This article reports results from the S&P 500 Aristocrats Index calculated as of April 2, 2013 projecting gain results one year hence. Seeking Alpha reader requests prompted this first installment in a new series of index-specific articles reporting dividend yield plus price upside results for twelve popular stock indices: Dow 30; S&P 500; Aristocrats; Russell 50; NASDAQ; NYSE International 100; Mergent Dividend Achievers; Champions; Contenders; Challengers; Carnevale's Power 25; Carnevale's Super 29.
The online investor tutorial site, Investor Glossary, recently offered this brief description of dividend dog methodology: "...[I]nvented to find the 10 stocks of the 30-stock Dow Jones Industrial Average with the highest yield (dividend / price) and invest equally in each, [t]he Dow dividend theory also requires that you repeat this process once a year.
Below, the Arnold S&P 500 Aristocrats Index top dog selections for April were disclosed.
Dog Metrics Ranked Aristocrats Stocks by Yield
McGraw Hill, publisher if this index, states:
The S&P 500® Dividend Aristocrats index measures the performance of large cap, blue chip companies within the S&P 500 that have followed a policy of increasing dividends every year for at least 25 consecutive years.
April Aristocrats found six of nine business sectors making the top ten by yield. One of three consumer goods firms led the pack. Pitney Bowes Inc. (PBI) was top dog; Leggett & Platt (LEG) was fifth; Kimberly-Clark (KMB) was ninth. One technology dog, AT&T (T) placed second. Two financials, HCP, Inc. (HCP), and Cincinnati Financial (CINF), placed third and sixth. One utility, (ED) placed fourth. Two basic materials firms were seventh and eighth: Nucor Corp. (NUE), and Air Products & Chemicals Inc (APD). The only service firm placed tenth, Sysco Corporation (SYY) to complete the top ten S&P 500 Aristocrats dog list by yield.
Dividend vs. Price Results Compared to Dow Dogs
Below is a graph of the relative strengths of the top ten Aristocrats dogs by yield as of market close 4/2/2013 compared to those of the Dow. Historic projected annual dividend history from $1000 invested in each of the ten highest yielding stocks and the total single share prices of those ten stocks created the data points shown in green for price and blue for dividend.
Actionable Conclusion: S&P 500 & Dow Dogs Get Bullish and Overbought
April Aristocrats collection of dividend payers continued a bullish price course set since November, 2012. Aggregate dividend from $10k invested in each of the top ten Aristocrats stocks dropped at a 13.7% rate since November, while total single share price increased nearly 11% in that period. In the past month S&P 500 Aristocrats top ten dog dividend dropped 4.5% while price rose 3.2%. The Aristocrats dogs increased their overbought condition as aggregate single share price of the ten exceeded projected annual dividend from $1k invested in each by nearly $73 or 16.8%.
The Dow dogs, meanwhile, saw annual dividend from $1k invested in each of the ten drop over 1.1% since March, while aggregate single share price jumped over 5.3%. The Dow dogs also extended their overbought condition as aggregate single share price of the ten continued to exceed projected annual dividend from $1k invested in each of the ten by over $121 or 32%.
Since Aristocrats index dogs are also blue chip high quality equivalents of the Dow list, (but including utilities) an additional gauge of upside potential was added to the simple high yield metric used to detect 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 Too: Analysts Calculate Over 6.5% Net Gain from Top 20 Aristocrats Dogs In 2014
Top twenty dogs from the S&P 500 Aristocrats index were graphed below to show relative strengths by dividend and price as of April 2, 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 price upsides and net gains including dividends less broker fees as of 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 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.
Yahoo projected a 1.6% lower dividend from $10K invested in this group while aggregate single share price was also projected to decrease by 08% in the coming year. The number of analysts contributing to the mean target price estimate for each stock was noted in the last column on the charts. Three to nine analysts was considered optimal for a valid estimate.
Actionable Conclusion Three: Analysts Forecast 6 S&P 500 Dividend Aristocrats Dogs to Net 5.1% to 26.2% By April 2014
Six probable profit generating trades revealed by Yahoo Finance for 2014 were:
Pitney Bowes (PBI) netted $262.94 based on a mean target price estimate from four analysts combined with projected annual dividend less broker fees;
Nucor Corp (NUE) netted $169.00 based on dividends plus mean target price estimate from nineteen analysts less broker fees;
Emerson Electric Co (EMR) netted $128.66, based on dividend plus mean target price estimates from twenty-two analysts less broker fees;
Air Products & Chemicals Inc (APD) netted $125.87 based on target price estimates from fourteen analysts plus dividends less broker fees;
AFLAC Inc (AFL) netted $110.62 based on dividends plus the mean of annual price estimates from seventeen analysts less broker fees;
Coca-Cola Co (KO) netted $71.76 based on dividends plus mean target price estimate from fourteen analysts less broker fees.
The average net gain in dividend and price was just over 14.1% on $1k invested in each of these six dogs.
The stocks listed above were suggested only as decent starting points for your index dog 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.