A once per year trading system triggered by yield, called the "Dogs of the Index" is employed by some investors to gauge the best of the best dividend stocks. The dogs system empowers investors with all the wisdom and knowledge of the well-paid wizards of investment and publishing for free, as they select the highest yielding and lowest priced equities in a collection of equities built by experts.
Charts below for the S&P 500 Index reveal how low yielding stocks whose prices increase (or whose dividends decrease) as candidates to be sold off once each year in order to sweep gains and reinvest the seed money into higher yielding stocks in the same index.
Two key metrics determine the yields to rank the S&P 500 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.
Investment empowerment from the S&P 500
Listed below are the top thirty S&P 500 stocks by yield as of 2/10/12 per IndexARB.com data. McGraw Hill, publisher of the Index states "Standard & Poor's strives to provide investors who want to make better informed investment decisions with market intelligence in the form of credit ratings, indices, investment research and risk evaluations and solutions." The company states that the index includes 500 leading companies in leading industries of the U.S. economy, capturing 75% coverage of U.S. equities.
As of February 10, four of the top ten stocks paying the biggest dividends in this index are technology firms. Frontier Communications (FTR) topped this list at 9 to 15% yields for eleven months last year. It's tops again at 18.56% for February. The remaining six include three consumer firms, one financial, one utility, and one service.
Vertical moves by S&P 500 index dividend payers
In 2011 two firms exchanged places at the top of the list, FTR and WIN. FTR remains atop the list in February.
A sizable move by Lockheed Martin (LMT) showed its stock price rising from $80.90 to $87.51 for a 8.2% gain in 40 days between December 30 and February 10.
Color code shows: (Yellow) firms listed in first position at least once between October 2011 and February 2012; (Cyan Blue) firms listed in tenth position at least once between October 2011 and February 2012; (Magenta) firms listed in twentieth position at least once between October 2011 and February 2012; (Green) firms listed in thirtieth position at least once between October 2011 and February 2012. Duplicates are depicted in color for highest ranking attained.
Click on charts below to enlarge:
Dividend VS. Price Results for S&P 500 Index Top 10
Below is a graph of the relative strengths of the top ten S&P 500 index stocks by yield as of February 10, 2012. 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 of the past four months shown in green for price and blue for dividends.
The S&P 500 components graph above shows projected dividend totals for $1000 invested in the top ten stocks rise away from their aggregate total single share prices. The bears have had their way again since October and S&P 500 dividend yields increased as stock prices fell. Will price gains come back to the S&P 500 top ten dividend dogs in March? 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. 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.