This article reports results from the NASDAQ 100 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 12 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, an 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 NASDAQ 100 Index top dog selections for April were disclosed.
Dog Metrics Ranked NASDAQ 100 Stocks by Yield
NASDAQ states, "The NASDAQ-100 Index includes 100 of the largest domestic and international non-financial securities listed on The Nasdaq Stock Market based on market capitalization. The Index reflects companies across major industry groups including computer hardware and software, telecommunications, retail/wholesale trade and biotechnology. It does not contain securities of financial companies including investment companies."
Just three of nine sectors were represented in the top 10 NASDAQ dogs in April per IndexARB.com data. Technology had seven firms in the top 10 showing high forward-looking yields. Garmin (NASDAQ:GRMN) claimed the top spot. The other six technology firms in declining order were: Vodafone (NASDAQ:VOD); Seagate Technology (NYSEARCA:SEA); Intel (NASDAQ:INTC); CA Technologies (NASDAQ:CA); Microchip Technology (NASDAQ:MCHP); Microsoft (NASDAQ:MSFT). The remaining two NASDAQ high yield sectors for April included one consumer goods representative, Kraft Foods Group, Inc. (KRFT) and two service firms, Paychex (NASDAQ:PAYX), and Staples (NASDAQ:SPLS), which filled out the top 10 NASDAQ 100 dogs.
Dividend vs. Price Results Compared to Dow Dogs
Below is a graph of the relative strengths of the top 10 NASDAQ 100 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 10 highest-yielding stocks and the total single share prices of those 10 stocks created the data points shown in green for price and blue for dividend.
Actionable Conclusion: NASDAQ 100 & Dow Dogs On Bull Track
NASDAQ 100 top April dividend payers continued a bullish price course set since November, 2012. Aggregate dividend from $10k invested in each of the top 10 NASDAQ 100 stocks dropped at a 9.8% rate since November, while total single share price increased nearly 18% in that period. In the past month the NASDAQ 100 top 10 dog dividend dropped 2.95% while price rose 7.8%.
In the Dow dogs, meanwhile the annual dividend from $1k invested in each of the 10 dropped over 1.1% since March, while aggregate single share price jumped over 5.3%. The Dow dogs extended their overbought condition as the aggregate single share price of the 10 continued to exceed the projected annual dividend from $1k invested in each of the 10 by over $121 or 32%.
Since NASDAQ 100 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 bargains.
Wall Street Wizard Wisdom Weighed
One year mean target price set by brokerage analysts multiplied by the number of shares in a $1k investment were used to compare 10 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 Two: Analysts Calculate Over 8.2% Net Gain from Top 20 NASDAQ 100 Dogs In 2014
Top 20 dogs from the NASDAQ 100 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 10 highest-yielding stocks and the aggregate single share prices of those 20 stocks divided by 2 created data points for 2013. Projections based on estimated increases in dividend amounts from $1000 invested in the 20 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 4.56% lower dividend from $10K invested in this group while the aggregate single share price was projected to increase over 5.5% 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 10 NASDAQ 100 DiviDogs to Net 7.5% to 21.3% By April 2014
Ten probable profit generating trades revealed by Yahoo Finance for 2014 were:
Garmin netted $212.99 based on dividends plus mean target price estimate from seven analysts less broker fees;
KLA-Tencor (NASDAQ:KLAC) netted $173.58, based on dividends plus a mean target price estimate by 15 analysts less broker fees;
Microsoft netted $155.35 based on dividends plus mean target price estimate from 30 analysts less broker fees;
Wynn Resorts (NASDAQ:WYNN) netted $141.20 based on a mean target price estimate from 23 analysts combined with projected annual dividend less broker fees;
Cisco Systems (NASDAQ:CSCO) netted $120.43, based on dividend plus mean target price estimates from 32 analysts less broker fees;
Maxim Integrated Products (NASDAQ:MXIM) netted $104.37 based on estimates from 25 analysts plus dividends less broker fees;
Applied Materials (NASDAQ:AMAT) netted $98.58 based on dividends plus the mean of annual price estimates from 14 analysts less broker fees;
Microchip Technology netted $98.32 based on dividends plus mean target price estimate from 16 analysts less broker fees;
Intel netted $91.60 based on estimates from 37 analysts plus dividends less broker fees;
Analog Devices (NYSE:ADI) netted $75.58 based on a mean target price estimate from 26 analysts combined with projected annual dividend less broker fees.
The average net gain in dividend and price was over 12.7% on $1k invested in each of these 10 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.
Disclosure: I am long DD, GE, JNJ, 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.
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.