Top Monthly Pay Dividend Dogs: A List To Buy And Hold

by: Fredrik Arnold

Previous monthly pay (MoPay) dividend dog stock lists reviewed in June and July prompted reader suggestions to expand the list to include funds, trusts and partnerships. The September list below is based on reader additions supplemented with a high-yield collection from here.

The Monthly Pay Dividend Advantage

Quarterly and annual dividend pay stock owners anxiously await announcements from a firm, fund or analyst to learn if their next dividend will be higher, lower or paid at all. Monthly pay stocks, funds and trusts inform the holder every four and one-third weeks by check or statement. If the equity reduces or suspends a payment, the holder can sell out of the investment immediately to cut future losses.

Dogs of the Index Metrics Cull Out Current Bargains

For this article 33 equities paying out monthly dividends were ranked using the two key dog performance metrics: (1) stock price; (2) annual dividend. Dividing the annual dividend by the price declared the percentage yield by which each dividend dog stock was ranked.

Historically dividend dog investors utilized this ranking system to select portfolios of five or 10 stocks in any one index, sector, survey or list to trade. They awaited the results from their investments in the lowest priced, highest-yielding stocks and prayed that the price of every stock they now owned climbed higher (having locked in a high-yield percentage at purchase).

Dogs of the index strategy, popularized by Michael B. O'Higgins in the book "Beating The Dow" (HarperCollins, 1991), revealed how high-yielding stocks whose prices increase (and whose dividend yields therefore decrease) can be sold off once each year to sweep gains to reinvest the seed money into higher-yielding stocks in the same index.

The 33 monthly dividend paying (MoPay) equities listed below were ranked by yields calculated as of September 28, to determine the Top Ten.

Ten monthly dividend equities showing the biggest yields as of September 28 represented just one of the nine market sectors. The top-yielding holdings as revealed by Yahoo Finance data were all financial entities: Cornerstone Progressive Fund (NYSEMKT:CFP); Cornerstone Strategic Value Fund (NYSEMKT:CLM), Armour Residential REIT (NYSE:ARR); Alpine Total Dynamic Dividend Fund (NYSE:AOD); Alpine Global Dynamic Div Fund (NYSE:AGD); AGIC Convertible & Income Fund II (NYSE:NCZ); AGIC Convertible & Income Fund I (NYSE:NCV); Full Circle Capital Corp. (FULL); Prospect Capital Corp. (NASDAQ:PSEC); Fifth Street Finance Corp (FSC).

Dividend vs. Price Results

Below relative strengths for the top 10 MoPay Dividend Dogs by yield were graphed as of September 28, 2012, and compared with those of the Dow. Nine months of historic projected annual dividend history from $1000 invested in the 10 highest yielding stocks and the total single share prices of those 10 stocks created the data points for each month shown in green for price and blue for dividends.

Conclusion: High Risk Mo Pay Dividend Dogs get Bearish while Dow is Bullish

New equity funds on the list pushed the top 10 MoPay Dogs to resume their bear path for the year as measured by dividend vs. price performance between January and September. Aggregate single share price for the top 10 declined 34.6% while projected dividends from those top 10 invested at $1k each increased 18.54% for that period. The gap between aggregate single share prices sinking beneath rising projected dividends from $1k invested in those 10 equities widened from 667.2% in January to 1590.5% in September.

Meanwhile, the Dow index moved back to overbought divergence as aggregate total single share prices popped 20% while dividends from $1k invested in the top 10 fell 5.3% to move beyond the 18.76% overbought divergence shown in June to 26.7% in September.

As of September 28 the MoPay Dogs showed $970 or 269% more dividends (with equally bigger risk) at a $402 or 83% lower aggregate single-share price than the Dow top 10.

Conclusion Two: Analysts Forecast September 2013 Net Gains at 0% Over 2012

Top 10 dogs for the MoPay list were graphed below to show relative strengths by dividend and price as of September 28, 2012, and those projected by analyst mean price target estimates to September 28, 2013.

Historic prices and actual dividends paid from $1000 invested in the 10 highest-yielding stocks and the aggregate single-share prices of those 10 stocks created the data points for 2012. Projections based on estimated increases in dividend amounts from $1000 invested in the 10 highest-yielding stocks and aggregate one-year analyst mean target prices as reported by Yahoo Finance created the 2013 data points green for price and blue for dividends. Note: one-year target estimated prices below current price were not included.

For the coming year Yahoo Finance projected a .38% lower dividend from $1k invested in each stock within this MoPay group while aggregate single-share price for the 10 was projected by analysts to increase by .44%. No probable profit generating trades were revealed by Yahoo Finance for 2013. Armour Residential REIT and Fifth Street Finance Corp both showed price increases. However, if those stocks were traded their net proceeds after deducting brokerage fees were less than from their dividends alone.

The influx of six funds into the top 10 MoPay kennel resulted in six fewer one-year analyst mean target price projections. Stock analysts don't hazard guesses as to when or how fund prices will rise. They are paid to gauge individual stocks. Hence this September MoPay Dog article has revealed a list to buy and hold (if you dare).

Disclosure: I 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.

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