- Top net gain "safer" dividend Real Estate stocks averaged 20.48% net 3/3/18. Five also claimed top yields.
- 27 of 90 Real Estate Sector stocks were tagged "safer" for dividends because they showed positive one-year returns and free cash flow yields greater than their dividend yields.
- Top 10 "safer" dividend March Real Estate annual-yields ranged from 11.16% to 15.6%. Their free cash-flow yields ranged from 12.28% to 67.63%.
- Total annual returns narrowed the Real Estate field from 90 to 88 by disqualifying two firms reporting negative numbers.
- Analyst one-year targets estimated ten highest-yield "safer" dividend Real Estate stocks made 21.72% more gains from $5K invested in the lowest priced five than from $5K invested in all ten.
Actionable Conclusion (1-10): Analysts Allege Top Ten Real Estate "Safer" Stocks Could Net 21% to 32% Gains To March 2019
Five of the ten top Real Estate dogs by yield (shaded in the chart above) were found among the top ten gainers for the coming year based on analyst 1 year target prices. Thus the yield strategy for this Real Estate group was graded 50% accurate by broker analysts.
Projections based on estimated dividend returns from $1000 invested in the thirty highest yielding stocks and their aggregate one year analyst median target prices, as reported by YCharts, created the 2018-19 data points. Note: one year target prices from one analyst were not applied (n/a). Ten probable profit-generating trades projected to March, 2019 were:
Cherry Hill Mortgage Investment (CHMI) netted $318.25 based on estimates from two analysts plus dividends less broker fees. The Beta number showed this estimate subject to volatility 68% less than the market as a whole.
IRSA Inversiones (IRS) netted $300.71 based on dividends plus a median target price estimate from three analysts less broker fees. The Beta number showed this estimate subject to volatility 80% more than the market as a whole.
CYS Investments (CYS) netted $288.41 based on estimates from five analysts, plus dividends less broker fees. The Beta number showed this estimate subject to volatility 57% less than the market as a whole.
Sutherland Asset Mgt (SLD) netted $278.19 based on a target price estimates from four analysts, plus dividends less broker fees. The Beta number 34% less than the market as a whole.
Dynex Capital (DX) netted $272.01, based on dividend plus mean target price estimates from four analysts less broker fees. The Beta number showed this estimate subject to volatility 29% less than the market as a whole.
MTGE Investment (MTGE) netted $226.38 based on estimates from five analysts, plus dividends, less broker fees. The Beta number showed this estimate subject to volatility 74% less than the market as a whole.
Two Harbors Investment (TWO) netted $221.10 based on dividends plus a median of the target estimates from eight analysts, less broker fees. The Beta number showed this estimate subject to volatility 62% less than the market as a whole.
ARMOUR Residential REIT (ARR) netted $219.32 based on estimates from four analysts plus dividends less broker fees. The Beta number showed this estimate subject to volatility 39% less than the market as a whole.
Simon Property Group (SPG) netted $216.50 based on a median target price estimate from twenty-two analysts, plus projected annual dividend less broker fees. The Beta number showed this estimate subject to volatility 43% less than the market as a whole.
Invesco Mortgage Capital (IVR) netted $213.44 based on estimates from four analysts, plus dividends, less broker fees. The Beta number showed this estimate subject to volatility 29% less than the market as a whole.
Average net gain in dividend and price was 25.53% on $10k invested as $1k in each of these ten Real Estate 'safer' dividend stocks. This gain estimate was subject to volatility 35% 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."
Six of Nine Industries Showed "Safer" Dividend Stocks In The Real Estate Sector
Nine industries compose the Real Estate sector, and six of those were represented by the 27 firms whose stock reports showed positive annual returns and margins of cash to cover dividends by this screen as of March 3.
The industry representation broke-out, thus: REIT - Diversified (15); REIT - Residential (6); REIT - Hotel & Motel (2); REIT - Industrial (1); REIT - Retail (2); Real Estate - General (2); REIT - Healthcare Facilities (0); REIT - Office (0); Real Estate Services (0).
The first two industries listed above populated the top ten Real Estate 'safer' dividend collection by yield.
27 of 90 Real Estate Firms Showed "Safer" March Dividends
Periodic Safety Inspection
A previous article discussed the attributes of the 50 Top yield Real Estate stocks derived from this master list of 90.
You see grouped below the tinted list of 27 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 expectations, 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 limited to positive results narrowed the list by two 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 became another tool to dig out bargains.
Star Metrics Found Nice Gains From Five Lowest Priced Of The Top Ten Yielding 'Safer' Dividend Real Estate Sector Stocks
Ten 'Safer' Dividend Real Estate firms with the biggest yields March 3 per YCharts data ranked themselves by yield as follows:
Actionable Conclusions: Analysts Predicted 5 Lowest Priced, of Ten "Safer" Dividend High Yield Real Estate Sector Dogs, Will (13) Deliver 25.51% VS. (14) 20.96% Net Gains from All Ten by March 2018
$5000 invested as $1k in each of the five lowest priced stocks in the "safe" ten Real Estate Sector collection by yield were determined by analyst 1 year targets to deliver 21.72% more gain than $5,000 invested as $.5k in all ten. The fifth lowest priced "safer" dividend Real Estate dog, Cherry Hill Mortgage Investment (CHMI) showed the best analyst augured net gain of 31.83% per their targets.
Lowest priced five "safer" Real Estate stocks as of March 3 were: Dynex Capital (DX); CYS Investments (CYS); Annaly Capital Management (NLY); Two Harbors Investment (TWO); Cherry Hill Mortgage Investment (CHMI), with prices ranging from $6.13 to $16.26.
Higher priced five "Safer" Dividend Real Estate stocks were: AG Mortgage Investment (MITT); PennyMac Mortgage Inv (PMT); Chimera Investment (CIM); MTGE Investment (MTGE); AGNC Investment (AGNC), with prices ranging from $16.74 to $18.17. The low priced little Real Estate dogs took over this month.
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.
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, Yahoo Finance; analyst mean target price by Thomson/First Call from Yahoo Finance. RE Dog photo taken from homedesignfordogs.com.
Two 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 now accumulating returns. Also, a Safari to Sweet Success (Dogs of the Week III) launched in early September. Click here to subscribe or get more information.
Make investing gains again. Catch your underdog on Facebook!
At 2 p.m. ET every NYSE trading day on Facebook, Dividend Dog Catcher Fredrik Arnold does a quick live video summary of one of four or five stocks contending for the next weekly slot in his Safari To Sweet Success portfolio. Go to Facebook/Dividend Dog Catcher at 2 p.m. ET trading days and watch, like, comment and share a live episode. Of course you're welcome to view all the replays, too.
Yet always remember: Root for the Underdog.
This article was written by
Fredrik Arnold is a retired quality service analyst sharing investment ideas with a primary focus on dividend yields by utilizing free cash flow and one-year total returns as trading indicators.He is the leader of the investing group The Dividend Dog Catcher, where he shares a minimum of one new dividend stock idea per week with focus on yield or extraordinary financial circumstances. All ideas are archived and available after weekly announcement. Learn more.
Analyst’s Disclosure: I am/we are long MNR. 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.
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