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 healthcare 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 healthcare sector top ten dividend dogs as of January 20 vs. the Dogs of the Dow January 13 stock list. Annual dividends from $1000 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.
Healthcare Dividend Dogs
The top ten healthcare sector stocks paying the biggest dividends in January represent five industries. Top healthcare sector stock PDL BioPharma (PDLI) is the only biotechnology firm in the top ten. Two (NeoStem (NBS), and Nordion (NDZ)) are specialized health services firms. Three (Eli Lilly (LLY), GlaxoSmithKline (GSK), and Merck (MRK)) are drug manufacturers - major. Two more are medical instruments and supplies firms: Kensey Nash (KNSY); Daxor (DXR). The remaining two in the top ten is Psychemedics (PMD) a medical laboratories and research firm and PetMed Express (PETS) a drug delivery company.
Of the top thirty healthcare sector stocks, ten firms are drug manufacturers-major. Other healthcare sector industries represented by more than one firm are: medical appliances and equipment, with five; medical instruments and supplies, with five; specialized health services, long-term care facilities, and home health care, with two each.
Vertical Moves in Healthcare Dividend Dog Stocks
Going back four months, PDL BioPharma claimed the top of this list by yield for the first month of the period, then NeoStem rose from second place in October to take the lead by yield in November and December by virtue of a price drop from $0.68 to $0.59 over two months. January finds PDL back on top only by 0.02% yield.
Meanwhile, the middle and bottom of the list featured more activity. For instance, Meridian Bioscience (VIVO) moved from eighth place by yield in October to fourteenth in January by virtue of a price gain from $16.77 to $20.12. Kensey Nash to make the list in January, declared its first $0.25 quarterly dividend since going public in 1995.
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.
Dividend vs. Price Results for Healthcare vs. Dow Dogs
Below is a graph of the relative strengths of the top ten Healthcare dividend sector 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: Healthcare Hounds Hunt
The January healthcare collection of 30 dividend payers shows general 3.56% market price 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 declined 6.69% 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 overlap aggregate total single share prices this month. The healthcare sector top ten show $165.43 more annual dividends returned from $1,000 invested in each on the top ten stocks at nearly $200 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 have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.