Top Dividend Stocks in the Recent Down Market

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 |  Includes: AGNC, AINV, ALSK, ANH, ARCC, ARR, BBEPQ, BFR, BGCP, BKCC, BSI, CEL, CIM, CLMT, CMLP, CMO, CODI, CQP, CYS, DX, ENP, EQC, FRO, FSC, FTR, GLP, GOGL, GTY, HTS, ITCB, IVR, MCGC, MFA, NLY, NMM, NOK, ORAN, PDLI, PMT, PNNT, PSEC, PT, PTNR, PVD, RSO, SBRA, SDRL, SFL, SLRC, TCAP, TGS, TNK, UMC, VE, VIV, VOC, WLB
by: Value Research

How does dividend yield impact stock movements in a downturn? Which dividend stocks best survive turbulent markets?

To answer these and other related questions about performance in severe market downturns, stocks were screened and sorted based on their performances over the week-long downturn that lasted through August 9th, 2011. Over the course of this week, the S&P500 index dropped over 13.3% while the mean drop for a broader sample of 4541 equities was 10.1%, providing an opportunity to observe sector differences during extreme market drops.* These investigations found that the winning stocks featured primarily small caps, that utilities have proven to be the most resilient sector, and that the worst performing industry was Hotel/Motel REITs.

Analysis of dividend stocks reveals no significant relationship between performance in the drop and dividend yield. Across all stocks, less than 2% of the variance in performance is accounted for by dividend yield. A plot of the weekly performance vs. dividend yield for the highest dividend stocks demonstrates no clear relationship:

This plot shows no clear relationship between dividend yield and performance in the market drop.

This result is consistent with the notion that dividend policy does not determine the safety of share prices in a downturn. Capital appreciation (or destruction) in a downturn cannot be determined by dividend policy.

However, by listing stocks with dividend yields higher than 10% by the greatest capital appreciation, we do notice that many mortgage REIT companies are at the top:

Ticker

Industry

Dividend Yield

% Weekly Gain

Beta

PMT

REIT - Residential

11.73%

7.03%

DX

Mortgage Investment

11.51%

4.57%

0.38

AGNC

REIT - Residential

18.81%

4.51%

NLY

REIT - Diversified

14.56%

2.94%

0.3

CYS

REIT - Diversified

18.32%

2.42%

ANH

REIT - Diversified

13.89%

1.27%

0.26

CIM

REIT - Diversified

16.46%

0.96%

1.25

HTS

REIT - Residential

14.51%

0.77%

0.25

ARR

REIT - Residential

19.00%

0.66%

0.12

CMO

Mortgage Investment

14.93%

0.39%

0.45

MFA

REIT - Diversified

13.28%

-0.40%

0.38

PNNT

Asset Management

10.62%

-0.78%

1.73

NOK

Communication Equipment

10.99%

-2.62%

1.59

RSO

REIT - Retail

18.32%

-2.85%

2.1

PT

Wireless Communications

11.50%

-2.99%

0.72

PDLI

Biotechnology

10.27%

-3.47%

0.54

BKCC

Asset Management

12.76%

-4.12%

1.48

SBRA

REIT - Healthcare Facilities

11.72%

-4.21%

TCAP

Asset Management

10.27%

-4.30%

0.45

IVR

Mortgage Investment

21.08%

-4.98%

FTE

Telecom Services - Foreign

10.14%

-5.37%

0.8

GLP

Basic Materials Wholesale

10.08%

-6.15%

0.49

FTR

Telecom Services - Domestic

10.92%

-6.78%

0.78

BBEP

Oil & Gas Drilling & Exploration

10.03%

-9.16%

0.95

PVD

Diversified Investments

10.02%

-9.36%

1.13

VLCCF

Shipping

11.40%

-9.73%

0.99

NRGY

Gas Utilities

10.07%

-9.79%

0.55

SLRC

Diversified Investments

11.41%

-9.82%

ALSK

Telecom Services - Domestic

12.59%

-10.95%

0.74

ARCC

Diversified Investments

10.08%

-11.64%

1.86

VOC

Independent Oil & Gas

17.69%

-12.15%

BCA

Foreign Regional Banks

28.64%

-12.16%

0.85

BGCP

Investment Brokerage - National

10.01%

-12.16%

1.48

VIV

Wireless Communications

12.99%

-12.37%

0.56

PSEC

Asset Management

14.97%

-12.78%

0.78

BSI

Grocery Stores

50.23%

-12.97%

1.08

SDRL

Oil & Gas Drilling & Exploration

10.40%

-13.24%

TNK

Shipping

16.72%

-13.32%

1.13

PTNR

Wireless Communications

16.64%

-13.61%

0.73

CEL

Wireless Communications

16.74%

-13.76%

0.7

ENP

Oil & Gas Drilling & Exploration

10.16%

-14.03%

0.85

SFL

Shipping

12.24%

-14.55%

1.51

TGS

Gas Utilities

48.09%

-14.71%

1.29

UMC

Semiconductor Equipment & Materials

10.12%

-14.73%

1.1

FSC

Credit Services

14.00%

-14.90%

AINV

Diversified Investments

13.93%

-15.37%

1.78

CWH

REIT - Office

10.52%

-15.99%

1.59

BFR

Foreign Regional Banks

13.27%

-16.25%

1.51

CODI

Diversified Investments

11.73%

-16.63%

1.02

NMM

Shipping

13.61%

-16.74%

1.27

FRO

Shipping

15.08%

-18.94%

1.29

CLMT

Oil & Gas Refining & Marketing

11.07%

-20.03%

0.34

OXF

Industrial Metals & Minerals

10.68%

-20.97%

MCGC

Asset Management

15.70%

-21.27%

2.38

GTY

REIT - Diversified

11.01%

-22.59%

0.85

VE

Waste Management

11.52%

-27.16%

1.88

CQP

Oil & Gas Pipelines

13.03%

-28.14%

0.43

Click to enlarge

*Stocks with volumes under 5000 were excluded from the screen, since low liquidity makes them hard to trade. ETFs and other funds were also excluded. Mean sector performance, mean market cap, and mean beta were calculated from an equal-weighted average of stocks in that sector.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.