Actionable Conclusions (1-10): Brokers Estimated Top Ten MoPay Equities To Net 12.02% to 64.03% Gains By January 2021
Seven of the ten top-yield MoPay stocks (shaded in the chart below) were verified as being among the top ten gainers for the coming year based on analyst 1-year target prices. Thus, the yield-based strategy for this MoPay group, as graded by broker estimates for this month, proved 70% accurate.
Projections based on estimated dividend amounts from $1000 invested in each of the ten highest-yielding stocks and the 1-year analyst median target prices for those stocks, as reported by YCharts, made the data points. Note: 1-year target prices from single analysts were not applied (n/a). Ten probable profit-generating trades to 2021 were:
Cross Timbers Royalty Trust (CRT) netted $640.31 based on the median of target estimates from two analysts plus estimated annual dividends, less broker fees. The Beta number showed this estimate subject to risk 11% under the market as a whole.
Capitala Finance Corp. (CPTA) netted $308.4 based on a median of target price estimates from six analysts plus dividends, less broker fees. The Beta number showed this estimate subject to risk 17% more than the market as a whole.
Great Elm Capital Corp. (GECC) netted $284.19 based on dividend plus the median of target prices estimated by two analysts, less broker fees. A Beta number was not available for GECC.
Vermilion Energy Inc. (VET) netted $281.06 based on dividends plus the median of annual price estimates from seventeen analysts, less broker fees. The Beta number showed this estimate subject to risk 24% more than the market as a whole.
Harvest Capital Credit Corp. (HCAP) netted $212.00 based on dividends plus the median of annual price estimates from two analysts, less broker fees. The Beta number showed this estimate subject to risk 34% less than the market as a whole.
Permianville Royalty Trust (PVL) was forecast to net $158.40 based on just dividends less broker fees. The Beta number showed this estimate subject to risk 40% more than the market as a whole.
Orchid Island Capital (ORC) netted $152.40 based on dividends plus the median of annual price estimates from five analysts, less broker fees. The Beta number showed this estimate subject to risk 52% less than the market as a whole.
PennantPark Floating Rate Capital (PFLT) netted $1451.19 based on a median of target price estimates from six analysts plus dividends, less broker fees. The Beta number showed this estimate subject to risk 24% less than the market as a whole.
Ellington Financial Inc. (EFC) netted $143.01 based on dividends plus the median of annual price estimates from seven analysts, less broker fees. The Beta number showed this estimate subject to risk 61% less than the market as a whole.
Mesa Royalty Trust (MTR) netted $120.30 based on just dividends less broker fees. The Beta number showed this estimate subject to risk 25% more than the market as a whole.
Average net gain in dividend and price was 24.45% on $1k invested in each of these ten MoPay stocks. This gain estimate was subject to average risk 8% less than the market as a whole.
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 specifically, these are, in fact, best called “underdogs”.
January Monthly Pay Dividend Data
Three lists produced numerous actionable conclusions and several more un-numbered results. To draw these conclusions and results, December 24 closing prices and estimated annual dividends were referenced from YCharts. Monthly pay (MoPay) equity (1) yield and (2) upside potential lists were compared and contrasted against (3) a high-yield (and higher-risk) MoPay CEICs/ETFs/ETNs list. (Note: YCharts data policy retains frequency of pay status on its lists for 1 year after termination.)
Monthly Pay Dividend Qualities
Quarterly, semi-annual, and annual dividend investors anxiously await announcements from a firm, fund, or brokerage 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 curtailed when companies suddenly cut monthly dividends to save cash. Three prominent MoPay firms declared dividend cuts between December 2016 and July 2019.
Former MoPay top ten regular by yield Bluerock Residential Growth REIT (BRG) announced in December it is retreating to quarterly dividend payments “in keeping with industry tradition”.
Third, Capitala Finance Corp. cut its monthly payout from $0.13 to $0.0833 as of October 30, 2017.
Tahoe Resources (TAHO) skipped its monthly payouts and dropped out as a MoPay resource in 2018.
Top yield stock for October 2016, Orchid Island Capital, released this cautionary note with its monthly dividend announcements: “The Company has not established a minimum distribution payment level and is not assured of its ability to make distributions to stockholders in the future”. ORC directors proceeded to back up their words with actions, cutting the dividend from $0.14 to $0.11 in February, to $0.09 in March, and to $0.08 in September 2018.
Recently, in July 2019, Armour Residential REIT (ARR) cut its payout from $0.19 to $0.17.
Upon inspection, the August 2019 YCharts equity list was pared down by removing four former MoPay members: JMP Group (JMP), San Juan Basin Royalty Trust (SJT), Global Net Lease (GNL), and Dividend Select 15 Corp. (OTCPK:DVVDF).
The November list scrubbed Pacific Coast Oil Trust (ROYT), which announced curtailment of its dividend as of October.
The U.S. exchange MoPay segment is volatile, transitive, and shrinking. More over-the-counter trades in monthly pay equities are available from Canadian firms, many of which are picking up U.S. OTC authorization.
Most Readers like MoPays
“[Y]ou list a few issues here whose distributions are rife with RETURN OF CAPTAL [ROC] at its most destructive form, funds that pay you back your own money each and every month in their distributions with no regard to what they truly earn…- these should not be included in any list containing the word “dividend”.
“I can enter or exit a position and still reap dividends for at least 2/3s of the quarter. They also smooth the income stream so I have cash at any given time to make a purchase at dips.”
– Ed Invests
“At this level of risk, I’m only buying monthly dividend payers. Dividend if cut only [sits] for a month and not a quarter.”
– Sinjjn Smythe
“…love those monthly payers.”
“Some of us are comfortable investing in Dog stocks because we feel the reward is worth the risk. As long as [my sin stock] continues to pay and raise the dividend like it has for 16 years now, it will have a spot in my portfolio.”
– Miz Magic DiviDogs
“One thing to point out: These stocks are not buy & hold. If you buy any of these stocks, set a price where you will sell… trailing stops work real good & with mopays you can get out & get back in without losing a whole quarter of dividends…”
List 1: 85 US Exchange-Traded Monthly Pay Dividend Equities by Yield
Top ten of these US exchange-listed monthly pay dividend equities showing the best yields into January represented three of the eleven Morningstar market sectors, with representative firms split 4, 3, 3 between the energy, real estate, and financial services sectors.
The first of four energy sector representatives led the top ten by yield, Permianville Royalty Trust . The other three energy dogs placed fourth, fifth, and ninth: Mesa Royalty Trust , Vermilion Energy Inc. , and Cross Timbers Royalty Trust , respectively.
Then three real estate representatives placed second, seventh, and tenth: Orchid Island Capital Inc. , American Hotel Income Properties REIT LP (OTC:AHOTF) , and ARMOUR Residential REIT Inc. , respectively.
Finally, financial services equities took the three remaining slots, placing third, sixth, and eighth: Oxford Square Capital Corp. (OXSQ) , Great Elm Capital Corp. , and Capitala Finance Corp. , respectively, to complete the January MoPay top ten list by yield.
List 2: Monthly Pay Dividend Equities by Price Upside
The results shown below from YCharts for MoPay dividend stocks as of market closing price on December 24 were compared with analyst median target prices 1 year out. The ten top stocks displayed 0.97% to 53.49% price upsides for the next year based on analyst 1-year targets.
Five (tinted) of the ten on this price upside list were members of the top ten list by yield. The first five places on this upside list went to Cross Timbers Royalty Trust , Capitala Finance Corp. , Great Elm Capital Corp. , Vermilion Energy Inc. , and Harvest Capital Credit Corp. .
The lower level five were, PennantPark Floating Rate Capital Ltd. , Ellington Financial Inc. , Solar Senior Capital Ltd. (SUNS) , ARMOUR Residential REIT Inc. , and Whitestone REIT (WSR) .
Price upside, of course, was defined as the difference between the current price and analyst 1-year median price targets for each stock.
Those ten MoPay stocks showing the highest upside price potential into 2020 were gleaned from 30 selected by yield. Three to nine analysts have historically provided the most accurate median target price estimates.
List 3: Monthly Pay Dividend Closed-End Investment Companies, Exchange-Traded Funds, and Notes by Yield
Eighty top monthly dividend paying (MoPay) Closed-End Funds, Exchange-Traded Funds, and Notes listed below were culled from nearly 800 candidates. Yields greater than 14% calculated as of December 24 determined the top ten.
The top ten monthly paying dividend investment companies, funds, and notes showing the biggest yields for per YCharts and Yahoo Finance data featured eight uncollateralized debt instruments (ETNs), one open-ended investment company (ETF), and one closed-ended investment company (CEIC).
Uncollateralized debt instruments (ETNs) captured the first, and fourth through tenth, positions: Credit Suisse X-Links MP2xLvgAlrnMLP ETN (AMJL) , UBS ETRACS M Py 2xLvg US Sm Cp HiDiv ETN (SMHD) , UBS ETRACS Mthly Py 2xLvg Mortg REIT ETN (MORL) , Credit Suisse X-LinksMP2xLvgMortREIT ETN (REML) , UBS ETRACS M Py 2xLvg MortgREIT ETN SerB (MRRL) , Credit Suisse X-Lnks Crde OlShrsCvCllETN (USOI) , UBS ETRACS Mthly Py 2xLvg Closed-End ETN (CEFL) , and UBS ETRACS M Py 2xLvg Divers Hi Inc ETN (DVHL) , respectively.
Finally, one open-ended investment company (ETF) placed second, InfraCap MLP ETF (AMZA) , and one closed-end investment company placed third, Oxford Lane Capital (OXLC) , to complete the top ten Exchange-Traded Notes, Exchange-Traded Funds, and Closed-End Investment Companies list for January 2020.
Compare Equity To Fund Performance
Note that the top ten equity dividends are priced 1% less those of the top ten funds. They were 2% apart in December and November 2019, but in October they were 1% less. For September equities were also 2% under funds, but in August they were equal. The difference is likely found in management fees collected in the fund world and the price of risk.
Background and Actionable Conclusions
Since June 2012 reader suggestions to include funds, trusts, and partnerships, a list of MoPay equities to buy and hold in September 2012 resulted from those reader suggestions, supplemented with a high yield collection from here. That list was supplemented by an upside potential article in October and a upside versus buy-and-hold in November. Another list factored December 2012 reader comments.
Now we have a new year of 2019 articles in January, February, March, April, May, June, July, August, September, October, November, and December, continuing to compare and contrast MoPay equity upside potential to the now lower-yield (but higher-risk) buy-and-hold Exchange-Traded Funds and Notes.
Yield Metrics Found No Advantage For Five Lowest-Priced Of Ten High-Yield MoPay Equities
Ten monthly pay stock equities were ranked by yield. Those results, verified by YCharts and Yahoo Finance, produced the following charts.
Actionable Conclusions: Analysts Estimated 5 Lowest-Priced of Top Ten High Yield MoPay Dividend Stocks (11) Would Produce 12.27% Vs. (12) 22.52% Net Gains from All Ten by December 2020
$5000 invested as $1k in each of the five lowest-priced stocks in the top ten MoPay dividend dog kennel by yield were predicted by analyst 1-year targets to deliver 45.5% less net gain than $5,000 invested as $.5k in all ten. The sixth-lowest priced MoPay dividend dog, Cross Timbers Royalty Trust, was predicted to deliver the best net gain of 64.03%.
The five lowest-priced MoPay dividend stocks estimated as of December 24 were Permianville Royalty Trust, American Hotel Income Properties REIT LP, Oxford Square Capital Corp., Orchid Island Capital Inc., and Mesa Royalty Trust, with prices ranging from $1.82 to $6.99.
Five higher-priced MoPay dividend equities estimated as of December 24 were Cross Timbers Royalty Trust, Great Elm Capital Corp., Capitala Finance Corp., Vermilion Energy Inc., and ARMOUR Residential REIT Inc., whose prices ranged from $7.59 to $17.77.
This distinction between five low-priced dividend dogs and the general field of ten reflects the “basic method” Michael B. O’Higgins employed for beating the Dow. The same technique, you now see, may someday be usable to find rewarding dogs in the MoPay stock kennel.
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. It is also the work analysts got paid big bucks to do.
Caution is advised, however, as analysts are historically 20-80% accurate on the direction of change and about 0-20% accurate on the degree of change.
Gains/declines as reported do not factor in any tax problems resulting from dividend, profit, or return of capital 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 MoPay dividend 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 YCharts; Dividend.com; Yahoo Finance; analyst mean target price by YCharts. Dog Photo: dreamstime.com
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Disclosure: I am/we are long MFCSF. 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.