This article reports results from the Russell 1000 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 1000; NASDAQ; NYSE International 100; Mergent Dividend Achievers; Champions; Contenders; Challengers; Carnevale's Power 25; Carnevale's Super 29.
Investor Glossary, the online investor tutorial site, 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 Russell 1000 Index top dog selections for April were disclosed.
Dog Metrics Ranked Russell 1000 Stocks by Yield
Russell Investments states that the Russell 1000 Index offers investors access to the extensive large-cap segment of the U.S. equity universe, representing approximately 90% of the U.S. market.
Six of the top ten stocks in this index paying the big dividends since March were financial sector firms: American Capital Agency (AGNC) led these. Annaly Capital Management Inc. (NLY), and Chimera Investment Corp. (CIM) followed in third and fourth place. Two technology firms captured second and seventh slots: Windstream Corp (WIN), and Frontier Communications (FTR). The only consumer goods firm, Pitney Bowes Inc. (PBI), was fourth. One services firm, Donnelley R R & Sons Co.(RRD) was eighth. Then three more financial representatives took the sixth, ninth, and tenth slots: Hatteras Financial Corp (HTS), Ares Capital Corp (ARCC), and MFA Financial Inc, (MFA), completing the Russell top ten dogs like financial book ends.
Dividend vs. Price Results Compared to Dow Dogs
Below is a graph of the relative strengths of the top ten Russell 1000 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: Russell 1000 & Dow Dogs Chase Bulls
Russell 1000 top dividend payers for April initiated a bullish price course. In the past month Russell top ten dog dividend dropped over 3.5% while price rose 3%.
In the Dow dogs, meanwhile annual dividend from $1k invested in each of the ten dropped over 1.1% since March, while aggregate single share price jumped over 5.3%. The Dow dogs 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 Russell index dogs are not the blue chip high quality equivalents of the Dow list, an additional gauge of upside potential was added to the simple high yield metric used to cull out bargains.
Weighing Wall Street Wizard Wisdom
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 12.7% Net Gain from Top 20 Russell 1000 Dogs In 2014
Top twenty dogs from the Russell 1000 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 3.5% lower dividend from $10K invested in this group while aggregate single share price was projected to increase over 2.4% 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 9 Russell 1000 DiviDogs to Net 6% to 33.5% By April 2014
Nine probable profit generating trades revealed by Yahoo Finance for 2014 were:
Donnelley R R & Sons Co (RRD) netted $335.67 based on dividends plus mean target price estimate from four analysts less broker fees;
Windstream (WIN) netted $325.50, based on dividends plus a mean target price estimate by thirteen analysts less broker fees;
Frontier Communications (FTR) netted $275.17 based on dividends plus mean target price estimate from twelve analysts less broker fees;
Pitney Bowes (PBI) netted $262.94 based on a mean target price estimate from four analysts combined with projected annual dividend less broker fees;
American Capital Agency (AGNC) netted $177.98, based on dividend plus mean target price estimates from seventeen analysts less broker fees;
Hatteras Financial Corp (HTS) netted $106.55 based on estimates from twelve analysts plus dividends less broker fees;
Ares Capital Corporation (ARCC) netted $106.46 based on dividends plus the mean of annual price estimates from thirteen analysts less broker fees;
CenturyLink Inc (CTL) netted $90.57 based on dividends plus mean target price estimate from sixteen analysts less broker fees;
Reynolds American (RAI) netted $60.91 based on a mean target price estimate from nine analysts combined with projected annual dividend less broker fees.
The average net gain in dividend and price was over 19.3% on $1k invested in each of these nine 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.