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Two articles in recent 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 second of those articles concluded by ranking eight indexes by risk from low to high:

  1. JPMorgan New Sovereigns Dogs
  2. S&P 500 Aristocrats Dogs
  3. Dow Industrial Index Dogs
  4. NASDAQ 100 Index Dogs
  5. NYSE International Index Dogs
  6. S&P 500 Index Dogs
  7. Top Dog Stocks by Sectors
  8. Russell 2000 Index Dogs

This is the sixth article in an eight part series launched as another step toward Yale economist Robert Schiller's admonishment to "make conservative preparations for possible bad outcomes". Part 1 reviewed the underlying top thirty component stocks of the Russell 2000 Index. Part 2 discussed the 3x9 Sectors 27 Dogs. Part 3 examined the underlying top thirty component dividend stocks of the S&P 500 Index. Part 4 investigated the underlying top thirty component dividend stocks of the NYSE International 100 Index. Part 5 reported the underlying top thirty highest yielding component dividend stocks of the NASDAQ 100 Index. Future articles in this eight part series will describe the complete component listings for all eight indices.

This article (part 6) surveys the underlying top thirty highest yielding component dividend stocks of the Dow Industrial Index. These are the current 30 Dogs of the Dow. This is the third lowest yielding with presumed third lowest risk of the eight indices listed above.

The "Dogs of the Dow" Strategy Employed for Trading

Investopedia explains the strategic concept as:

An investing strategy that consists of buying the 10 dogs of the dow [dogs of the index] stocks the highest dividend yield at the beginning of the year. The portfolio should be adjusted at the beginning of each year to include the 10 highest yielding stocks.

This strategy is so simple you don't need more than 15 minutes per year to decide which stocks to buy. Just 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 reveals the percentage amount by which each stock is ranked. After selecting a pool of twenty to thirty stocks that throw the highest dividend yields in any index, the investor follows, trades, and awaits the results of an investment in the lowest priced, highest yielding one-half (if 20) to one-third (if 30) of the pool. A third variable of broker commission of $10 per trade is deducted from every transaction to reveal net income each year.

Data from here reveals the following thirty stock portfolio as of September 19, 2011:


Top Dividend Stocks in the Dow Industrial Index Pound

Below are links to short summary business profiles of the thirty top yielding Dogs of the Dow. All are dividend paying stocks for September 2011 from Yahoo Finance.

1. AT&T (T) [Sector: Technology; Industry: Telecom Services - Domestic]

2. Verizon Communications (VZ) [Sector: Technology; Industry: Telecom Services - Domestic]

3. Pfizer (PFE) [Sector: Healthcare; Industry: Drug Manufacturers - Major]

4. Merck (MRK) [Sector: Healthcare; Industry: Drug Manufacturers - Major]

5. General Electric (GE) [Sector: Industrial Goods; Industry: Diversified Machinery]

6. Intel (INTC) [Sector: Technology; Industry: Semiconductor - Broad Line]

7. Johnson & Johnson (JNJ) [Sector: Healthcare; Industry: Drug Manufacturers - Major]

8. JP Morgan Chase (JPM) [Sector: Financial; Industry: Money Center Banks]

9. Dupont (DD) [Sector: Industrial Goods; Industry: Chemicals - Major Diversified]

10. Travelers (TRV) [Sector: Financial; Industry: Property & Casualty Insurance]

11. Procter & Gamble (PG) [Sector: Consumer Goods; Industry: Personal Products]

12. Kraft Foods (KFT) [Sector: Consumer Goods; Industry: Food - Major Diversified]

13. Chevron (CVX) [Sector: Basic Materials; Industry: Major Integrated Oil & Gas]

14. Wal Mart (WMT) [Sector: Services; Industry: Discount Variety Stores]

15. Home Depot (HD) [Sector: Services; Industry: Home Improvement Stores]

16. McDonalds (MCD) [Sector: Services; Industry: Restaurants]

17. 3M (MMM) [Sector: Conglomerates; Industry: Conglomerates]

18. Coca-Cola (KO) [Sector: Consumer Goods; Industry: Beverages - Soft Drinks]

19. Microsoft (MSFT) [Sector: Technology; Industry: Application Software]

20. United Technologies (UTX) [Sector: Conglomerates; Industry: Conglomerates]

21. Boeing (BA) [Sector: Industrial Goods; Industry: Aerospace/Defense Products & Services]

22. Exxon Mobil (XOM) [Sector: Basic Materials; Industry: Major Integrated Oil & Gas]

23. Hewlett Packard (HPQ) [Sector: Technology; Industry: Diversified Computer Systems]

24. Caterpillar (CAT) [Sector: Industrial Goods; Industry: Farm & Construction Machinery]

25. International Business Machines (IBM) [Sector: Technology; Diversified Computer Syatems]

26. American Express (AXP) [Sector: Financial; Industry: Mortgage Investment]

27. Cisco Systems (CSCO) [Sector: Technology; Industry: Networking & Communication Devices]

28. Bank of America (BAC) [Sector: Financial; Industry: Regional Mid-Atlantic Banks]

29. Walt Disney Co. (DIS) [Sector: Services; Industry: Entertainment - Diversified]

30. Alcoa, Inc. (AA) [Sector: Basic Materials; Industry: Aluminum]

Charting the Ups and Downs of The Dow Dogs

Over the past nine months AT&T has retained the top slot the top of this dividend yield based list. Color code shows: (Yellow) (1) firm listed in first position at least once between January and September 2011; (Cyan Blue) (6) firms listed in tenth position at least once between January and September 2011; (Magenta) (6) firms listed in twentieth position at least once between January and September 2011; (Green) (3) firms listed in thirtieth position at least once between January and September 2011. Duplicates are depicted in color for highest attained rank.


Click to enlarge



September Dividend vs Price Results for Dow Index Highest Dividend Paying 10

AT&T topped this list at 6.12% Yield as of September 19. Year to date annual projected dividend totals for $1000 invested in each of the top ten stocks had not diverged beyond $150 of aggregate total single share price but began a reversal in August. September exaggerated the August position switch at $35.60 rising to $89.04 as of September 19. This trend signals stock prices of the top ten dividend yielders dropping as lower priced stocks have risen to occupy the top ten slots boosting dividend yields and the number of shares buyable with a fixed investment amount.


Maybe annual projected dividend totals for $1000 invested in the top ten of the Dow Index dividend stocks will continue to exceed the aggregate single share price by a wider margin.



Conclusion

The graph above shows further divergence in price vs yield occurring just last week when the gap widened from $89.04 to $127.44 between September 19 and September 23. Maybe Annual projected dividend totals for $1000 invested in the top ten of the Dow Index dividend stocks will continue to exceed the aggregate single share price by a wider margin. Still, the Dow Index remains a very tame and harmonious list showing low risk. In October another review of the 30 Dogs of the Dow 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.

Source: Introducing Dogs Of The Indices In Depth Part 6: High Yielding Dow Industrial Index Dogs