A month ago your intrepid Dogs of the Index analyst began applying dog dividend methodology to each of eight major market sectors: basic materials, consumer goods, financial, healthcare, industrial goods, services, technology, and utilities.
The ninth sector, conglomerates, according to Yahoo Finance, contains just eight firms, five of which pay dividends. Thus I declined to apply dogs of the index metrics to such a limited universe of conglomerates, declaring, "such a task is comparable to a dog show judge trying to evaluate a Chihuahua based on St. Bernard conformation standards."
Dogs of the Index Metrics Used to Select The Top Ten Sector Stocks
Two key metrics determine the yields that rank index or sector 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 ten stocks in any one index or sector 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 higher (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.
Comparative Methods Used
First, the entire list of technology sector companies is sorted by yield as of January 20 using Ycharts.com to reveal the top thirty. Market performance of these thirty selections is then reviewed using four months of historic projected annual dividend history from Yahoo Finance.
Thereafter, today's article goes on to assess the relative strengths of the technology sector top ten dividend dogs as of January 20 vs. the Dogs of the Dow January 13 stock list. Annual dividends from $1,000 invested in the ten highest yielding stocks in the sector and index are compared to the aggregate single share prices of the top ten stocks in the sector and index.
Technology Dividend Dogs
The top ten technology sector stocks paying the biggest dividends in January represent eight industries. Top technology sector stock, Cimitron (NASDAQ:CIMT) is the only technical and systems software firm in the top ten. IncrediMail (NASDAQ:PERI) at number two is the only business software & services firm listed.
Four firms on the technology top ten list by yield are from the telecommunications services industries. Domestic firms are: Frontier (NYSE:FTR); Otelco (OTT). Foreign firms are: Telecom New Zealand (NZT); Telefonica (NYSE:TEF). The remaining five industries and theirs representative firms are: information technology services, MIND C.T.I. (NASDAQ:MNDO); wireless communications, Vimpel (NYSE:VIP); diversified communications services, Telecom Argentina (NYSE:TEO); internet information providers, SouFun (NYSE:SFUN).
Of the top thirty technology sector stocks by yield, eight firms are in the Telecom Services-Domestic industry. Other technology sector industries represented by more than one firm are: Wireless Communications, with six; Telecom Services-Foreign, with four; Diversified Communication Services, with three.
Vertical Moves in Technology Dividend Dog Stocks
Going back four months, CIMT claimed the top of this list by yield in October and stayed there into January. The Technology list moved from bearish to bullish between December 16 and January 20. A bright bullish example is SouFun (SFUN) moving from fifth place by yield in October to twelfth in January by virtue of a 27.5% price gain from $12.11 to $19.49 for the period. It's hard to pick the biggest loser but one example will suffice, New Zealand Telecom (NZT) lost 40.53% in price between November at $10.66 and January at $8.42.
Color code shows: (Yellow) firms listed in first position at least once between October 2011 and January 2012; (Cyan Blue) firms listed in tenth position at least once between October 2011 and January 2012; (Magenta) firms listed in twentieth position at least once between October 2011 and January 2012; (Green) firms listed in thirtieth position at least once between October 2011 and January 2012. Duplicates are depicted in color for highest ranking attained.
Below is a graph of the relative strengths of the top ten technology sector dividend stocks by yield as of January 20, 2012 compared to those of the Dow. Using four months of historic projected annual dividend history from $1,000 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.
Conclusion: The Hybrid Dogs Rebound
This technology collection of 30 dividend payers shows rising prices resulting in falling dividend projections into the first month of 2012. There was a 20.06% increase in aggregate single share prices for the top ten over the four monthly points surveyed. Dividends from $1,000 invested in each of the top ten decreased 8.58% for the period.
Meanwhile, the Dow index moved to within $3.50 of convergence as dividends from $1,000 invested in the top ten nearly overlapped aggregate total single share prices in January. The technology sector top ten show $992.01 more projected annual dividends returned from $1,000 invested in each on the top ten stocks at more than a $285 lower aggregate ten share price than the Dow as of January 20.
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 eight sectors reported: basic materials, consumer goods, financial, healthcare, industrial goods, services, technology, and utilities.
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.
Disclosure: I am long T.