Dogs Of The JP Morgan Sovereigns Dividends Pull Away In February

by: Fredrik Arnold

How to determine the best of the best dividend stocks? Some investors rely on a once per year trading system triggered by yield, called the "Dogs of the Index" to provide clues. The dog system empowers investors with all the wisdom and knowledge of the well-paid wizards of investment, published for free, as the highest yielding and lowest priced equities in a collection of equities built by experts are revealed.

Charts below for the JP Morgan Sovereigns index reveal moderate yielding stocks whose prices may increase (and whose dividend yields therefore decrease) as buy candidates to be held for at least one year, then sold off to sweep gains and provide seed money to reinvest in higher yielding stocks in the same index.

Two key metrics determine the yields that rank the JP Morgan Sovereigns 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. 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 JP Morgan Sovereigns Index

Listed below are the thirty JPMorgan Sovereigns Index stocks by yield as of February 10 per Yahoo Finance data. On July 22, 2011, Thomas Lee, an equity strategist with J.P. Morgan, published a note titled "Corporates are the New Sovereigns: 22 stocks to own around sovereign default." The Barron's article covering Lee's announcement defined a Sovereign as an entity, which can print money or tax at will. Lee's report listed 22 corporate stocks that show 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 J.P. Morgan, and showing upside to their target prices.

Top ten stocks paying the biggest dividends of the JPMorgan Sovereigns for February include firms from six of nine business sectors: two healthcare firms, one basic materials, two industrials, two services, two consumers and one technology. Lockheed Martin (NYSE:LMT) is at the top by yield.

For these twenty two JPMorgan Sovereign dividend payers, four technology companies, three consumer goods, no financial, five services, two basic materials, two industrial, four health care, no utility, and two conglomerates represent the market sectors.

Vertical moves by JP Morgan Sovereigns index dividend payers

With LMT at the top in February, the colors on the charts below reveal: (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 charts below to enlarge.

Bullish vertical moves were made over this 40 day comparisons report by Merck (NYSE:MRK) with a 36.85% price gain, Raytheon (NYSE:RTN) with a 2.37% gain, United Parcel Service. (NYSE:UPS) with a 4.78% gain, Honeywell (NYSE:HON) showing 9.16% price improvement among the top ten.

Bearish moves for the same period were experienced by Abbott Laboratories (NYSE:ABT) showing a 2% price decline, Pepsico, Inc. (NYSE:PEP) with a 3.6% decline, Coca-Cola Company (NYSE:KO) with a 2.9% decline, Norfolk Southern (NYSE:NSC) declining 1.825% in price within the top ten.

Dividend VS. Price Results for for JPMorgan Sovereigns Index Top 10

Below is a graph of the relative strengths of the top ten JPMorgan Sovereigns index stocks by yield, as of February 10, 2012. Four months of historic 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 month shown in green for price and blue for dividends.

JPMorgan Sovereign Index top ten yield components for February showed a small discernible bullish price trend as prices for the top ten equities veered slightly northward. Meanwhile, projected total annual dividends paid from $1000 invested in each of those top ten stocks dropped to the $336 level.

What direction will JPMorgan Sovereign prices and dividends go in March? Stay tuned.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

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.