Results from the Russell 1000 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 twelve 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 Russell 1000 Index top dog elections for May/June were disclosed step by step.
Dog Metrics Ranked Russell 1000 Index 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.
Seven of the top ten stocks in this index paying the big dividends since April were financial sector firms: American Capital Agency (NASDAQ:AGNC) led these. Annaly Capital Management Inc. (NYSE:NLY), and Chimera Investment Corp. (NYSE:CIM) followed in second and fourth place. Two technology firms captured the third and seventh slots: Windstream Corp (NASDAQ:WIN), and Frontier Communications (NASDAQ:FTR). The only services firm, Donnelley R R & Sons Co.(NASDAQ:RRD) was ninth. The remaining four financial representatives took the fifth, sixth, eighth, and tenth slots Hatteras Financial Corp (NYSE:HTS), MFA Financial Inc. (NYSE:MFA), Ares Capital Corp (NASDAQ:ARCC), and New York Community Bancorp (NYSE:NYCB), completed the Russell top ten dogs.
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 6/14/2013 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 (1): Russell 1000 Dogs Shy as Dow Dogs Chased Bulls
The May/June Russell 1000 collection of dividend payers initiated a bearish price course. In the past month Russell top ten dog dividend increased nearly 4% while price dropped 8%.
For the Dow dogs, meanwhile, projected annual dividend from $1k invested in each of the top ten 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 ten exceeded projected annual dividend from $1k invested in each of the ten by over $198 or 53%.
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 Two (2): Analysts Calculate Over 13% 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 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 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 6% lower dividend from $10K invested in this group while aggregate single share price was projected to increase nearly 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 (3): Analysts Forecast 10 Russell 1000 DiviDogs to Net 14% to 36.5% By June 2014
Ten probable profit generating trades revealed by Yahoo Finance for 2014 were:
- American Capital Agency netted $364.80, based on dividend plus mean target price estimates from seventeen analysts less broker fees;
- Annaly Capital Management Inc. netted $218.10 based on dividends plus the mean of annual price estimates from eighteen analysts less broker fees;
- Windstream Corporation netted $206.23, based on dividends plus a mean target price estimate by thirteen analysts less broker fees;
- Pitney Bowes (NYSE:PBI) netted $196.59 based on a mean target price estimate from four analysts combined with projected annual dividend less broker fees;
- Hospitality Properties Trust (NYSE:HPT) netted $196.59 based on a mean target price estimate from four analysts combined with projected annual dividend less broker fees
- Donnelley R R & Sons Co netted $183.65 based on dividends plus mean target price estimate from five analysts less broker fees;
- Frontier Communications netted $181.42 based on dividends plus mean target price estimate from fourteen analysts less broker fees;
- Ares Capital Corporation netted $181.42 based on dividends plus the mean of annual price estimates from fourteen analysts less broker fees;
- MFA Financial Inc. netted $176.33 based on dividends plus mean target price estimate from twelve analysts less broker fees;
- Hatteras Financial Corp netted $140.49 based on estimates from eleven analysts plus dividends less broker fees.
The average net gain in dividend and price was over 20.45% on $1k invested in each of these ten 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, INTC, JNJ, MCD, 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.