This weekly report tallied yield (dividend / price) results from here verified by Yahoo Finance for monthly dividend paying small, mid, & large cap (MoPaySML) stocks as of market closing prices November 20 compared to those results for the top ten dogs of the Dow.
Actionable Conclusion (1): Dividend Dogs Bullish; Dow Dogs Not So Last Week
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MoPaySML dividend dogs rallied after October 31. Aggregate dividend from $10k invested as $1k in each of the top ten stocks plunged at a rate of 9% since Halloween while total single share price of those ten surged up nearly 53% for that period. The pop in market price and dividend plunge was likely exaggerated by the author's use of the more exclusive S, M & L Cap stock screen for price and dividend data vs. the screen including MicroCaps in October. This past week, however, the MoPaySML rally continued as their dividend fell 0.41% while price rose 0.12%
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For the Dow dogs, meanwhile, projected annual dividend from $10k invested as $1K in each of the top ten Dow dogs increased over 0.45% since November 11, while aggregate single share price fell 8%. The Dow dogs overbought condition in which aggregate single share price of the ten exceeded projected annual dividend from $1k invested in each of the ten shrank some. The overhang was $161 or 43% for September, shrank down to $111 or 30% for October, expanded to $171 or 47'% November 11, then backed off to $127 or 34% as of November 20. Much of this bear chase was triggered by Microsoft (MSFT) replacing JPMorgan Chase (JPM) in the top ten Dow dogs this past week.
Monthly pay dividend dog stock lists reviewed since June 2012 prompted reader suggestions to include funds, trusts, and partnerships. This report on small, mid, and large cap only monthly pay stocks only was prepared in response to Seeking Alpha editors plus August, September and October reader input. Three additional actionable conclusions were drawn.
Monthly Pay Dividend Pros and Cons
Quarterly, Semi-Annual and Annual dividend stockholders 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, trusts, and partnerships inform the holder every four and one third weeks by check and/or statement. If the entity reduces or suspends a payment, the holder can sell out of the investment immediately to cut future losses. This advantage has been countered when companies suddenly cut monthly dividends to save cash and trigger a price crash. So the segment is volatile.
Readers have added fuel to the firestorm. In January TennisBoy88 wrote: "...Monthly paying stocks...are slightly protected against traders that buy just before the ex-date and sell after the record date. The brokerage commissions they have to pay for a measly monthly dividend helps keep them away and the stock price doesn't fluctuate so wildly."
Reader drking in August pointed to another advantage of receiving 12 vs. 4 dividends per year: "Mopay dividends reinvested will return almost 1% more yearly than quarterly payors as it compounds faster."
Many readers are offended by the term "dividend" applied to REITs, MLPs and hybrid financial institutions. For example, arbtrdr wrote: "The only problem with this analysis is you are comparing companies of VERY different varieties. REITs pay no taxes and their distributions are classified as ordinary income and thus not subject to the 15% or 20% tax rate. MLPs also pay little no taxes at the corporate level, but instead have "distributions"... Comparing REITs, MLPs and regular corporations thus requires a financial analysis...not include[d].
Dogs of the Index Metrics Extracted Bargains
For this article thirty small, mid, and large cap dividend equities were culled from over 650 entities listed here paying monthly returns. This report presumed yield (dividend / price) dividend dog methodology applied to any dividend stock group and compared that collection side by side with the Dow industrial index leaders. Below, the Arnold MoPaySML selections for November 20 were disclosed step by step.
November 20 Monthly Pay Small. Medium & Large Cap Dividend Stocks
Ten monthly pay S/M/L Cap dividend equities showing the best yields for November 20 represented the usual three of nine Yahoo market sectors. The top dog stock revealed by Yahoo Finance data was again Armour Residential REIT (ARR). This was one of four financial sector firms that populated the list. The remaining three financial MoPaySML dogs placed fourth, ninth, and tenth: Prospect Capital Corporation (PSEC); Fifth Street Finance (FSC); Brookfield Canada Office Properties (BOXC).
The second slot in the top ten was filled by one of four Basic Materials concerns, Pacific Coast Oil Trust (ROYT). The others placed fourth, ninth, and tenth: Enduro Royalty Trust (NDRO); Pacific Coast Oil Trust (ROYT; Linn Energy LLC. (LINE); LinnCo LLC (LNCO). Two utilities, Just Energy Group Inc. (JE), and Atlantic Power Corp (AT), placed third and eighth to round out the MoPaySML top dog list.
To quantify the top dog rankings, analyst mean price target estimates provided a "market sentiment" gauge of upside potential and so were added to the simple high yield "dog" metric used to sniff out bargains.
Wall Street Wizard Weighting Worked
One year mean target price set by brokerage analysts multiplied by the number of shares in a $1k investment were used to compare ten stocks showing the highest upside price potential into 2014 out of 20 selected by yield. The number of analysts providing price estimates was noted after the name for each stock. Three to nine analysts was considered optimal for a valid mean target price estimate.
Actionable Conclusion (2) 10 MoPaySML Dividend Dogs Track 12% to 36% Nov. 20 Upsides
The Top 20 dogs on the MoPay stock list graphed below showed relative strengths by dividend and price as of November 20, 2013 and those projected by analyst mean price target estimates to the same date in 2014.
A hypothetical $1000 investment in each equity was divided by the current share price to find the number of shares purchased. The shares number was then multiplied by projected annual per share dividend amounts to find the dividend return. Thereafter the analyst mean target price was used to gauge the stock upsides to 2014.
Historic prices and actual dividends paid from $1000 invested in the ten highest yielding stocks and the aggregate single share prices of those twenty stocks divided by 2 created the data points for 2013. Projections based on estimated increases in dividend amounts from $1000 invested in the twenty highest yielding stocks and aggregate one year analyst target share prices from Yahoo Finance divided by 2 created the 2014 data points green for price and blue for dividends.
Actionable Conclusion (3): Wall Street Wizards Wisdom Wished 19.6% 1 yr. Net Gain from Top 20 MoPaySML Dogs
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Yahoo projected an almost 11.6% lower dividend from $10K invested as $1k in each of this group of ten while aggregate single share price was projected to increase by nearly 11% in the coming year. The number of analysts contributing to the mean target price estimate for each stock was noted in the next to the last column on the charts. Three to nine analysts was considered optimal for a valid projection estimate. Estimates provided by one analyst were not applied (n/a).
A beta (risk) ranking for each stock was provided in the far right column on the above chart. A beta of 1 meant the stock's price would move with the market. Less than 1 showed lower than market movement. Higher than 1 showed greater than market movement. A negative beta number indicated the degree of a stock price movement opposite of market direction.
Actionable Conclusion (4): Analysts Forecast 2014 MoPaySML DiviDog Stock Net Gains of 19% to 46%
Seven of the ten top dividend yielding MoPaySML dogs were verified as being among the ten gainers out of 20 for the coming year based on analyst 1 year target prices. So this week the dog strategy for this collection as graded by Wall St. wizards was 70% accurate.
Ten probable profit generating trades were revealed by Thompson/First Call in Yahoo Finance for 2014:
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Enduro Royalty Trust netted $456.42 based on dividends plus mean target price estimate from four analysts less broker fees. The Beta number showed this estimate subject to volatility 2% less than the market as a whole.
Atlantic Power Corp netted $402.76 based on estimates from five analysts plus dividends less broker fees. The Beta number showed this estimate subject to volatility 65% less than the market as a whole.
Pacific Coast Oil Trust netted $400.06 based on dividends plus a mean target price estimate from three analysts less broker fees. The Beta number showed this estimate subject to volatility 88% less than the market as a whole.
Armour Residential REIT netted $357.55 based on estimates from nine analysts plus dividends less broker fees. A Beta number was not available for ARR.
American Realty Capital (ARCP) netted $302.03 based on dividends plus the mean of annual price estimates from four analysts less broker fees. The Beta number showed this estimate subject to volatility 10% opposite the market as a whole.
Baytex Energy Corp (BTE) netted $294.43 based on a mean target price estimate from eleven analysts combined with projected annual dividend less broker fees. The Beta number showed this estimate subject to volatility 82% greater than the market as a whole.
Linn Co., LLC netted $226.89, based on dividend plus mean target price estimates from nine analysts less broker fees. The Beta number showed this estimate subject to volatility 88% less than the market as a whole.
Linn Energy, LLC netted $226.19 based on dividends plus the mean of annual price estimates from thirteen analysts less broker fees. The Beta number showed this estimate subject to volatility 20% less than the market as a whole.
Fifth Street Finance Corporation netted $213.04, based on dividend plus mean target price estimates from nine analysts less broker fees. The Beta number showed this estimate subject to volatility 18% less than the market as a whole.
Home Loan Servicing Solutions Ltd. (HLSS) netted $193.14 based on a mean target price estimate from eight analysts combined with projected annual dividend less broker fees. The Beta number showed this estimate subject to volatility 34% less than the market as a whole.
The average net gain in dividend and price was 30.7% on $10k invested as $1k in each of these ten MoPaySML dogs. This gain estimate was subject to average volatility 44% less than the market as a whole.
Net gain 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.
The stocks listed above were suggested only as decent starting points for your MoPaySML dividend stock purchase 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.
Disclosure: I am long ARR, AT, ERF, FSC, HRZN, PGH, GE, INTC, MCD, MSFT, PFE, T, VZ. 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. (More...)
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