Sector Study: Real Estate Dividend Dogs VS. Energy Dividend Dogs, Which To Buy?

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Includes: ACRE, AJX, ANDX, BPMP, CHMI, CNXM, DKL, ET, GLOP, GLP, GNL, GPMT, GPP, HEP, MMLP, OMP, PMT, RC, SNP, STWD, SUN, TRGP, TRTX, USAC, WSR, XAN
by: Fredrik Arnold
Summary

The real estate sector includes nine industries all related to real property ownership. Like: general real estate; Real Estate services; and seven varieties of real estate investment trusts, or REITs.

The energy sector includes six industries all related to bringing oil and gas to market. They are: drilling, exploration and production (E&P), equipment and services, integrated, midstream, refining & marketing.

The top-yield ten real-estate dogs, averaged 9.33% yield. Top-ten energy pups, averaged 11.49%.

These are the RE VS. NRG Dogs 4/4/2019: Real Estate top five firms by broker net gains, WSR, XAN, CHMI, RC, &  GNL averaged 25.5%. Energy top five, BPMP; TRGP; OMP; ET; CNXM estimated net averaged 39.08% gains.

Analyst one-year targets predicted that ten highest yield Real Estate stocks could produce 7.20% more gain from $5k invested in the lowest-priced five than from $5k in all ten. The Energy prediction showed 19.7% more net-gain for the little dog five than from $5k invested in all ten.

Actionable Conclusions (1-5): Brokers Predicted 20.82% To 35.75% Net Gains From Top Five Real Estate Sector Dogs By April 2020

Four of five top dividend-yielding Dow dogs were verified as being among the top ten gainers for the coming year based on analyst 1-year target prices. (They are tinted gray in the chart below). So, our April 4 yield-based forecast for Real Estate dogs, as graded by Wall St. wizards, was 80% accurate.

Source: YCharts.com

Projections based on estimated dividend returns from $1000 invested in the five highest yielding stocks and their aggregate one year analyst median target prices, as reported by YCharts, created the 2019-20 data points. Note: one year target prices by lone analysts were not applied. Top five probable profit-generating trades projected to April 4, 2020 were:

Global Net Lease Inc (GNL) netted $357.46 based on a target price estimate from three analysts, plus dividends, less broker fees. The Beta number showed this estimate subject to volatility 29% less than the market as a whole.

Ready Capital Corp (RC) was projected to net $264.53, based on the median of target estimates from eight analysts, plus dividends, less broker fees. The Beta number showed this estimate subject to volatility 21% less than the market as a whole.

Cherry Hill Mortgage (CHMI) was projected to net $227.72, based on dividends, plus the median of target price estimates from three analysts, less broker fees. The Beta number showed this estimate subject to volatility 67% less than the market as a whole.

Exantas Capital Corp (XAN) was projected to net $217.19, based on dividends, plus the median of target price estimates from four analysts, less broker fees. The Beta number showed this estimate subject to volatility 19% less than the market as a whole.

Whitestone REIT (WSR) was forecast to net $208.15, based on target price estimates from six analysts, plus annual dividend, less broker fees. The Beta number showed this estimate subject to volatility 14% more than the market as a whole.

The average net gain in dividend and price was estimated at 25.5% on $5k invested as $1k in each of these five Dow stocks. This gain estimate was subject to average volatility 24% under the market as a whole.

Actionable Conclusions (6-10): Analysts Estimated 34.25% To 46.6% Net Gains For Top Five Energy Sector Dogs To April 2020

None of the five top Energy Sector dividend stocks by yield were among the top ten gainers for the coming year based on analyst 1-year target prices. Thus, this yield-based forecast for S&P 500 dogs was graded by Wall St. Wizards as 0% accurate.

Source: YCharts.com

Projections were based on estimated dividends from $1000 invested in each of the highest yielding stocks and their aggregate one year analyst median target prices, as reported by YCharts. Note: one year target prices by lone analysts were not applied. Five probable profit-generating energy sector trades projected to April 4, 2020 were:

CNX Midstream Partners LP (CNXM) was projected to net $465.96, based on a median of target price estimates from nine analysts, plus the estimated annual dividend, less broker fees. The Beta number showed this estimate subject to volatility 29% more than the market as a whole.

Energy Transfer LP (ET) was projected to net $417.26, based on dividends, plus a mean target price estimate from nineteen analysts, less broker fees. The Beta number showed this estimate subject to volatility 75% more the market as a whole.

Oasis Midstream Partners (OMP) was projected to net $383.69, based on a median target estimates from eight analysts, plus dividends, less broker fees. A Beta number was not available for OMP.

Targa Resources Corp (TRGP) was projected to net $344.62, based on a median of target price estimates from twenty analysts, plus dividends, less broker fees. The Beta number showed this estimate subject to volatility 39% more than the market as a whole.

BP Midstream Partners (BPMP) was projected to net $342.49 based on dividends, plus a median target estimate from seven brokers, less transaction fees. A Beta number was not available for BPMP.

The average net gain in dividend and price was estimated at 39.08% on $5k invested as $1k in each of these five stocks. These gain estimates were subject to average volatility 48% more than the market as a whole.

Source: puppytoob.com

The Dividend Dogs Rule

Stocks earned the "dog" moniker by 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 precisely, these are, in fact, best called, "underdogs".

The April 4, 2019 Real Estate & Energy Sector Top Dogs By Yield

Source: YCharts.com

Actionable Conclusion (11-20) 10 Top Real Estate Dividend Stocks By Yield Range 8.53% To 11.4% & 10 Top Energy Sector Equities Range 9.84% To 16.31% Per YCharts

Top ten Real Estate dividend dogs as of 4/4/19 by YCharts represented three of nine sector industries.

Top yielding stock, Cherry Hill Mortgage Investment Corp (CHMI) [1] was the top of two residential REIT representatives in the top ten. The other placed seventh, Granite Point Mortgage Trust Inc (GPMT) (7).

Second place went to the first of seven diversified REIT representatives, Global Net Lease Inc (GNL) [2]. The other diversified REITs placed third, fifth, sixth, and eighth to tenth: Ready Capital Corp (RC) [3]; Great Ajax Corp (AJX) [5]; PennyMac Mortgage Investment Trust (PMT) [6]; TPG RE Finance Trust Inc (TRTX) [8]; Ares Commercial Real Estate Corp (ACRE) [9]; Starwood Property Trust Inc (STWD) [10].

Finally, a lone retail REIT placed fourth, Whitestone REIT (WSR) [4], Whitestone REIT to compete the Real Estate sector top ten by yield.

Actionable Conclusions (21-30): 10 Top Energy Sector Dividend Stocks By Yield

Top ten Energy Sector stocks selected 4/4/19 by yield represented four of six industries in the sector. First place was claimed by the first of seven oil and gas midstream industry representatives, Martin Midstream Partners LP (MMLP) [1].

The other six placed placed third, fourth, and seventh to tenth: Green Plains Partners LP (GPP) [3]; Andeavor Logistics LP (ANDX) [4]; Global Partners LP (GLP) [7]; Delek Logistics Partners LP (DKL) [8]; Holly Energy Partners LP (HEP) [9]; GasLog Partners LP (GLOP) [10].

In second place was the lone oil and gas equipment & services industry representative, USA Compression Partners LP (USAC) [2]. In fourth place was a single oil and gas integrated industry representative, (SNP) [4].

Finally, in fifth place was a lone oil and gas refining & marketing industry rep, Sunoco LP (SUN) [5]. to complete the energy sector top ten by yield for April.

Source: YCharts.com

Dividend Vs. Price Results

Graphs above show the relative strengths of the top ten Real Estate and Energy sector dogs by yield as of market close 4/4/2019. The two sets of charts show the variation of dividends as calculated by YCharts.com

Top ten real estate dogs show none overbought. (All their aggregate single share prices of the ten exceed projected annual dividend from $10k invested as $1k in each). A dividend dogcatcher priority is to source stocks whose dividends from $1K invested exceed their single share price. In the real estate sector, all of the top thirty stocks by yield meet that goal.

Furthermore, all thirty top Energy sector stocks by yield also meet the dogcatcher standard for dividend economics , namely being not overbought. Energy sector top thirty Dogs are all well priced more than 10% below the dividend secured from $1,000.00 invested.

Actionable Conclusion (31): Real Estate Sector Top Ten Stocks Show Less Risk & 5% More Dividend Output Than Energy Sector Top Ten

The aggregate single share price for the top ten Real Estate dogs was 15% per YCharts and 20% for the Energy top ten while the dividend derived from $10k invested as $1k in each of the ten was 85% from the Real Estate ten, and 80% from the Energy ten.

This negative gap between low share price and high dividend per $1k (or undersold condition) means, no matter which chart you read, both real estate and energy sector top dogs high risk and high opportunity selections. The Real Estate top ten average price per dollar of annual dividend for April 2, 2019 was $10.46, while the Energy top ten average price per dividend dollar was $9.06, a $1.40 spread.

Analysts Forecast A 7.20% Advantage For 5 Highest Yield Lowest Price Real Estate Dogs To April 4, 2020

Ten top real estate sector dogs were culled by yield for this report. Yield (dividend / price) results as verified by YCharts did the ranking.

Source: YCharts.com

As noted above, top ten real estate dogs selected 4/4/19 revealing the highest dividend yields represented three of the nine industries in that sector.

Actionable Conclusions: Analysts Expected 5 Lowest-Priced of the Ten Highest-Yield Real Estate Dogs (32) To Deliver 19.25% Vs. (33) 17.95% Net Gains by All Ten Come April 4, 2020

Source: YCharts.com

$5000 invested as $1k in each of the five lowest-priced stocks in the top ten real estate sector dividend kennel by yield were predicted by analyst 1-year targets to deliver 7.20% more gain than from $5,000 invested in all ten. The sixth lowest priced real estate top yield dog, Global Net Lease Inc (GNL), was projected to deliver the best net gain of 35.75%.

Source: YCharts.com

The five lowest-priced real estate sector top-yield dogs for April 4 were: Whitestone REIT (WSR); Great Ajax CRC); Ares Commercial Real Estate Corp (ACRE); Cherry Hill Mortgage Investment Corp (CHMI), with prices ranging from $11.92 to $17.20.

Five higher-priced real estate sector dogs for April 4 were: Granite Point Mortgage Trust Inc (GPMT); Global Net Lease Inc (GNL); TPG RE Finance Trust Inc (TRTX); PennyMac Mortgage Investment Trust (PMT); Starwood Property Trust Inc (STWD), whose prices ranged from $18.93 to $22.52.

Analysts Forecast A 19.7% Advantage For 5 Highest Yield, Lowest Priced Energy Sector Dividend Stocks To April, 2020

Ten top energy sector dividend dogs were culled by yield for this update. Yield (dividend / price) results verified by YCharts did the ranking.

Source: YCharts.com

As noted above, top ten real estate sector dividend dogs selected 4/4/19 showing the highest dividend yields represented three of six industries in the oil and gas field.

Actionable Conclusions: Analysts Predicted 5 Lowest-Priced Of the Top Ten Highest-Yield Energy Sector Dogs (34) Delivering 22.00% Vs. (35) 18.38% Net Gains by All Ten Come April, 2020

Source: YCharts.com

$5000 invested as $1k in each of the five lowest-priced stocks in the top ten Dividend energy sector kennel by yield were predicted by analyst 1-year targets to deliver 19.7% more gain than $5,000 invested as $.5k in all ten. The second lowest priced selection, USA Compression Partners LP (USAC), was projected to deliver the best net gain of 31.97%.

Source: YCharts.com

The five lowest-priced top-yield energy sector dividend dogs as of April 4 were: Martin Midstream Partners LP (MMLP), USA Compression Partners LP (USAC); Green Plains Partners LP (GPP); Global Partners LP (GLP); GasLog Partners LP (GLOP), with prices ranging from $12.26 to $22.35.

Five higher-priced energy sector dividend dogs as of April 4 were: Holly Energy Partners LP (HEP); Sunoco LP (SUN); Delek Logistics Partners LP (DKL); Andeavor Logistics LP (ANDX); China Petroleum & Chemical Corp (SNP), whose prices ranged from $27.04 to $80.22.

The distinction between five low-priced dividend dogs and the general field of ten reflected Michael B. O'Higgins' "basic method" for beating the Dow. The scale of projected gains based on analyst targets added 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. Caution is advised, since analysts are historically only 20% to 80% accurate on the direction of change and just 0% to 20% accurate on the degree of change. (In 2017 the market somewhat followed analyst sentiment. In 2018 analysts estimates were contrarian indicators of market performance.)

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 Dow dividend dog 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 www.indexarb.com; YCharts.com; finance.yahoo.com; analyst mean target price by Thomson/First Call in YahooFinance. Dog photo: puppytoob.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.