22 'Safer' 10%+Yield Dividend WallStars Open-Up In Mid-October

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Includes: AGNC, ANH, ATT, CYS, DX, GMLP, GPP, IRCP, IRS, MITT, ORC, OSB, SXCP, TCRD, TWO, WMC
by: Fredrik Arnold

Summary

WallStars show positive broker target-price-upsides. 53 stocks displayed 10%+ forward-yield, $3.00+ prices, and $200M+ market caps. Free-cash-flow yields greater than dividend-yields 10/23/18 made 22 "safer' dividend payers.

Broker target-estimated Mid-October top-ten 'safer' net-gains ranged 28%-119% from DX, GPP, ANH, TCRD, OSB, SXCP, SNP, IRS, ATTO, and topped by IRCP.

Top ten 10%+‘Safer’ Dividend WallStar annual-yields ranged 11.75%-16.55% from DX, CPLP; NLY; ANH; GPP; TCRD; OSB, SXCP, GMLP, topped by SNMP. Their free cash-flow yields ranged 12.04%-78.24%.

Besides safety margin, 10%+‘Safer’ Dividend WallStars also reported payout ratios, total annual returns, dividend growth, and p/e ratios to further manifest their dividend support. Positive total annual returns narrowed the list of 53 to 45.

Analyst one-year targets determined that ten highest yield 10%+‘Safer’ Dividend WallStars could produce 2.53% more gain from $5k invested in the lowest-priced five than from $5k in all ten. So, low-priced "little" stocks led the 'safer' WallStar pack this time.

Actionable Conclusions (1-10): Brokers Forecast Ten 10%+ Yield 27.66% To 119.15% By Mid-October, 2019

Five of the ten top 10%+‘Safer’ Dividend WallStars 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 yield strategy for this group, as graded by analyst estimates for this month, proved 50% accurate.

Projections based on dividends from $1000 invested in the highest yielding stocks and the aggregate one year analyst mean target prices of these stocks as reported by YCharts provided the data points. Note: one year target prices from single analysts were not applied (n/a). Data revealed ten probable profit-generating trades to Mid-October, 2019:

IRSA Propiedades Comerciales SA (IRCP) netted $1,191.45 based on the median of target price estimates from five analysts plus dividends less broker fees. The Beta number showed this estimate subject to volatility 69% under the market as a whole.

Atento S.A (ATT) netted $967.99 based on dividends plus a median target price from eight analysts less broker fees. The Beta number showed this estimate subject to volatility 86% under the market as a whole.

IRSA Inversiones y Representaciones SA (IRS) netted $536.21 based on estimates from four analysts, plus dividends, less broker fees. The Beta number showed this estimate subject to volatility 80% more than the market as a whole.

China Petroleum & Chemical (SNO) netted $487.89 based on a median target price set by four analysts, plus estimated dividends less broker fees. The Beta number showed this estimate subject to volatility 30% more than the market as a whole.

SunCoke Energy Partners (SXCP) netted $370.55, based on dividends plus a median target price estimate from four analysts, minus broker fees. The Beta number showed this estimate subject to volatility 38% more than the market as a whole.

Norbord Inc (OSB) netted $340.66 based on dividends plus a median target price estimate from ten analysts less broker fees. The Beta number showed this estimate subject to volatility 111% more than the market as a whole.

THL Credit (TCRD) netted $329.90 based on a median target estimate from eight analysts, plus dividends, less broker fees. The Beta number showed this this estimate subject to volatility 15% more than the market as a whole.

Anworth Mortgage Asset Corp (ANH) netted $293.23 based on estimates from three analysts plus dividends less broker fees. The Beta number showed this estimate subject to volatility 99% less than the market as a whole.

Green Plains Partners (GPP) netted $284.92 based on a median target estimate from five analysts, plus dividends less broker fees. The Beta number showed this estimate subject to volatility 43% less than the market as a whole.

Dynex Capital Inc (DX) netted $276.55, based on a median target price set by four analysts, plus estimated dividends, less broker fees. The Beta number showed this estimate subject to volatility 45% less than the market as a whole.

Average net gain in dividend and price was 50.79% on $10k invested as $1k in each of these ten 10%+Yield ‘Safer’ Dividend WallStars. This gain estimate was subject to average volatility 30% 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 Eleven Sectors Are Represented By Twenty-two Mid-October 'Safer' 10%+Yield WallStars

Sectors represented by the twenty-two 10%+Yield ‘Safer’ Dividend WallStars numbered five of eleven. Those 22 stocks showed positive annual returns and positive margins of cash to October 23, 2019.

The 10%+Yield ‘Safer’ Dividend sector representation broke-out, thus: Industrials (2); Real Estate (14); Financial Services (1); Basic Materials (2); Energy (3); Communication Services (0); Consumer Cyclical (0); Consumer Defensive (0); Healthcare (0);Technology (0); Utilities (0).

All of those six sectors were represented by the top ten by yield.

22 of 53 10%+Yield ‘Safer’ Dividend WallStars

Periodic Safety Inspection

A previous article discussed the attributes of the 10%+Yield WallStars on this list of 53.

You see grouped below a tinted list showing 22 that passed the 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 the sagging prices in 9 of the 53.

Corporate financial gains, however, are easily re-directed by boards of directors making company policy cancelling or varying the payout of dividends to shareholders. Some may not cut or reduce dividends but carefully regulate their annual pay outs in slow business periods.

This article contends that adequate cash flow is strong justification for a company to sustain annual dividend pay increases to shareholders.

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

Orchid Island Capital (ORC) in March, 2018, and September, 2018;

Anworth Mortgage Asset (ANH) in June, 2018;

Dynex Capital (DX) in April, 2017;

THL Credit Inc. (TCRD) in December, 2016;

AGNC Investment Corp (AGNC) in August, 2016, among others.

Four additional columns of financial data, listed after the Safety Margin figures above, 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. Positive results in all five columns after the dividend ratio is a solid financial signal.

Actionable Conclusions: (11) Top Ten 10%+ Yield 'Safer' Dividend WallStars Showed 4.58% To 39% Upsides To October, 2019; (12) Lowest Downside Of All Was 0%.

To quantify top dog rankings, analyst mean price target estimates provide a "market sentiment" gauge of upside potential. Added to the simple high yield metric, analyst mean price target estimates became another tool to dig out bargains.

Yield Metrics Revealed Real Bargains From Lowest Priced, 10%+Yielding ‘Safer’ Dividend WallStars

Ten "Safer" 10%+Yield ‘Safer’ Dividend WallStars with the biggest yields October 23 per YCharts data ranked themselves as follows:

Actionable Conclusions: Analysts Predicted 5 Lowest Priced, of Ten "Safer" Dividend Top Yield 10%+ Yield WallStars, Will Deliver (13) 23.70% VS. (14) 23.11% Net Gains from All Tenby Mid-October, 2019

$5000 invested as $1k in each of the five lowest priced stocks in the ten 10%+Yield ‘Safer’ Dividends WallStar pack were determined by analyst 1 year targets to deliver 2.53% more net gain than $5,000 invested in all ten. The tenth lowest priced 'Safer' WallStar, Norbord Inc (OSB) showed the best broker-calculated net-gain of 34.07% per their target estimates.

Lowest priced five 10%+Yield ‘Safer’ Dividend WallStars as of October 23 were: Anworth Mortgage Asset Corp (ANH); Dynex Capital Inc (DX); Orchid Island Capital (ORC); THL Credit (TCRD); Western Asset Mortgage Capital Corp (WMC), with prices ranging from $4.31 to $9.75.

Higher priced five 10%+Yield ‘Safer’ Dividend WallStars as of October 23 were, Golar LNG Partners (GMLP); Green Plains Partners LP (GPP); AG Mortgage Investment Trust Inc (MITT); AGNC Investment Corp (AGNC); Norbord Inc (OSB), with prices ranging from $13.96 to $25.86. The little, low- priced 10%+ ‘Safer’ Dividend WallStars kept their lead this month.

This distinction between five low priced dividend stocks 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 safest 10%+ ‘Safer’ DiviDogs 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: covergala.weebly.com

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

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.