31 Of 104 Russell 3000 'Safer' Dividend WallStar Dogs Tagged For July

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Includes: ANH, APLE, ARR, BGSF, CLNY, CORR, F, FII, GCI, GLPI, GMRE, IVR, IVZ, LADR, ORC, PM, RC, SFL, SIR
by: Fredrik Arnold
Summary

31 of 104 Russell 3000 Index stocks were deemed "safer" for dividends by showing positive one-year returns and free cash flow yields greater than dividend yields.

The master-list of 104 was pre-screened for yields >4%; price >$4; net returns >-15%; >.05% broker targets 7/13/18. Broker target-estimated net gains for top ten ranged 13.65%-42.43%.

Ten "safer" dividend WallStar Russell 3K yields ranged 10.21%-14.63% from CORR, LADR, SIR, GMRE, SFL, SLD, ARR, IVR, ANH, and ORC. Free cash flow yields ranged 10.03%-30.43%.

Besides safety margin, Russell 3000 WallStar stocks also reported payout ratios (lower is better), total annual returns, dividend growth, and P/E ratios to show dividend  reliability. Total annual returns narrowed the "safer" list of 104 to 75 by removing stocks showing negative returns.

Analyst one-year targets revealed that ten highest-yield "safer" dividend Russell 3000  WallStar stocks may produce 13.89% more gain from $5k invested in the lowest priced five than from $5k in all ten. Little low price "safer" dividend stocks came through in July.

Actionable Conclusions (1-10): Analysts Calculated Top Ten 'Safer' Dividend Russell 3000 WallStar Stocks Could Net 13.65% to 42.43% Gains By July 2019

One of the ten top yield "safer" Dividend Russell 3000 WallStar dogs (whose name is shaded in the chart above) was 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 group, as graded by analyst estimates, proved 10% accurate.

The following probable profit generating trades were flagged by projections based on estimated dividend returns from $1,000 invested in each of the thirty highest yielding stocks and their aggregate one-year analyst median target prices, as reported by YCharts, to calculate the 2018-19 data points. Note: one-year target prices by lone analysts were not applied. Ten probable profit-generating trades projected to July 13, 2019 were:

Colony Capital (CLNY) netted $424.26 based on dividends plus a median target price estimate from four analysts less broker fees. The Beta number showed this estimate subject to volatility 41% more than the market as a whole.

Invesco (IVZ) netted $330.51, based on dividends plus a target price estimate from seventeen analysts, minus broker fees. The Beta number showed this estimate subject to volatility 66% more than the market as a whole.

Philip Morris International (PM) netted $242.22 based on a median target estimate from nineteen analysts, plus dividends, less broker fees. The Beta number showed this estimate subject to volatility 13% less than the market as a whole.

Global Medical REIT (GMRE) netted $240.21 based on a median target price estimate from six analysts, plus projected annual dividends less broker fees. The Beta number showed this estimate subject to volatility 1395% opposite the market as a whole.

Gannett (GCI) netted $192.48 based on dividends plus a median target price estimate from six analysts, less broker fees. The Beta number showed this estimate subject to volatility 70% less than the market as a whole.

Federated Investors (FII) netted $170.74 based on a median target price set by ten analysts, plus estimated dividends less broker fees. The Beta number showed this estimate subject to volatility 30% more than the market as a whole.

Ford Motor (F) netted $163.97 based on estimates from twenty-three analysts plus dividends less broker fees. The Beta number showed this estimate subject to volatility 2% more than the market as a whole.

BG Staffing (BGSF) netted $141.29 based on a mean target estimate from two analysts, plus dividends less broker fees. The Beta number showed this estimate subject to volatility 89% less than the market as a whole.

Apple Hospitality REIT (APLE) netted $138.30 based on estimates from five analysts, plus dividends less broker fees. The Beta number showed this estimate subject to volatility 33% less than the market as a whole.

Gaming and Leisure Properties (GLPI) netted $136.53 based on a median target price estimate from eleven analysts, plus projected annual dividends less broker fees. The Beta number showed this estimate subject to volatility 42% less than the market as a whole.

Average net gain in dividend and price was 21.8% on $10k invested as $1k in each of these ten "safer" dividend stocks. This gain estimate was subject to average volatility 67% opposite the market as a whole (thanks to GMRE's huge negative beta).

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".

Eight of Eleven Sectors Delivered "Safer" Dividends To The Russell 3000 WallStars

The 31 "safer" members of this Index represented eight of eleven sectors. They showed positive annual returns and adequate margins of cash to cover dividends by this screen as of July 13.

The "safer" dividend Russell 3000 WallStar sector representation broke-out, thus: Real Estate (17); Industrials (2); Financial Services (3); Utilities (1); Consumer Cyclical (5); Consumer Defensive (1); Communication Services (1); Technology (1); Basic Materials (0); Energy (0); Healthcare (0).

The first two sectors shown in the above list composed the top ten "safer" dividend Russell 3000 team by yield.

31 of 104 Russell 3000 WallStars Showed "Safer" Dividends

Periodic Safety Inspection

A previous article discussed attributes of 50 top yield constituents of the Russell 3000 Index selected from this master list of 104. You see grouped below the tinted list documenting 31 (out of those 104) that passed the dividend dog "safer" check with positive past-year returns and cash flow yield sufficient to cover their anticipated annual dividend yield. The margin of excess is shown in the bold face "Safety Margin" column. The total returns column screened out nineteen with sagging profits.

Financial priorities, however, are frequently re-directed by boards of directors setting company policy cancelling or varying the payout of dividends to shareholders.

Note that many of these top "safer" Russell dividend WallStar payers have adjusted their dividends lower recently, including:

Orchid Island Capital (ORC) in July 2015; February 2018; April 2018;

Anworth Mortgage Asset Corp. (ANH) in June 2018;

ARMOUR Residential REIT (ARR) in March and April 2016; January 2017, among others.

This article contends that adequate cash flow is 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, dividend growth levels, and P/E ratios for each stock. This data is provided to reach beyond yield to select reliable payout stocks. Positive results in those first five columns after the dividend ratio sends a remarkably 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.

Yield Metrics Revealed Nice Bargains From Lowest Priced Top Ten Yielding "Safer" Dividend Russell 3000 Index WallStars For July

Ten "safer" Russell 3000 WallStars with the biggest yields July 13 per YCharts data ranked themselves by yield as follows:

Actionable Conclusions: Analysts Predicted 5 Lowest Priced, of Ten "Safer" Dividend Russell 3000 WallStars, Will (11) Deliver 12.27% Vs. (12) 10.78% By All 10 Come July 2019

$5,000 invested as $1k in each of the five lowest priced stocks in the "safer" Dividend Russell 3000 WallStars 10 by yield were determined by analyst 1-year targets to deliver 13.89% more gain than $5,000 invested as $.5k in all ten. The third lowest priced "safer" Dividend Russell 3000 WallStar, Global Medical REIT showed the best analyst augured net gain of 24.02% per their target estimates.

Lowest priced five "safer" Dividend Russell 3000 WallStar stocks as of July 13 were: Anworth Mortgage Asset; Orchid Island Capital; Global Medical REIT; Ship Finance International (SFL); and Ladder Capital (LADR), with prices ranging from $5.02 to $15.97.

Higher priced five "safer" Dividend Russell 3000 WallStar stocks as of July 13 were: Invesco Mortgage Capital (IVR); Sutherland Asset Management (SLD); Select Income REIT (SIR); ARMOUR Residential REIT; and CorEnergy Infrastructure Trust (CORR), with prices ranging from $16.13 to $38.19. The low price little Russell 3000 WallStars lead the way in July

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. 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 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 safest "Safer" Dividend Russell 3000 Index 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 www.ycharts. com; www.finance.yahoo.com; analyst mean target price by Thomson/First Call in Yahoo Finance. Dog photo from: happyjackrussell.com

Disclosure: I am/we are long 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.