18 'Safer' Dividend 10%+Yield WallStars Shine On Mid-December

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Includes: ANH, APAM, CPLP, CYS, DX, GPP, HMLP, MBT, NEWM, ORC, SIR, SNP, SXCP, TCRD, TWO, VEON, WMC
by: Fredrik Arnold
Summary

WallStars all show positive broker target-price-upsides. 94 stocks displayed 10%+ forward-yield, $2.00+ prices, and $100M+ market-caps. Free cash-flow yields greater than dividend-yields 12/14/18 identified 18 "safer' dividend payers.

Broker target-estimated Mid-December top-ten 'safer' net-gains ranged 25.99%-79.12% from HCLP, APAM, SNP, GPP, SIR, TCRD, MBT, SXCP, VEON, and topped by CPLP.

Top ten 10%+‘Safer’ Dividend WallStar annual-yields ranged 11.71%-16.36% from DX, VEON; ANH; NEWM; WMC; GPP; CPLP, SXCP, ORC, topped by TCRD. Their free cash-flow yields ranged 12.03%-78.29%.

Besides safety margin, 10%+‘Safer’ Dividend WallStars also reported payout ratios, total annual returns, dividend growth, and p/e ratios to further boost their dividend support. Positive total annual returns narrowed the list of 94 to 48.

Analyst one-year targets determined that ten highest yield 10%+ ‘Safer’ Dividend WallStars could produce 3.23% more gain from $5k invested in the lowest-priced five than from $5k in all ten.Thus, lower-priced "small" stocks led the 'safer' WallStar pack this time.

source: YCharts

Actionable Conclusions (1-10): Brokers Forecast Ten 10%+ Yield Equities To Gain 25.99% To 79.12% By Mid-December, 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-December, 2019:

Capital Product Partners LP (CPLP) netted $748.00 based on the median of target price estimates from eight analysts plus dividends less broker fees. The Beta number showed this estimate subject to volatility 7% over the market as a whole.

VEON Ltd (VEON) netted $767.50 based on estimates from fifteen analysts plus dividends less broker fees. The Beta number showed this estimate subject to volatility 112% more than the market as a whole.

SunCoke Energy Partners LP (SXCP) netted $742.62 based on dividends plus a median target price from four analysts less broker fees. The Beta number showed this estimate subject to volatility 31% over the market as a whole.

Mobile TeleSystems PJSC (MBT) netted $572.28 based on estimates from seventeen analysts, plus dividends, less broker fees. The Beta number showed this estimate subject to volatility 12% more than the market as a whole.

THL Credit (TCRD) netted $461.82 based on a median target estimate from eight analysts, plus dividends, less broker fees. The Beta number showed this this estimate subject to volatility 5% more than the market as a whole.

Select Income REIT (SIR) netted $448.t70 based on dividends plus a median target price estimate from four analysts less broker fees. The Beta number showed this estimate subject to volatility 18% less than the market as a whole.

Green Plains Partners (GPP) netted $399.54 based on a median target estimate from four analysts, plus dividends less broker fees. The Beta number showed this estimate subject to volatility 61% less than the market as a whole.

China Petroleum & Chemical (SNP) netted $338.35 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 50% more than the market as a whole.

Artisan Partners Asset Management Inc (APAM) netted $301.32, based on a median target price set by seven analysts, plus estimated dividends, less broker fees. The Beta number showed this estimate subject to volatility 70% more than the market as a whole.

Hoegh LNG Partners LP (HMLP) netted $259.86, based on dividends plus a median target price estimate from ten analysts, minus broker fees. The Beta number showed this estimate subject to volatility 20% less than the market as a whole.

Average net gain in dividend and price was 50.83% on $10k invested as $1k in each of these ten 10%+Yield ‘Safer’ Dividend WallStars. This gain estimate was subject to average volatility 10% less than the market as a whole.

source: fallinpets.com

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".

Seven of Eleven Sectors Are Represented By Eighteen Mid-December 'Safer' 10%+Yield WallStars

Sectors represented by the eighteen 10%+Yield ‘Safer’ Dividend WallStars counted seven of eleven. Those 18 stocks showed positive annual returns and positive margins of cash to December 14, 2019.

The 10%+Yield ‘Safer’ Dividend sector representation broke-out, thus: Financial Services (2); Real Estate (8); Basic Materials (1); Industrials (2); Energy (2); Consumer Cyclical (1); Communication Services (2); Consumer Defensive (0); Healthcare (0);Technology (0); Utilities (0).

Six of those seven sectors were represented in the top ten by yield.

18 of 94 10%+Yield ‘Safer’ Dividend WallStars

source: YCharts

Periodic Safety Inspection

A previous article discussed the attributes of the 10%+Yield WallStars on this list of 94.

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 46 of the 94.

source: YCharts=

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 (DX) 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%+ Yield 'Safer' Dividend WallStars Showed 17.66% To 67.38% Upsides To Mid-December, 2019; (12) Lowest 2 Downsides Were 0%.

source: YCharts

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 Slight Bargains From Lowest Priced, 10%+Yielding ‘Safer’ Dividend WallStars

Ten "Safer" 10%+Yield ‘Safer’ Dividend WallStars with the biggest yields December 14 per YCharts data ranked themselves as follows:

source: YCharts

Actionable Conclusions: Analysts Predicted 5 Lowest Priced, of Ten "Safer" Dividend Top Yield 10%+ Yield WallStars, Will Deliver (13) 40.09% VS. (14) 38.84% Net Gains from All Tenby Pre-December, 2019

source: YCharts

$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 3.23% more net gain than $5,000 invested in all ten. The very lowest priced 'Safer' WallStar, Capital Product Partners LP (CPLP) showed the best broker-calculated net-gain of 79.12% per their target estimates.

source: YCharts

Lowest priced five 10%+Yield ‘Safer’ Dividend WallStars as of December 14 were: Capital Product Partners LP (CPLP); VEON Ltd (VEON); Anworth Mortgage Asset Corp (ANH); Dynex Capital Inc (DX); Orchid Island Capital (ORC), with prices ranging from $2.50 to $7.09.

Higher priced five 10%+Yield ‘Safer’ Dividend WallStars as of October 23 were, THL Credit (TCRD); Western Asset Mortgage Capital Corp (WMC); SunCoke Energy Partners LP (SXCP); New Media Investment Group Inc (NEWM); Green Plains Partners LP (GPP), with prices ranging from $6.60 to $14.23. The little, low-priced 10%+ ‘Safer’ Dividend WallStars re-captured 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. 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.

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: fallinpets.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.