Top 10 Dividend 'CCC' Combinations Vs. December Dogs Of The Dow

by: Fredrik Arnold

Last week David Fish published his Dividend Champions, Contenders, and Challengers Smackdowns XXI on Seeking Alpha. He defines the CCC group as follows: "Champions are companies that have paid higher dividends for at least 25 straight years; Contenders have streaks of 10-24 years; Challengers have streaks of 5-9 years." This article combines the top 10 yielding stocks from each group then utilizes the dogs of the index strategy to sort the combined index of those 30 into a suitable grouping of 10 to trade.

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 Shiller'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.

The Dogs of the Index Strategy

Two key metrics determine the yields that rank 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. Investors select portfolios of five or 10 stocks in any one index by yield to trade. They await the results from their investments in the lowest priced, highest yielding stocks they selected and pray that the price of every stock they now own climbs (having locked in a high yield percentage at purchase).

This Dogs of the Index strategy, popularized by Michael B. O'Higgins in the book "Beating The Dow" (HarperCollins, 1991), reveals how low yielding stocks whose prices increase (and whose dividend yields therefore decrease) can be sold off once each year to sweep gains and reinvest the seed money into higher yielding stocks in the same index.

Classic Dogs of the Index theory trades the Dow Index as of the first of January. So this is prime time to select stocks to trade.

Comparative Methods Used

First, the combination of David Fish's 102 Champions, 145 Contenders, and 202 Challengers is sorted by yield to reveal the top 30. Market performance of these 30 selections is then reviewed using three months of historic projected annual dividend history.

Thereafter, today's article goes on to assess the relative strengths of David Fish's Top 10 Dividend CCC Combination vs. the Dogs of the Dow December stock list. There annual dividends from $1000 invested in the 10 highest yielding stocks in each index versus the aggregate single share prices of the top 10 stocks in each index are compared.

Fish Dividend CCC Combination (Click to enlarge)

Mr. Fish's top 10 CCC Combination stocks paying the biggest dividends for December include firms representing six market sectors. The top stock is a utility sector equity. The balance of the top 10 include one technology, one service, two consumer goods, one basic materials, and four financial firms The full list of 30 stocks has two service, one healthcare, five consumer goods, 10 financial, eight basic materials, no industrial, two utilities, two technology, and no conglomerates representing the market sectors.

Vertical Moves in Fish Dividend CCC Combination Stocks

Going back three months, three firms, one financial, one technology and one utility, claimed the top of this list by yield. The action is primarily at the top of the list. A notable price gain was made by Triangle Capital (NYSE:TCAP) in the past three months moving from first place by yield to fourth by virtue of a price gain from $16.17 to $18.93. Conversely, Pitney Bowes (NYSE:PBI) lost value moving from 15th place at $20.26 to 12th place at $18.83 during the same time frame.

Color code shows: (Yellow) firms listed in first position at least once between October and December 2011; (Cyan Blue) firms listed in 10th position at least once between October and December 2011; (Magenta) firms listed in 20th position at least once between October and December 2011; (Green) firms listed in 30th position at least once between October and December 2011. Duplicates are depicted in color for highest ranking attained.

Click to enlarge:

December Dividend vs. Price Results for Fish CCC Combinations vs. Dow

Below is a graph of the relative strengths of the top 10 Fish Dividend CCC Combination index stocks by yield as of December 9, 2011 compared to those of the Dow. Using three months of historic projected annual dividend history from $1000 invested in the 10 highest yielding stocks each month and the total single share prices of those 10 stocks creates the data points for each month shown in green for price and blue for dividends.

Click to enlarge:

Conclusion: Another Risky Team of Dogs Ready to Run

This CCC Combination collection of 30 reliable steadily increasing dividend payers shows wide divergence between total projected annual dividends from $1000 invested in each of the 10 stocks versus their aggregate single share prices. The Dow index exhibited near convergence of the same over the past three months. The CCC top 10 Combinations index pays comparatively 1400% higher dividends per share price than the Dow with 14 times the risk, too.

At the end of each month, two summaries will conclude this new series of articles by showing comparative results of yield and price for all (now thirteen) indices reported: Russell 1000; Sectors 3x9; S&P 500: NYSE International 100; NASDAQ 100; Dow 30; S&P 500 Aristocrats; JPMorgan Sovereigns; Carnavale Power 25; Fish Dividend Champions; Fish Dividend Contenders; Fish Dividend Challengers; Fish CCC Combinations.

Disclosure: I am long T.

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. Prices and Returns on equities in this article are listed without consideration of fees, commissions, taxes, penalties, or interest payable due to purchasing, holding, or selling same.