17 'Safer' Dividends Found In My Readers' 44 Most Mentioned July Dividend Stocks

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Includes: AGNC, CIM, CJREF, CPLP, GMLP, ORC, PM, SBS, TD, TEO, VEDL
by: Fredrik Arnold
Summary

From 6/15/18 to 7/15/18, Fredrik Arnold dividend "followers" commented on 48 equities and funds. Some comments were bad news, so some rogues mixed in to create a FollowerFavorite/Rogue (FoFa/Ro) list.

17 of 44 equities became "safer" dividend plays by showing positive annual returns, and free cash flow yields greater than their dividend yields.

Top 10 dividend yields ranged 5.55-28.92% from PM, CPLP, CIM, VEDL, AGNC, TEO, ORC, GMLP, and CJREF and were led by LFE.TO. Their free cash flow yields ranged 6.13-57.45%.

Payout ratios (lower is better), total annual returns, dividend growth, and P/E ratios further quantified the 17 "safer" financial dividend cushions. Fifteen of the 44 FoFa/Ro equities were disqualified due to their negative one-year returns, and four were funds whose accounting is incompatible.

The FoFa/Ro Selection Process

Any dividend-paying stock mentioned in a message, e-mail or comment to the author is fair game for a listing in this article. Thus, it is possible that only rogues and discontinued or dreadful dividend issues may appear. Lately readers and other contributors have questioned the intent, purpose, and validity of my daily stock lists. Some readers get upset and know more or better. Best of all, readers catch errors in my data or calculations and warn of pending mergers and acquisitions. Yes, it's all a friendly effort to find more money in safer stocks.

Here are the top gain "Safer" Dividend Follower Favorites & Rogues per closing YCharts data July 18, 2018:

Actionable Conclusions (1-10): Brokers Predicted 12.13% To 71.34% Net Gains From Top 10 "Safer" Dividend FoFa/Ro Stocks To July 2019

Eight of ten 10 "Safer" dividend-yielding FoFa/Ro stocks were among the top 10 gainers for the coming year based on analyst one-year target prices (The eight names are tinted in the chart above). So, this yield-based forecast for the "Safer" dividend FoFa/Ros was graded 80% accurate as gauged by Wall St. wizard calculations.

The following probable profit-generating trades were identified by estimated dividend returns from $1,000 invested in each highest-yielding stock. That dividend and the aggregate one-year analyst median target price, as reported by YCharts, created the 2018-19 data. Ten probable profit-generating trades projected to July 18, 2019, were:

Telecom Argentina (TEO) projected to net $713.41, based on dividends, plus a median target upside estimate from 10 analysts, less broker fees. The Beta number showed this estimate subject to volatility 8% more than the market as a whole.

Golar LNG Partners (GMLP) was projected to net $542.84, based on dividends, plus a mean target price estimate from 11 analysts, less broker fees. The Beta number showed this estimate subject to volatility 13% less than the market as a whole.

Capital Product Partners (CPLP) was projected to net $532.47 based on dividends, and median target price from nine analysts, less broker fees. The Beta number showed this estimate subject to volatility 23% more than the market as a whole.

Corus Entertainment (OTCPK:CJREF) was projected to net $485.80, based on a target price estimate from the author, plus the projected annual dividend, less broker fees. The Beta number showed this estimate subject to volatility 43% less than the market as a whole.

Companhia De Saneamento (SBS) was projected to net $447.19, based on a target price estimate from the author, plus annual dividend, less broker fees. The Beta number showed this estimate subject to volatility 63% less than the market as a whole.

Canadian Life Cos Split (LFE.TO) was projected to net $363.49, based on a target price estimate from the author, plus dividends, less broker fees. The Beta number showed this estimate subject to volatility 137% more than the market as a whole.

Philip Morris International (PM) netted $260.85 per the median 19 analysts, plus dividends, less broker fees. The Beta number showed this estimate subject to volatility 13% under the market as a whole.

Vedanta (VEDL) netted $217.41 based on a target price estimate from the author, plus dividends, less broker fees. The Beta number showed this estimate subject to volatility 124% more than the market as a whole.

Orchid Island Capital (ORC) was projected to net $127.84, based on a target price estimate from the author, plus dividends, less broker fees. The Beta number showed this estimate subject to volatility 65% less than the market as a whole

The Toronto-Dominion Bank (TD) was projected to net $121.34 based on dividends, plus a median target estimate from 16 brokers, less broker fees. The Beta number showed this estimate subject to volatility 3% less than the market as a whole.

The average net gain in dividend and price was estimated at 38.13% on $10k invested as $1k in each of these 10 dogs. This gain estimate was subject to volatility 22% more than the market as a whole.

The Dividend Dogs Rule

The "dog" distinction was earned by stocks exhibiting three traits: (1) Paying reliable, repeating dividends, (2) their prices fell to where and (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".

Eight Sectors Were Represented By "Safer" July Dividend FoFa/Ro

Of 11 sectors, eight were represented by the 17 stocks with past year positive returns and current cash margins greater than their announced annual dividends. The count of 17 "safer" dividend FoFa/Ro by sector showed: Financial services (2); consumer cyclical (1); industrials (2); real estate (6); communication services (2); basic materials (1); consumer defensive (2); utilities (1); energy (0); healthcare (0) and; technology (0).

Periodic Safety Check

A previous article discussed the attributes of the 48 FoFa/Ro stocks and funds from which these 17 were sorted. You see above the tinted green list that passed the dividend "stress" test. These 17 FoFa/Ro stocks 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. Fifteen of the 44 FoFa/Ro equities were disqualified by negative one-year returns.

Corporate financial cash flow, however, is easily redirected by any board of directors managing company policy cancelling or varying the payout of dividends to shareholders. For example, Orchid Island Capital on the list below cut its monthly dividend from $0.14 to $0.11 in February 2018 and cut it again to $0.09 in March 2018.

Three additional columns of reported cash data listed after the Safety Margin figures reveal payout ratios (lower is better), total annual returns, dividend growth, and P/E ratio levels for each stock. This data is provided to reach beyond yield to select reliable payout stocks. The one-year total returns column above showed 15 stocks exhibiting tumbling prices.

Yield Metrics Uncovered Miniscule Lower Price Bargains For 5 FoFa/Ro "Safer" Dividend Stocks To July 2019

Ten "Safer" dividend top FoFa/Ro for July 18 per YCharts data ranked themselves by yield as follows:

Ten top "Safer" FoFa/Ro dividend-paying stocks were culled by Yield (dividend/price). Results were verified by Yahoo Finance.

Actionable Conclusions: Analysts Concluded Five Lowest Priced of Top 10 High Yield FoFa/Ro "Safer" Dividend Stocks Would Deliver (11) 34.54% Vs. (12) 34.14% Net Gains For All 10 By July 2019

$5,000 invested as $1k in each of the five lowest priced stocks in the top 10 "follower favorite" July kennel by yield were predicted by analyst one-year targets to deliver 1.16% more net gain than $5,000 invested as $.5k in each of all 10.

The ninth lowest priced, TEO, was projected to deliver the best net gain of 71.34%.

Ten FFave "Safer" Dividend Picks Saw 1.16% More Gain From Five Highest-Yield, Lowest-Priced Stocks

Lowest priced five FoFa/Ro safer dividend stocks as of July 18 were: Capital Product Partners; Corus Entertainment; Canadian Life Cos Split; Orchid Island Capital; and Vedanta, with prices ranging from $3.06 to $11.98.

Higher-priced five follower favorite "safer" dividend dogs for July 18 were: Golar LNG Partners; Chimera Investment (CIM); AGNC Investment (AGNC); Telecom Argentina; and Philip Morris International, whose prices ranged from $15.14 to $82.15.

This distinction between five low-priced dividend dogs and the general field of 10 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 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-May 2018. These were not recommendations.

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.

Stocks listed above were suggested only as possible reference points for your FoFa/Ro "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: pinterest.com

Disclosure: I am/we are long T, VEDL. 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 discusses one or more securities that do not trade on a major U.S. exchange. Please be aware of the risks associated with these stocks.