Many stockholders rely on a once per year trading system triggered by yield, called the "Dogs of the Index", to determine the best of the best dividend stocks. The system empowers investors with all the wisdom and knowledge of the well-paid wizards of investment and publishing for free, as potential buyers select the highest yielding and lowest priced equities within a collection built by experts.
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. Charts below display a snapshot of the Dow Index as of February 10, 2012.
Two key metrics determine the yields that rank the Dow 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.
Thus, two key metrics determine the yields to rank the Russell 1000 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 Russell 1000
Listed below are the top thirty Russell 1000 stocks by yield as of 2/10/12 per Yahoo Finance data. Russell Investments states that the Russell 1000 Index offers investors access to the extensive large-cap segment of the U.S. equity universe, representing approximately 90% of the U.S. market.
As of February 10, eight of the top ten stocks in this index paying the big dividends were financial sector firms. Of the top thirty Russell 1000 dividend payers, just six were non-financial companies. Two consumer goods, two services, one technology, and one industrial were the non financial sectors represented. This index is updated annually and the next revision will be in June.
Vertical moves by Russell 1000 index dividend payers
Since October 2011, one firm has held the top of the Russell list, AGNC, despite its January 12% dividend reduction from $5.60 to $5.00 annually.
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:
The notable move by Lockheed Martin (NYSE:LMT) continued as its stock price jumped from $74 to $87.51 for a 18.26% gain over the past four months.
Heading the opposite direction, Leggett & Platt (NYSE:LEG) jumped up the chart by yield as its price declined 4.7% from $23.04 to $21.36 over the first 40 days in the new year. Also Alaska Communications (NASDAQ:ALSK) made peripatetic moves as its price dropped 54% from $6.07 to $2.81 in four months while management trimmed their dividend 77% from $.86 to $.20 annually.
Dividend vs. Price results for Russell 1000 index top 10
Below is a graph of the relative strengths of the top ten Russell 1000 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.
Russell 1000 components show projected dividend totals for $1000 invested in the top ten Russell stocks dropped dramatically toward their aggregate total single share prices. The bulls did hold sway again since November and Russell dividend yields sank as stock prices increased. Will price gains continue to be rampant on the Russell 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.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.