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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 seventh 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. 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. Part 6 surveyed the components of the Dow Industrials, the current "Dogs of the Dow." Future articles in this eight part series will describe the complete component listings for all eight indices.

This article (part 7) describes thirty highest yielding component dividend stocks of the S&P 500 Aristocrats, treating them as an index. These are the top yielding stocks from companies paying and increasing dividends each year for 25 years or more on the S&P 500 Index. This is the second lowest yielding with presumed second lowest risk of the eight indices listed above.

The "Dogs of the Index" 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 with 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.

Top Yielding Stocks in the S&P 500 Aristotrats Index Dog Pound

Data from Yahoo Finance reveals the following thirty stock portfolio as of September 23, 2011:


This Dividend Aristocrats Index of 30 stocks is a subset of the S&P 500. It consists of forty stocks in the index paying and increasing dividends every year for 25 years or more.

Four of the top ten stocks in the above list are consumer goods companies, two are financial firms, two are health care pharmaceutical firms, one is a utility, and the top one (NYSE:CTL) is a technology sector telecom. At the top, this index includes five of nine business sectors.

The full list of 30 represents all nine sectors but gets thick in the middle to bottom with ten consumer goods firms and five service sector stocks. Here is the breakdown of the 30 September component stocks by business sector: Technology: 2; Consumer Goods: 10; Services 5; Financial: 3; Basic Materials: 3; Healthcare: 2; Utilities: 1; Industrial Goods: 3; Conglomerates: 1.

S&P 500 Aristocrats Top 30 Component Profiles for September

Below are links to short summary business profiles of the thirty top yielding S&P 500 Aristocrats for September 2011 from Yahoo Finance.

1. CenturyLink, Inc. (CTL) [Sector: Technology; Industry: Telecom Services - Domestic]

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

3. Cincinnati Financial Corporation (NASDAQ:CINF) [Sector: Financial; Industry: Property & Casualty Insurance]

4. Leggett & Platt Incorporated (NYSE:LEG) [Sector: Consumer Goods; Industry: Home Furnishings & Fixtures]

5. Consolidated Edison, Inc. (NYSE:ED) [Sector: Utilities; Industry: Diversified Utilities]

6. Kimberly-Clark Corporation (NYSE:KMB) [Sector: Consumer Goods; Industry: Personal Products]

7. AFLAC Incorporated (NYSE:AFL) [Sector: Financial; Industry: Accident & Health Insurance]

8. Abbott Laboratories (NYSE:ABT) [Sector: Healthcare; Industry: Drug Manufacturers - Major]

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

10. Clorox Company (NYSE:CLX) [Sector: Consumer Goods; Industry: Housewares & Accessories]

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

12. Pepsico, Inc. (NYSE:PEP) [Sector: Consumer Goods; Industry: Beverages - Soft Drinks]

13. PPG Industries, Inc. (NYSE:PPG) [Sector: Basic Materials; Industry: Specialty Chemicals]

14. Bemis Company, Inc. (NYSE:BMS) [Sector: Consumer Goods; Industry: Packaging & Containers]

15. Emerson Electric Company (NYSE:EMR) [Sector: Industrial Goods; Industry: Industrial Equipment & Components]

16. Stanley Black & Decker, Inc. (NYSE:SWK) [Sector: Industrial Goods; Industry: Machine Tools & Accessories]

17. Automatic Data Processing Inc. (NASDAQ:ADP) [Sector: Technology; Industry: Business Software & Services]

18. Air Products and Chemicals, Inc. (NYSE:APD) [Sector: Basic Materials; Industry: Chemicals - Major Diversified]

19. 3M Company (NYSE:MMM) [Sector: Conglomerates; Industry: Conglomerates]

20. Wal-Mart Stores, Inc. (NYSE:WMT) [Sector: Services; Industry: Discount Variety Stores]

21. Lowe's Companies Inc. (NYSE:LOW) [Sector: Services; Industry: Home Improvement Stores]

22. McDonald's Corporation (NYSE:MCD) [Sector: Services; Industry: Restaurants]

23. The Coca-Cola Company (NYSE:KO) [Sector: Consumer Goods; Industry: Beverages - Soft Drinks]

24. Dover Corporation (NYSE:DOV) [Sector: Industrial Goods; Industry: Diversified Machinery]

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

26. The Chubb Corporation (NYSE:CB) [Sector: Financial; Industry: Property & Casualty Insurance]

27. Walgreen Company (NYSE:WAG) [Sector: Services; Industry: Drug Stores]

28. Archer-Daniels-Midland Company (NYSE:ADM) [Sector: Consumer Goods; Industry: Farm Products]

29. Target Corporation (NYSE:TGT) [Sector: Services; Industry: Discount Variety Stores]

30. McCormick & Co. Inc. (NYSE:MKC) [Sector: Consumer Goods; Industry: Processed & Packaged Goods]

Charting Movement of the S&P 500 Aristocrat Dogs

Over the past nine months CenturyLink (CTL) has retained the top slot on 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) (4) 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) (4) firms listed in thirtieth position at least once between January and September 2011. Duplicates are depicted in color for highest attained rank. Four firms dropped off the list of 30 between January and September: BF-B; BDX; VFC; MHP. They were replaced by WAG; DOV; ADM; TGT. Others dropped off and rejoined including DOV & ADM.


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September Dividend vs Price Results for Aristocrat Index Highest Yielding 10

CenturyLink (CTL) has topped this list all year. CTLs September 23 yield was at 8.69%. Year to date annual projected dividend totals for $1000 invested in each of the top ten stocks showed maximum divergence of $93.44 over aggregate single share price in August. September sees the gap narrowing to $78.13. This gap in August signaled stock prices of the top ten dividend yielders dropping as lower priced stocks rose to occupy the top ten slots boosting dividend yields and the number of shares buyable with a fixed investment amount. In September yields dropped slightly as share prices rose.

Conclusion

Maybe annual projected dividend totals for $1000 invested in the top ten Aristocrat Index stocks will continue to converge with the aggregate single share price. This remains a very tame and harmonious list showing low risk. In October another review of the Dogs of the S&P 500 Aristocrat Index 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 am long JNJ
Source: Introducing Dogs Of The Indices In Depth Part 7: High Yielding S&P 500 Aristocrats