) netted $181.24, based on dividend plus mean target price estimates from two analysts less broker fees. The Beta number showed this estimate subject to volatility 64% less than the market as a whole.
Apple Hospitality REIT (APLE) netted $156.81 based on estimates from four analysts plus dividends less broker fees. A Beta number was not available for APLE.
Dynex Capital (DX) netted $119.24 based on a median target price estimate from four analysts, plus projected annual dividend less broker fees. The Beta number showed this estimate subject to volatility 15% less than the market as a whole.
Cherry Hill Mortgage Investment (CHMI) netted $115.80 based on estimates from three analysts, plus dividends less broker fees. The Beta number showed this estimate subject to volatility 62% less than the market as a whole.
Invesco Mortgage Capital (IVR) netted $114.75 based on dividends plus a mean of the target estimates from four analysts, less broker fees. The Beta number showed this estimate subject to volatility 18% less than the market as a whole.
Ellington Residential (EARN) netted $110.06 based on estimates from three analysts, plus dividends, less broker fees. The Beta number showed this estimate subject to volatility 35% less than the market as a whole.
Average net gain in dividend and price was 18.95% on $10k invested as $1k in each of these ten Real Estate "safer" dividend stocks. This gain estimate was subject to volatility 31% less 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. Thus, the highest yielding stocks in any collection became known as "dogs." More specifically, these are, in fact, best called, "underdogs".
Five of Nine Industries Show "Safer" August Dividends In The Real Estate Sector
Nine industries compose the Real Estate sector, and five of those were represented by the 29 firms whose stock reports showed positive annual returns and margins of cash to cover dividends by this screen as of August 10.
The industry representation broke out as follows: REIT - Diversified (13); REIT - Residential (6); REIT - Hotel & Motel (7); REIT - Retail (2); REIT - Industrial (1); REIT - Healthcare Facilities (0); REIT - Office (0); Real Estate Services (0); Real Estate - General (0).
The first two industries listed above populated the top ten Real Estate 'safer' dividend dog team by yield.
29 of 95 Real Estate Firms With "Safer" August Dividends
Periodic Safety Inspection
A previous article discussed the attributes of the 50 Top yield Real Estate stocks derived from this master list of 95.
You see grouped below the tinted list of 29 that passed the Real Estate dog "safer" check with positive past-year returns and cash flow yield sufficient to cover their annual dividend yield. The margin of cash excess is shown in the bold face "Safety Margin"column.
Financial guarantees, however, are easily over-ruled by boards of directors or company policies cancelling or varying the payout of dividends to shareholders. This article contends that adequate cash flow is a strong justification for a company to sustain annual dividend increases to shareholders.
Three additional columns of financial data, listed after the Safety Margin figures above, 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. Total annual returns by positive results narrowed the list by four for this article. Positive results in all five columns after the dividend ratio is unique as a solid financial signal.
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 Conclusions: Wall St. Wizards Predicted (11) A 4.13% 1 yr. Average Upside, and (12) A 12.53% Net Gain For Top 30 August "Safer" Real Estate Stocks
Top dogs on the Real Estate stock list were graphed above to compare relative strengths by dividend and price as of August 10, 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 2.4% lower dividend from $10K invested as $1k in the top ten June Real Estate dogs while aggregate single share price was projected to increase by 5.7% 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.
Dog Metrics Found Better Gains From Five Lowest Priced Of The Top Ten Yielding "Safe" Dividend Real Estate Sector Stocks
Ten "Safe" Real Estate firms with the biggest yields August 10 per YCharts data ranked themselves by yield as follows:
Actionable Conclusions: Analysts Predicted (13) 5 Lowest Priced, of Ten "Safer" Dividend High Yield Real Estate Sector Dogs, Will Deliver 9.68% VS. (14) 8.49% Net Gains from All Ten by August, 2018
$5000 invested as $1k in each of the five lowest priced stocks in the "safe" ten Real Estate Sector pack by yield were determined by analyst 1 year targets to deliver 14% more gain than $5,000 invested as $.5k in all ten. The fourth lowest priced "safer" dividend Real Estate dog, Orchid Island Capital (ORC) showed the best analyst augured net gain of 30.5% per their targets.
Lowest priced five "safer" Real Estate dogs as of August 10 were: Anworth Mortgage Asset (ANH); Dynex Capital (DX); CYS Investments (CYS); Orchid Island Capital (ORC); Annaly Capital Management (NLY), with prices ranging from $6.02 to $12.27.
Higher priced five "Safer" Dividend Real Estate dogs as of August 10 were: Ellington Residential (EARN); Cherry Hill Mortgage Investment (CHMI); Chimera Investment (CIM); AG Mortgage Investment (MITT); AGNC Investment (AGNC), with prices ranging from $14.07 to $21.25. The low price small Real Estate dogs came on strong here.
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 net gain estimates mentioned 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, this glossary instablog to interpret my abbreviated headings, and this instablog to aid your safe investing. --Fredrik Arnold
Stocks listed above were suggested only as possible starting points for your "Safer" Real Estate dog dividend stock research process. These were not recommendations.
One or more of these Real Estate sector dividend pups qualified as a valuable catches! They are helping make investing fun again! Find them among the 52 Dogs of the Week (DOTW)I and others among 52 DOTWII found on The Dividend Dog Catcher premium site. Click here to subscribe or get more information.
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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.finance.yahoo.com; analyst mean target price by Thomson/First Call in Yahoo Finance. Home Dog photo from: dnainfo.com
