10 Market Selected International Dividend Buy Opportunities: Dogs Of The Index Q4 Update

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 |  Includes: BBVA, BCE, BMO, BP, CHL, CM, DEO, E, GSK, HSBC, NGG, NOK, ORAN, PUK, RDS.A, RDS.B, RY, SAN, SID, SLF, STO, TEF, TI, TLK, TOT, TRP, UL, UN, WBK, YPF
by: Fredrik Arnold

Investment strategists have long recommended dividend paying stocks. Recent articles have investigated and compared projected dividend yields from eight indices in an effort to sort out an answer to the question: "Which dividend stocks are good, better, best, bad or ugly?"

Until now this series of articles has provided information without stating the obvious fact that any portfolio of stocks is only as strong as the grounds for its collection. Much like a building is planned and built to suit its location, so must a stock portfolio be built to suit the owner's purpose.

The Need for Investment Research

Some investors select dividend stocks based on fundamental financial reports from individual companies. This approach is central to the existence of Seeking Alpha. Readers and writers herein can debate and compare the relative merits of their favorite stock picks. This method takes a lot of time and study to determine an answer to the question, "Which dividend stocks are good, better, best, bad or ugly?"

Meanwhile, in the world of finance and publishing, many well-paid financial wizards busy themselves attempting to gain followers and credibility for their chosen collections of equities. These organizations include:

  • Russell Investments, a Washington, USA Corporation, a subsidiary of Northwestern Mutual Life Insurance Company publishes the Russell 1000 index and others.
  • Standard and Poors, a division of McGraw Hill publishes indices including the S&P 500 and the S&P 100.
  • Dow Jones, a CME Group Company, aggregates the Dow Jones Industrial index of 30 stocks selected to represent the market as a whole, which is commonly called the DOW.
  • NASDAQ initials initially were the acronym for the National Association of Securities Dealers Automated Quotations. It was the nation's first electronic stock exchange.
  • NYSE stands for the New York Stock Exchange and, as NYSE Euronext, publishes an index of 100 international stocks, among others.
  • CBOT stands for Chicago Board of Trade, a designated contract market reported by CME Group which declares itself as "the world's leading and most diverse derivatives marketplace."
  • JPMorgan (NYSE:JPM), Morgan Stanley (NYSE:MS), Merrill Lynch (NYSE:BAC), Morningstar, Vanguard, Fidelity, Edward Jones, and nearly all investment houses collect lists of equites to serve various market niches.

A Short Cut to Investment Wisdom

October as the start of the fourth quarter of the year also signals the start of the profit generating equity trading season. It heralds the much quoted "buy in October sell in May" admonition.

As a shortcut to determining the best dividend stocks, many investors rely on a once per year trading system triggered by yield, called the "Dogs of the Index" strategy. This strategy gives the investor the tactical advantage of obtaining all the wisdom and knowledge of the well-paid wizards of investment and publishing for free merely by choosing to invest in an existing collection of equities built by experts.

The charts below reveal 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 NYSE International 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 five or ten stocks in the index.

Revelations from the NYSE International Index for October

Below are thirty picks for October served up as of October 20 by Yahoo Finance as the top dividend yielding stocks listed on the NYSE International Index. The NYSE states as follows:

The NYSE International 100 Index tracks the largest 100 non-U.S. common stocks listed on the New York Stock Exchange. As of year-end 2004, the companies represented have a combined market capitalization (float-adjusted) of $4.3 trillion. Together they represent over one-quarter of the total market capitalization of all common stocks listed on the NYSE.


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Four of the top ten stocks paying the biggest dividends in this index for October are technology firms. YPF Sociedad Anonima (NYSE:YPF) last topped this list in August and edges out Telefonica SA (NYSE:TEF). YPF is tops again with a 9.44% yield in October. Of these top thirty S&P 500 dividend payers, seven are technology companies, three consumer goods, nine financial, no services, eight basic materials, no industrial, one health care, two utilities, and no conglomerates represent the sectors.

October Changes in NYSE International Index Top 30 Dividend Paying Stocks

Over the first nine months five different firms have exchanged places at the top of the list, TEF, YPF, NOK, STD, and SID. Color code shows: (Yellow) firms listed in first position at least once between January and October 2011; (Cyan Blue) firms listed in tenth position at least once between January and October 2011; (Magenta) firms listed in twentieth position at least once between January and October 2011; (Green) firms listed in thirtieth position at least once between January and October 2011. Duplicates are depicted in color for highest ranking attained. Notice that no NYSE International 100 stocks disappeared from the list in October.


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October Dividend vs Price Results for NYSE International Index Top 10

Below is a graph of the relative strengths of the top ten NYSE International 100 Index stocks by yield as of October 20, 2011. Using ten months of historic projected annual dividend history from $1000 invested in the ten highest yielding stocks each month and the total single share prices of those ten stocks creates the data points for each month shown in green for price and blue for dividends.

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The October NYSE International 100 Index component update shows bear market divergence with dividends continuing to increase as the aggregate total single share prices drop. Perhaps the bulls will hold sway in the month to come and share prices will begin to grow up toward the dividend yields to signal bull market convergence. 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.