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Over the years many investment strategists have recommended dividend paying stocks. How do you tell which dividend stock is good, better, best, bad or ugly? One way is to back test using historic pricing and dividends. By this method this article reveals the relative strengths of seven stock indexes by yield using eight months of historic projected annual dividend history from $1000 invested in the ten highest yielding stocks in each index.

As a once per year trading system triggered by yield, the "Dogs of the Index" strategy inspiring the graph and charts below reveals low-yielding stocks whose prices increase (or whose dividends decrease) to be sold off once each year to sweep gains and reinvest the seed money into higher-yielding stocks in the same index. Two key metrics determine the yields that rank the [Index] dog stocks: (1) Stock Price; (2) Annual Dividend. Dividing the annual dividend by the price of the stock declares the percentage yield by which each dog stock is ranked. Thus the investor is able to follow, trade, and await the results from an investment in the lowest priced, highest yielding stocks in each index.

Charting the great Bear Market of 2011 by projected dividend yields

The following graph shows annual dividends projected from $1000 invested in each of ten stocks with the top yields in seven indices (a total of 70 stock investments). The chart plots projected yields as of a specific purchase date near the middle of each month going back to December 2010. Projected yield increases were charted as average stock prices within each index fell. In the past month, for example, yields have rocketed upward as each index average stock price declined at rates between 11.1% for the Dow (NYSEARCA:DIA) to 21.7% for the Russell 2000. Relative yield strengths differentiate the indices on the graph. The Dow, NASDAQ (NASDAQ:QQQ), and Aristocrats show lower yields with less pronounced upswings. The NYSE International and S&P 500 (NYSEARCA:SPY) stocks display slightly higher yields than the Dow group. The Russell Index and Top Yielding Sectors declare the highest yields and the greatest rate of increase within the past month.

Annual Dividends Forecast from $1k Invested in each of 10 Top Yielding Stocks in 7 Indices - (click chart to enlarge)

Stocks comprising each Index

The following charts supporting the above graph display the ten stocks comprising each index as of 8/18/ or 8/19/2011 and their projected annual dividends. Yield data for the Dow, NASDAQ, & S&P 500 index dividend stocks is as of 8/18 from Russell, Sectors, Aristocrats, and NYSE International yield data is as of 8/19 from Yahoo Finance. Any variations in divided projections from identical stocks on separate lists results from the data coming from separate sources with closing prices on successive days. For example CINF projected annual dividend is listed as $1.61at $25.71 in the 8/18/11 database but as $1.60 at $25.59 by the 8/19/11 Yahoo Finance data. This month nine stocks repeat on two lists each: Intel (NASDAQ:INTC); Johnson & Johnson (NYSE:JNJ); Proctor & Gamble (NYSE:PG); CenturyLink (NYSE:CTL); Pitney Bowes (NYSE:PBI); Cincinnati Financial (NASDAQ:CINF); Invesco Mortgage (NYSE:IVR); American Capital (NASDAQ:AGNC); Armour Residential REIT (NYSE:ARR); Frontier Communications (NASDAQ:FTR).

Dow Stocks

Below are the current Dow Dogs in which General Electric (NYSE:GE) has replaced McDonalds (NYSE:MCD) by yield and Procter & Gamble (PG) has replaced Kraft (KFT) since December. AT&T (NYSE:T) is tops by yield on this index.


Shown are current top yielding stocks primarily from the Technology and Service Sectors. Seagate Technologies (NASDAQ:STX) is tops by yield on this index.

Aristocrat Stocks

The ten top yielding stocks from companies paying and increasing dividends each year for 25 years or more on the S&P 500 Index. CenturyLink (CTL) is tops in yield on this index.

S&P 500 Stocks

The ten top yielding stocks from companies paying and increasing dividends each year for 25 years or more on the S&P 500 Index. CenturyLink is tops in yield on this index.

NYSE International 100 Stocks

No repeats here from any other index. These are ten European based companies on the NYSE showing the highest dividend yields now. YPF Sociedad Anonima Common Stock (NYSE:YPF) is tops by yield on this index.

Top Stocks by Sectors

This list is composed of top dividend payers regardless of index limited to three stocks from each of nine sectors. These top include three financials (from the Russell Index), three basic material firms, two service companies, and two technology companies (one from the S&P index). Invesco Mortgage(IVR) is tops by yield on this index.

Russell Index Stocks

These are all financial firms paying huge dividends. This month Invesco Mortgage tops the list by yield at 22.8%. In previous months American Capital Agency Corp has been the leader with yields between 18% and 20%.


Projected dividend yield amounts from seven indexes over the past eight months show an upside to the stock market plunge that began in May. Seven representative market indices also display relative strengths in top end dividend yield among themselves. Two indices crossed paths with rivals tracking at higher levels. These seven indices and their component stocks have ongoing stories to tell. This graph and list of companies will be updated again for publication in September and each month thereafter.

Disclosure: I am long MRK, T, VZ, JNJ, INTC, CVX.