Actionable Conclusions (1-10): Brokers Calculated Top Ten 10%+ ‘Safer’ Dividend WallStars To Net 19.19% To 99.27% By 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 $1,000 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 November 2019:
Atento (ATTO) netted $992.70 based on dividends plus a median target price from eight analysts less broker fees. The Beta number showed this estimate subject to volatility 56% under the market as a whole.
Sanchez Midstream Partners (SNMP) netted $837.18 based on the median of target price estimates from three analysts plus dividends less broker fees. The Beta number showed this estimate subject to volatility 7% opposite the market as a whole.
SunCoke Energy Partners (SXCP) netted $403.71, based on dividends plus a median target price estimate from four analysts, minus broker fees. The Beta number showed this estimate subject to volatility 34% more than the market as a whole.
Select Income REIT (SIR) netted $374.67 based on estimates from four analysts, plus dividends, less broker fees. The Beta number showed this estimate subject to volatility 20% less than the market as a whole.
THL Credit (TCRD) netted $320.29 based on a median target estimate from eight analysts, plus dividends, less broker fees. The Beta number showed this estimate subject to volatility 7% more than the market as a whole.
Green Plains Partners (GPP) netted $318.83 based on a median target estimate from four analysts, plus dividends less broker fees. The Beta number showed this estimate subject to volatility 57% less than the market as a whole.
Ready Capital Corp. (RC) netted $245.06 based on a median target price set by eight analysts, plus estimated dividends less broker fees. The Beta number showed this estimate subject to volatility 34% less than the market as a whole.
Sunoco LP (SUN) netted $231.48, based on a median target price set by thirteen analysts, plus estimated dividends, less broker fees. The Beta number showed this estimate subject to volatility 17% less than the market as a whole.
Golar LNG Partners (GMLP) netted $193.25 based on dividends plus a median target price estimate from thirteen analysts less broker fees. The Beta number showed this estimate subject to volatility 9% less than the market as a whole.
Dynex Capital Inc. (DX) netted $191.92 based on estimates from four analysts plus dividends less broker fees. The Beta number showed this estimate subject to volatility 40% less than the market as a whole.
Average net gain in dividend and price was 41.09% on $10k invested as $1k in each of these ten 10%+ ‘safer’ dividend WallStars. This gain estimate was subject to average volatility 53% 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 Eleven Sectors Are Represented By The Eighteen November 'Safer' Dividend WallStars
Sectors represented by the nineteen 10%+ ‘safer’ dividend WallStars numbered six of eleven. Those 18 stocks showed positive annual returns and positive margins of cash to November 7, 2019.
The 10%+ yield ‘safer’ dividend sector representation broke-out, thus: Energy (3); Real Estate (10); Financial Services (1); Basic Materials (1); Industrials (2); Consumer Cyclical (1); Communication Services (0); Consumer Defensive (0); Healthcare (0);Technology (0); Utilities (0). The first three of those six sectors represented the top ten by yield.
18 of 60 10%+ ‘Safer’ Dividend WallStars
Periodic Safety Inspection
A previous article discussed the attributes of the 10%+ dividend WallStars on this list of 60.
You see grouped below a tinted list showing 18 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 22 of the 60.
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;
CYS Investments (CYS) in March 2018;
Two Harbors Investment (TWO) in December 2017, and issuing more stock to acquire CYS in August;
Dynex Capital in April 2017, 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%+ 'Safer' Dividends Showed 9.27% To 90.48% Upsides To November 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, High Yielding, 10%+ ‘Safer’ Dividend WallStars
Ten 10%+ ‘safer’ dividend firms with the biggest yields November 7 per YCharts data ranked themselves as follows:
Actionable Conclusions: Analysts Predicted 5 Lowest Priced, of Ten 'Safer' Dividend Top Yield 10%+ Dividend Stocks, Will Deliver (13) 31.83% Vs. (14) 25.3% Net Gains from All Ten by November 2019
$5,000 invested as $1k in each of the five lowest priced stocks in the ten 10%+ ‘safer’ dividend WallStar pack by yield were determined by analyst 1-year targets to deliver 25.85% more net gain than $5,000 invested in all ten. The fourth lowest priced 'safer' WallStar, Sanchez Midstream Partners LP, showed the best broker-calculated net-gain of 83.72% per their target estimates.
Lowest priced five 10%+ yield ‘safer’ dividend WallStars as of November 7 were: Dynex Capital Inc.; Orchid Island Capital; THL Credit; Sanchez Midstream Partners; and Annaly Capital Management Inc. (NLY), with prices ranging from $6.04 to $9.93.
Higher priced five 10%+ ‘safer’ dividend WallStars as of November 7 were, Ellington Residential Mortgage REIT (EARN); Green Plains Partners LP (GPP); Ladder Capital Corp (LADR); AG Mortgage Investment Trust Inc (MITT); and Sunoco LP (SUN), with prices ranging from $10.81 to $26.77. The little, low-priced 10%+ ‘safer’ dividend WallStars kept the 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. 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 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: exoticart.club
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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.