Russell 3000: An April Index For All Sectors, Even REITs

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Includes: AJX, BKS, CATO, CHMI, CTL, GNL, GPMT, JCAP, NCMI, NRZ, PMT, RC, WSR, XAN
by: Fredrik Arnold
Summary

"All Russell US Indexes are subsets of the Russell 3000 Index, [namely] large-cap Russell 1000 & small-cap Russell 2000 Indexes. These Indexes are. building blocks of financial-products [and] performance-benchmarks."- ftserussell.com.

Broker-estimated April top 10 price gains ranged 7.95%-141.55% in Price Target Upsides. Top 50 by yield showed 4.85-11.28%.

Top 10 Russell 3000 April index stocks by annual yield were, PMT, GPMT, NCMI, AJX, WSR, CATO, RC, NYMT, GNL, BKS, & CHMI, averaging 10.00%.

10 Top Broker Price Upsides ranged from 11.99%-31.33% from NCMI, WSR, CHMI, AJX, CTL, JCAP, XAN, RC, GNL, & BKS and averaged 16.77% estimated upside.

$5k invested in the lowest-priced five November top-yield Russell 3000 dividend stocks showed 2.27% more net-gain than from $5k invested in all 10.  Little (low-priced) issues topped the Russell 3000 top 10.

Actionable Conclusions (1-10): Analysts Forecast 18.9% To 40.59% Net Gains For 10 Russell 3000 Come April 2020

Seven of 10 top Russell 3000 dividend stocks by yield were verified as being among the top 10 gainers for the coming year based on analyst one-year target prices. (They are tinted gray in the chart below). So, the yield-based forecast for Russell 3000 stocks as graded by Wall St. wizards was 80% accurate.

Source: YCharts.com

Projections based on estimated dividend returns from $1k invested in each of the 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. 10 probable profit-generating trades projected to April 10, 2020 were:

Barnes & Noble Inc. (BKS) was projected to net $405.92 based on dividends, plus a median target estimate from 22 analysts, less broker fees. The Beta number showed this estimate subject to volatility 3% more than the market as a whole.

Global Net Lease Inc. (GNL) was projected to net $354.22, based on dividends, plus the median target price from estimates by three analysts, less broker fees. The Beta number showed this estimate subject to volatility 29% under the market as a whole.

Ready Capital Corp. (RC) netted $263.62 based on a median target price estimate 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.

Exantas Capital Corp. (XAN) was projected to net $218.37, based on a median target estimates from four analysts, plus dividends, less broker fees. The Beta number showed this estimate subject to volatility 19% less than the market as a whole.

Cherry Hill Mortgage (CHMI) was projected to net $215.43, based on target price estimates from three analysts, plus annual dividend, less broker fees. The Beta number showed this estimate subject to volatility 67% less than the market as a whole.

Great Ajax (AJX) was projected to net $199.33, based on a median target price estimate from five analysts, plus the estimated annual dividend, less broker fees. The Beta number showed this estimate subject to volatility 30% less than the market as a whole.

CenturyLink Inc. (CTL) was projected to net $199.14, based on dividends, plus a mean target price estimate from 18 analysts, less broker fees. The Beta number showed this estimate subject to volatility 23% less than the market as a whole.

Whitestone REIT (WSR) was projected to net $195.96, based on dividends, plus a mean target price estimate from six analysts, less broker fees. The Beta number showed this gain estimate subject to volatility 14% over the market as a whole.

National CineMedia Inc. (NCMI) was projected to net $189.49, based on dividends, plus a mean target price estimate from six analysts, less broker fees. The Beta number showed this estimate subject to volatility 13% less than the market as a whole.

Jernigan Capital Inc. (JCAP) was projected to net $188.99, based on a median target price estimate from four analysts, plus dividends, less broker fees. The Beta number showed this estimate subject to volatility 44% less than the market as a whole.

The average net gain in dividend and price was estimated at 24.31% on $10k invested as $1k in each of these 10 dogs. This gain estimate was subject to average volatility 23% under the market as a whole.

Source: puppysingapore.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."

50 Top Russell 3000 WallStars By Target Gains

Source: YCharts.com

50 Top Russell 3000 Dividend Equities By Yield

Source: YCharts.com

Actionable Conclusions (11-20): 10 Top Russell 3000 Dividend Stocks Ranged 8.81%-11.28% By Yield

Top 10 Russell 3000 all cap stocks selected 4/10/19 by yield represented just two of 11 Morningstar sectors.

Seven top yielding stocks were real estate firms. They placed first, third, fourth, sixth, seventh, ninth and tenth and were Cherry Hill Mortgage Investment Corp. [1], Global Net Lease Inc. [3], Ready Capital Corp.[4], Whitestone REIT [6], Great Ajax Corp. [7], Granite Point Mortgage Trust Inc. (GPMT) [9], PennyMac Mortgage Investment Trust (PMT) [10].

The consumer cyclical stocks placed second, fifth, and eighth on this top 10 yield list. They were Barnes & Noble Inc.[2], The Cato Corp. (CATO) [5], National CineMedia Inc. [8], to complete the Russell 3000 top 10 for April.

Actionable Conclusions: (21-30) Top 10 Russell 3000 Upsides Showed 11.99% To 31.33% Price Upsides To April 2020; (31) Downsides Were Screened Out.

Source: YCharts.com

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

Brokers Predict A 2.27% Advantage For Five Highest Yield, Lowest Priced Russell 3000 Dividend Stocks By April 2020

10 top Russell 3000 dividend dogs were culled by yield for their monthly update. Yield (dividend/price) results verified by YCharts did the ranking. The master list was prescreened to just include firms with over 3.5% dividends, price above $5, with net returns greater than 0%.

Source: YCharts.com

As noted above, top 10 Russell 3000 dividend dogs selected 4/10/19 showing the highest dividend yields represented just two of 11 sectors in the Morningstar scheme.

Actionable Conclusions: Analysts Projected Five Lowest-Priced Top Stocks (32) Delivering 21.37% Vs. (33) 20.9% Net Gains by All 10 Come April 2020

Source: YCharts.com

$5k invested as $1k in each of the five lowest-priced stocks in the top 10 Dividend Russell 3000 kennel by yield were predicted to produce 2.27% more gain than $5k invested as $.5k in all 10. The very lowest priced Russell 3000 top yield stock, Barnes & Noble Inc., was projected to deliver the best net gain of 40.59%.

Source: YCharts.com

The five lowest-priced top yield Russell 3000 dividend dogs for November 8 were Barnes & Noble Inc., National CineMedia Inc., Whitestone REIT, The CATO Corp., Great Ajax Corp., with prices ranging from $5.33 to $13.68.

Five higher-priced Russell 3000 dividend dogs, as calculated November 8, were Ready Capital Corp., Cherry Hill Mortgage, Granite Point Mortgage, Global Net Lease Inc., PennyMac Mortgage, whose prices ranged from $14.49 to $21.35.

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.

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 Russell 3000 dog stock purchase or sale research process. These were not recommendations.

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 Yahoo. Russell Dog photo: puppysingapore.com

Disclosure: I am/we are long ADES, BGSF. 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.

Additional disclosure: 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.