Dogs Of The Indices In Depth Part 2: High Yielding Top Dogs By Sectors

|
 |  Includes: AEE, AGNC, ALSK, ARR, AZN, BA, BTI, CAT, CHKE, CIM, CINF, CLX, CQP, DD, DUK, ECOL, FE, FTR, GE, GNI, GOGL, GSK, HIMX, IVR, LLY, LMT, LO, LZR, MMM, MO, MRK, NGG, OTEL, PBI, PDLI, PFE, POM, PPL, PSEC, RRD, SCCO, STON, TEG, TNK, UTX, VGR, WHX, WM
by: Fredrik Arnold

<< Return to Part 1

Two articles in the past two weeks described consolidated year to date results from the top 10 high yield stocks comprising (Dog) stocks in each of seven and eight indices. The more recent article concluded by ranking eight indexes by risk from low to high:

  • JPMorgan New Sovereigns Dogs
  • S&P 500 Aristocrats Dogs
  • Dow Industrial Index Dogs
  • NASDAQ 1000 Index Dogs
  • NYSE International Index Dogs
  • S&P 500 Index Dogs
  • Top Dog Stocks by Sectors
  • Russell 2000 Index Dogs

This is the second article in an eight part series launched as another step toward Yale economist Robert Shiller's admonishment to "make conservative preparations for possible bad outcomes." Part 1 reviewed the underlying top thirty component stocks of the Russell 2000 Index.

This article (Part 2) reviews the underlying top 27 component dividend stocks of the Top Dog Stocks by Sectors Index. This is the next to the highest yielding with presumed second highest risk of the eight indices listed above.

Future articles in this eight part series will describe the complete component listings for the all eight indices.

Data from Yahoo Finance reveals the following thirty stock portfolio as of September 9, 2011:

Top Stocks by Sectors Index Dog Pound

Click to enlarge
(Click to enlarge)

Components of this 3x9 Sector Index are limited to the three top dividend paying stocks from each of nine sectors: Financial; Basic Materials; Services; Technology; Healthcare; Consumer Goods; Utilities; Industrial Goods; Conglomerates. So, by definition, the pool is balanced. Since its inception two years ago, the top dividend yielding stocks in the pool, regardless of sector, have been listed as top Dogs of this index each month. As a result of this policy every month three financial firms from the Russell index repeatedly showed up at or near the top of this Sectors index. (In January of 2012 one top yielding stock from each sector will be selected for the nine top Dogs or the 3x9 Sector Index along with the best yielding runner-up from any sector to be the tenth. This change is expected to diversify the portfolio so it will less closely track the Russell Dogs.)

As it stands this month, three of the top 10 stocks in this index are financial firms paying out huge dividends. Three more of the top ten are basic material sector firms. The remaining four are two each from the service and technology sectors.

With three stocks selected by sector each quarter, the dropout rate for components of this index is more severe than any other. If a stock is not one of the top dividend payers in its sector, it's out.

Sectors Index Component Profiles

Below are links to summary business profiles of the 27 3X9 Sector Dividend paying stocks for September 2011 from Yahoo Finance.

1. Invesco Mortgage Capital Inc. (NYSE:IVR) [Sector: Financial; Industry: Mortgage Investment]

2. Whiting USA Trust I (NYSE:WHX) [Sector: Basic Materials; Industry: Oil & Gas Drilling & Exploration]

3. American Capital Agency Corp. (IVR) [Sector: Financial; Industry: REIT Residential]

4. ARMOUR Residential REIT, Inc. (NYSE:ARR) [Sector: Financial; Industry: REIT Residential]

5. Teekay Tankers Ltd. (NYSE:TNK) [Sector: Services; Industry: Shipping]

6. Knightsbridge Tankers Limited (VLCCF) [Sector: Services; Industry: Shipping]

7. Alaska Communications Systems Group Inc. (NASDAQ:ALSK) [Sector: Technology; Industry: Telecom Services-Domestic]

8. Great Northern Iron Ore Properties (NYSE:GNI) [Sector: Basic Materials; Industry: Steel & Iron]

9. Frontier Communications Corporation (NYSE:FTR) [Sector: Technology; Industry: Telecom Services - Domestic]

10. Cheniere Energy Partners LP (NYSEMKT:CQP) [Sector: Basic Materials; Industry: Oil & Gas Pipelines]

11. PDL BioPharma, Inc. (NASDAQ:PDLI) [Sector: Healthcare; Industry: Biotechnology]

12. Otelco Inc. (OTT) [Sector: Technology; Industry: Telecom Services - Domestic]

13. StoneMor Partners LP (NASDAQ:STON) [Sector: Services; Industry: Personal Services]

14. Pitney Bowes, Inc. (NYSE:PBI) [Sector: Consumer Goods; Industry: Business Equipment]

15. National Grid Transco PLC (NYSE:NGG) [Sector: Utilities; Industry: Gas Utilities]

16. Altria Group, Inc. (NYSE:MO) [Sector: Consumer Goods; Industry: Cigarettes]

17. Eli Lilly & Co. (NYSE:LLY) [Sector: Healthcare; Industry: Drug Manufacturers-Major]

18. Duke Energy Corporation (NYSE:DUK) [Sector: Utilities; Industry: Electric Utilities]

19. Ameren Corporation (NYSE:AEE) [Sector: Utilities; Industry: Diversified Utilities]

20. Waste Management, Inc. (NYSE:WM) [Sector: Industrial Goods; Industry: Waste Management]

21. US Ecology, Inc (NASDAQ:ECOL) [Sector: Industrial Goods; Industry: Waste Management]

22. Lockheed Martin Corporation (NYSE:LMT) [Sector: Industrial Goods; Industry: Aerospace/Defense Products & Services]

23. General Electric Co. (NYSE:GE) [Sector: Conglomerates; Industry: Conglomerates]

24. AstraZeneca PLC (NYSE:AZN) [Sector: Healthcare; Industry: Drug Manufacturers-Major]

25. Clorox Corporation (NYSE:CLX) [Sector: Conglomerates; Industry: Conglomerates]

26. British American Tobacco plc (NYSEMKT:BTI) [Sector: Consumer Goods; Industry: Cigarettes]

27. 3M Company (NYSE:MMM) [Sector: Conglomerates; Industry: Conglomerates]

Follow the Ever-Changing 3x9 Sector Top Dividend Paying 27

Over the past nine months three different firms have bubbled to the top of the list. Color code shows: (Yellow) firms listed in first position at least once between January and September 2011; (Cyan Blue) firms listed in tenth position at least once between January and September 2011; (Magenta) firms listed in nineteenth position at least once between January and September 2011; (Green) firms listed in twenty seventh position at least once between January and September 2011. Duplicates are depicted in color for highest ranking attained.

Notice how many stocks come and go from the list after quarterly component updates. Gone in March are half the components LZR, PSEC, CHKE, PBI, AEE, CINF, NGG, MRK, PFE, SCCO, DD, BA, UTX, & CAT, replaced by IVR, CIM, GNI, CQP, FTR, AZN, BTI, GSK, LO, PPL, FE, LMT, WM, & CLX. In April the top three dividend yielders for each of the nine sectors were again updated with just two changes: CIM & LO were replaced by PBI & TEG. The July quarterly update removed nearly one third of the components HIMX, RSO, VGR, POM, RRD, TEG FE, & GSK which were replaced by ARR, ALSK, PDLI, VLCCF, NGG, MO, AEE, & DUK. The next quarterly update for this list will take place in October.

Click to enlarge
(Click to enlarge)



Click to enlarge
(Click to enlarge)

September Dividend vs. Price Results for 3x9 Sector Index Top Dividend Paying 10

Again in September Invesco Mortgage topped this list at 23.83% Yield. Annual projected dividend totals for $1000 invested in each stock blew away the aggregate total single share prices again this month and have begun to diverge further. This divergence is caused by lower priced stocks with high dividends replacing stocks on the list whose prices increased to reduce the yield percentage by which the top dogs are selected.

Click to enlarge
(Click to enlarge)

Click to enlarge
(Click to enlarge)

Perhaps the Annual projected dividend totals for $1,000 invested in the top ten 3X9 Sector stocks will begin to converge toward the aggregate total single share prices in October. The last time that convergence occurred was at the March quarterly update when half the list was replaced. In October another review of the quarterly updated list of 3X9 Sector top 27 dividend stocks will be reported. Stay tuned

Disclaimer: This article is for informational and educational purposes only and shall not be construed to constitute investment advice. Nothing contained herein shall constitute a solicitation, recommendation or endorsement to buy or sell any security.

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