Seeking Alpha

Russell 2000 Small Cap Leaders: Entravision By Net Gains, And Arlington By Yield In September

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Includes: AI, BRG, CBL, CYS, DIN, EVC, FSAM, MDLY, MITT, NCMI, NEWM, NYMT, SNR, WMC, WPG
by: Fredrik Arnold
Summary

"All Russell US Indexes are subsets of the Russell 3000 Index, includ[ing] the. small cap Russell 2000 Index. Russell US Indexes are. building blocks of financial products [and] performance benchmarks."

Top ten broker target-estimated net gains ranged 15%-68%, topped by EVC 9/28/17. The master list was pre-screened for yields over 5% and net returns greater than -25%.

50 Top Russell 2000 index stocks ranged in estimated annual-yield from 7.05% to 17.27%. Top ten, WMC, CYS, WPG, MITT, CBL, NCMI, FSAM, MDLY , NYMT, and AI averaged 12.69%.

Top ten Russell 2000 firms by broker target price upsides, SNR, AI, CBL, DIN, NEWM, BRG, MDLY, NCMI, FSAM, and EVC averaged 22.98% estimated price gains.

$5k invested in the lowest-priced five September top-yield Russell 2000 dividend dog stocks showed 49.72% more net-gain than the same amount invested in all ten.  Low price small Dogs bossed September's Russell 2000 top ten.

Actionable Conclusions (1-10): Analysts Predicted 15% To 68.3% Net Gains For Top Ten Russell 2000 Dogs By September 2018

Five of ten top Russell 2000 dividend dogs by yield were verified as being among the top ten gainers for the coming year based on analyst 1-year target prices. (They are tinted gray in the chart above). So, this yield-based forecast for Russell 2000 small cap dogs as graded by Wall St. wizards proved 50% accurate.

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

Entravision Communications (EVC) was projected to net $683.23, based on dividends, plus median target price estimates from two analysts, less broker fees. The Beta number showed this estimate subject to volatility 56% more than the market as a whole.

Fifth Street Asset Management (OTCPK:FSAM) was projected to net $555.00, based on target price estimates from two analysts, plus annual dividend, less broker fees. A Beta number was not available for FSAM.

Medley Management (MDLY) was projected to net $399.35, based on a median target estimates from five analysts, plus dividends, less broker fees. A Beta number was not available for MDLY.

National CineMedia (NCMI) was projected to net $395.60, based on a median target price estimate from eight analysts, plus dividends, less broker fees. The Beta number showed this estimate subject to volatility 33% less than the market as a whole.

Bluerock Residential (BRG) was projected to net $278.61, based on dividends, plus a mean target price estimate from six analysts, less broker fees. The Beta number showed this estimate subject to volatility 31% less than the market as a whole.

Arlington Asset Investment (AI) was projected to net $228.04 based on dividends, plus a median target estimate from seven brokers, less broker fees. The Beta number showed this estimate subject to volatility 13% more than the market as a whole.

New Media Investment Group (NEWM) was projected to net $201.32, based on a median target price estimate from three analysts, plus the estimated annual dividend, less broker fees. The Beta number showed this estimate subject to volatility 28% more than the market as a whole.

DineEquity (DIN) netted $194.70 based on a median target price estimate from five analysts, plus dividends, less broker fees. The Beta number showed this estimate subject to volatility 60% less than the market as a whole.

CBL & Associates (CBL) was projected to net $194.12, based on dividends, plus a mean target price estimate from sixteen analysts, less broker fees. The Beta number showed this estimate subject to volatility 16% more than the market as a whole.

New Senior Investment Group (SNR) was projected to net $149.93, based on dividends, plus a mean target price estimate from three analysts, less broker fees. A Beta number was not available for SNR.

The average net gain in dividend and price was estimated at 32.8% on $10k invested as $1k in each of these ten dogs. This gain estimate was subject to average volatility 2% less than the market as a whole.

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 precisely, these are, in fact, best called, "underdogs".

50 Top Russell 2000 Small Cap Dividend Dogs By Yield

Actionable Conclusions (11-20): Top Russell 2000 Dividend Stocks By Yield

Top ten Russell 2000 small cap stocks selected 9/28/17 by yield represented three of eleven Morningstar sectors. Top yielding stock, Arlington Asset Investment (AI) [1] was one of three financial services sector representatives in the top ten.

The other financial services representatives placed third, and fourth, Medley Management (MDLY) [3], Fifth Street Asset Management (OTCPK:FSAM) [4].

Six real estate firms placed second, and sixth, through tenth: New York Mortgage Trust (NYMT) [2], CBL & Associates (CBL) [6], AG Mortgage Investment (MITT) [7], Washington Prime Group (WPG) [8], CYS Investments (CYS) [9], and Western Asset Mortgage (WMC) [10].

Finally, one consumer cyclical sector firm placed fifth, National CineMedia (NCMI) [5], to complete the Russell 2000 top ten for September.

Actionable Conclusions: (21-30) Top Ten Russell 2000 Dogs Showed 5.66% To 60.00% Upsides To September, 2018; (31) Worst Downside From One of Twelve Was -6.83%.

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" metrics, analyst mean price target estimates provided another tool to dig out bargains.

Actionable Conclusions: Wall St. Brokers Estimated (32) A 6.79% Median Target Price Upside and (33) 16.97% Net Gain From 30 Russell 2000 Dogs Come August 2018

Top thirty stocks were graphed below to show relative strengths by dividend and price as of September 28, 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 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 5.1% lower dividend from $10k invested as $1k in ten dogs in this group while aggregate single share price for those ten was projected to increase by 4.4% in the coming year. Notice, price moving to about $900 away from dividend in the coming year is nowhere near a transition to any Dow-like oversold condition for Russell 2000 top yield dogs in 2018.

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 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.

Analysts Forecast A 49.72% Advantage For 5 Highest Yield, Lowest Priced Russell 2000 Dividend Stocks To September, 2018

Ten top Russell 2000 small cap dividend dogs were culled by yield for their monthly update. Yield (dividend / price) results verified by YCharts did the ranking. The master list was prescreened to only include firms with over 5% dividends and with net returns greater than -25%.

As noted above, top ten Russell 2000® dividend dogs selected 9/28/17 showing the highest dividend yields represented just three of eleven in the Morningstar sector scheme.

Actionable Conclusions: Analysts Projected (34) 5 Lowest-Priced of the Top Ten Highest-Yield Russell 2000 Dogs Delivering 31.29% Vs. (35) 20.90% Net Gains by All Ten by September, 2018

$5000 invested as $1k in each of the five lowest-priced stocks in the top ten Dividend Russell 2000 kennel by yield were predicted by analyst targets to deliver 49.72% more gain than $5,000 invested as $.5k in all ten. The very lowest priced Russell 2000 top yield dog, Fifth Street Asset Management (OTCPK:FSAM), was projected to deliver the best net gain of 55.5%.

The five lowest-priced top yield Russell 2000 dividend dogs for September 28 were: Fifth Street Asset Mgmt (OTCPK:FSAM); New York Mortgage Trust (NYMT); Medley Management (MDLY); National CineMedia (NCMI); Washington Prime Group (WPG), with prices ranging from $4.00 to $8.49.

Five higher-priced Russell 2000 dividend dogs for August 21 were: CYS Investments (CYS); CBL & Associates (CBL); Western Asset Mortgage (WMC); Arlington Asset Investment (AI); AG Mortgage Investment (MITT), whose prices ranged from $8.64 to $19.31.

The distinction between five low-priced dividend dogs and the general field of ten reflected Michael B. O'Higgins' "basic method" for beating the Dow. The scale of projected gains based on analyst targets added 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. Caution is advised, since analysts are historically only 20% to 80% accurate on the direction of change and just 0% to 20% accurate on the degree of change.

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

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.

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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.indexarb.com; YCharts.com; finance.yahoo.com; analyst mean target price by Thomson/First Call in YahooFinance. Dog photo: reference.com

Disclosure: I am/we are long ADES, BGSF. 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 microcap stocks. Please be aware of the risks associated with these stocks.