October Dog Show I: Dividend Yields For 80 Index Leading Stocks

|
 |  Includes: AGNC, CTL, DHT, DIA, FTR, LMT, MRK, QQQ, SPY, STX, T, TNK, YPF
by: Fredrik Arnold

This article compares the relative strengths of eight stock indexes by yield using ten months of historic projected annual dividend history from $1000 invested in the ten highest yielding stocks in each index. This is part of an ongoing effort to answer the question, "Which dividend stocks are good, better, best, bad or ugly?" It also aims to provide strong evidence of the need to heed Yale professor Robert Schiller's observation:

People still place too much confidence in the markets and have too strong a belief that paying attention to the gyrations in their investments will someday make them rich, and so they do not make conservative preparations for possible bad outcomes.

Previous posts in September ranked the dividend stocks of eight indices by risk in the following order from most risk to least:

Russell 1000 Index Stocks

Transitioning from Russell 2000 stocks to the 1000 list in October brought some diversity to the list along with higher capitalized firms bringing lower risk. There are seven financial, one service, one technology, and one industrial firms paying big but not so huge dividends in the top ten. This month American Capital Agency Corp. (AGNC) returns to the top of the list at 20.98% yield, followed by Teekay Tankers (TNK), a service firm.

Top Stocks by Sectors

Composed of top dividend payers regardless of index and limited to three stocks from each of nine sectors. Those in the top ten include two financial firms (from the Russell Index), three basic material firms, two service companies, and two technology companies (one from the S&P index). DHT Holdings (DHT) a service firm is tops with an October 14 yield of 23.53% for this index.

NYSE International 100 Stocks

These international dividend stocks are found in none of the other seven indices. Of ten European based companies on the NYSE showing the highest dividend yields in October, YPF Sociedad Anonimia (YPF) heads this list in October with a 9.44% yield.

S&P 500 Stocks

The best of the top ten S&P 500 dividend paying stocks is Frontier Communications (FTR) tops with a 12.367% October 20 indexarb.com yield for this index.

Aristocrat Stocks

These are 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 at 8.31% as of October 24 for this index.

NASDAQ 100 Stocks

Shown below are current top yielding stocks primarily from the Technology and Service Sectors. Seagate Technologies (STX) is tops by yield at 5.97% as of October 20 in this index.

Dow Stocks

Below are the current Dow Dogs in which AT&T (T) remains atop this index with a 6.72% yield for October 20.

JPMorganSovereign Stocks

Below are ten October top stocks by yield on a list first published July 22, 2011 by Thomas Lee, an equity strategist with JPMorgan, titled “Corporates are the New Sovereigns: 22 stocks to own around sovereign default.” A Barron's article defined a Sovereign as an entity that can print money or tax at will. Lee's 22 corporate stocks were based on less risk of default than the sovereign U.S. Government based on five-year credit spreads, free cash flow yields exceeding bond yields, ratings of overweight by JPMorgan, and showing upside to their target prices. Merck (MRK) had topped this list since January but was replaced at the top by Lockheed Martin (NYSE:LMT) for October by virtue of a September 22 one dollar annual dividend increase pegging its yield at 5.08%.

Companies in the top ten for each index
Click to enlarge

Any variations in divided projections from identical stocks on separate lists results from the data coming from separate sources with closing prices on different days. For example, PBI's projected annual dividend is listed as $1.50 at $19.85 in the 10/20/11 indexarb.com database used for the S&P 500 Index but as $1.48 at $20.65 by the 10/24/11 Yahoo Finance data used for the S&P 500 Aristocrats Index.

Tracking the Bull and Bear Markets of 2011 by Projected Doggish Dividend Yields

The following graph shows annual dividends projected from $1000 invested in each of ten stocks with the top yields in eight indices (a total of 80 stock investments). The chart plots projected yields as of a specific purchase date near the middle of each month going back to January. Projected yield increases were most frequent as average stock prices within each index fell. Bull market reversals in several indices forced yields down as recent prices increased.

Relative yield strengths differentiate the indices on the graph. The JPM Sovereigns, Dow (DIA), NASDAQ (QQQ), and Aristocrats show lower yields with less pronounced swings. The NYSE International and S&P 500 (SPY) stocks display slightly higher yields than the lower volatility group. The Russell Index and Top Yielding Sectors declare the highest yields and the greatest rate of increase during the past months. These indices have now exchanged positions in October by virtue of the reporters changeover from Russell 2000 to higher cap Russell 1000 stocks in that index.

Annual Dividends Forecast from $1k Invested in each of 10 Top Yielding Stocks in 8 Indices

Conclusion

Projected dividend yield amounts from eight indexes over the past ten months show a welcome leveling of the stock market plunge that began in May. These eight representative market indices display their relative strengths in top end dividend yield.

For example, two indices, (the NASDAQ and INTERNATIONAL) crossed paths between April and August with rivals (the DOW and S&P) once tracking at higher levels. Now the NASDAQ is back below the DOW in yield in September and October.

These eight indices and their component stocks have ongoing stories to tell. This graph and list of companies will be updated again for publication in November and in months thereafter.

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

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 T, VZ, CVX, JNJ, INTC.