Results from the S&P 500 Aristocrats Index as of June 14, 2013, were reported in this article, which contrasted recent stock prices and dividends with those projected one year out. Seeking Alpha reader requests prompted this series of index-specific articles reporting dividend yield plus price upside results for 12 popular stock indices: Dow 30; S&P 500; S&P Aristocrats; Russell 50; NASDAQ; NYSE International 100; Mergent Dividend Achievers; Champions; Contenders; Challengers; Carnevale's Power 25; Carnevale's Super 29.
Investor Glossary has summarized dividend dog methodology thus: "...[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. This report presumed dividend dog methodology applied to any index and compared that index side by side with the Dow.
Below, the Arnold S&P 500 Aristocrats Index top dog elections for May/June were disclosed step by step.
Dog Metrics Ranked S&P 500 Aristocrats Index 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."
May/June Aristocrats had seven of nine business sectors making the top 10 by yield. The lone technology dog, AT&T (T) led the pack. One of two financial firms, HCP, Inc. (HCP), was second. The other financial, Cincinnati Financial (CINF), placed fifth. The lone utility, Consolidated Edison Inc. (ED) was third. Healthcare firm, AbbVie Inc. (ABBV) placed fourth. Two consumer goods firms placed fifth and eighth: Leggett & Platt (LEG), and Kimberly-Clark (KMB). Two basic materials firms were seventh and ninth: Chevron Corp. (CVX), and Nucor Corp. (NUE). 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 10 Aristocrats dogs by yield as of market close 6/14/2013 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 (1): S&P 500 & Dow Dogs Go Bullish and Overbought
The May/June Aristocrats collection of dividend payers continued a bullish price course set since November, 2012. Aggregate dividend from $10k invested in each of the top 10 Aristocrats stocks dropped at a 25.8% rate since November, while total single share price increased nearly 22.2% in that period. In the past month S&P 500 Aristocrats top 10 dog dividend dropped 13% while price rose 10%. The Aristocrats dogs increased their overbought condition as aggregate single share price of the 10 exceeded projected annual dividend from $1k invested in each by over $180 or 47.7%.
For the Dow dogs, meanwhile, projected annual dividend from $1k invested in each of the top 10 dropped over 2.2% since April, while aggregate single share price popped up over 13.6%. Dow dogs increased their overbought condition as aggregate single share price of the 10 exceeded projected annual dividend from $1k invested in each of the 10 by over $198 or 53%.
Since the S&P 500 Aristocrats index dogs are 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 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 7.15% Net Gain from Top 20 Aristocrats Dogs In 2014
Top 20 dogs from the S&P 500 Aristocrats index were graphed below to show relative strengths by dividend and price as of June 14, 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 5.6% lower dividend from $10K invested in this group while aggregate single share price was projected to increase by 5.6% 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 S&P 500 Dividend Aristocrats Dogs to Net 8% to 15.3% By June 2014
Ten probable profit generating trades revealed by Yahoo Finance for 2014 were:
Coca-Cola Co (KO) netted $153.28 based on dividends plus a mean target price estimate from 14 analysts less broker fees;
HCP Inc. (HCP) netted $151.49 based on a mean target price estimate from 11 analysts combined with projected annual dividend less broker fees;
Nucor Corp. netted $144.43 based on dividends plus a mean target price estimate from 19 analysts less broker fees;
Chevron Corp (CVX) netted $113.77, based on dividend plus mean target price estimates from 21 analysts less broker fees;
AbbVie Inc. (ABV) netted $105.90 based on target price estimates from 10 analysts plus dividends less broker fees;
McDonald's Corp. (MCD) netted $97.56 based on dividends plus the mean of annual price estimates from 17 analysts less broker fees;
Procter & Gamble (PG) netted $97.39 based on dividends plus a mean target price estimate from 14 analysts less broker fees.
Emerson Electric Co. (EMR) netted $91.15 based on dividends plus a mean target price estimate from 23 analysts less broker fees;
AT&T Inc. (T) netted $85.28 based on dividends plus a mean target price estimate from 28 analysts less broker fees;
Consolidated Edison Inc. (ED) netted $79.97 based on dividends plus a mean target price estimate from 19 analysts less broker fees.
The average net gain in dividend and price was just over 11.2% 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.
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.