A trading system triggered by yield, called the "Dogs of the Index," can be used to determine the best of the best dividend stocks. The dogs system empowers investors with all the wisdom and knowledge of well-paid wizards of investment and publishing for free, as those investors once each year to select the highest yielding and lowest priced constituents in a collection of equities built by experts.
Charts below for the S&P 500 Index revealed high yielding stocks whose prices increased (or whose dividends decreased) as candidates to be sold off this time next year to sweep gains and reinvest the seed money into higher yielding stocks in the same index.
Two key metrics determined 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 declared the percentage yield by which each dog stock was ranked. Thus the investor was able to follow, trade, and await results from an investment in the lowest priced, highest yielding five or ten stocks in the index.
Investor Empowerment from the S&P 500
Listed below are the top thirty S&P 500 stocks by yield as of 3/13/12 per Yahoo Finance 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 March 13, four of the top ten stocks paying the biggest dividends in this index are technology firms. Frontier Communications (NASDAQ:FTR) topped this list.
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 tinted yellow atop the list again in March.
Color code shows: (Yellow) firms listed in first position at least once between November 2011 and March 2012; (Cyan Blue) firms listed in tenth position at least once between November 2011 and March 2012; (Magenta) firms listed in twentieth position at least once between November 2011 and March 2012; (Green) firms listed in thirtieth position at least once between November 2011 and March 2012. Duplicates are depicted in color for highest ranking attained.
Click on charts below to enlarge:
Bullish vertical moves since February 10 were made by six of the top ten S&P 500 dogs: Frontier Communications share price increased 9.16%; Pitney Bowes (NYSE:PBI) saw share price climb .27%; RR Donnelley (NASDAQ:RRD) saw a 5.3% price bump; Century Link (NYSE:CTL) shares climbed 3.52%; AT&T Inc (NYSE:T) shares jumped up 6.0%; Altria Group Inc (NYSE:MO) share price flared up 3.05%. Honorable mention must be given to Reynolds American (NYSE:RAI) plunging out of the top ten on a 5.33% price spike.
Bearish moves for the same period were confined to four dogs of the S&P 500 top ten: Windstream Corp (NASDAQ:WIN) moved up the list to second place as its price dropped 2.18%; Pepco Holdings Inc (NYSE:POM) stock price plunged 1.312%; Supervalu (NYSE:SVU) jumped into the top ten on a 6.35% price swoon; Health Care REIT (NYSE:HCN) claimed a top ten slot as it price sagged 3.35% in a month.
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 March 13, 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 created the data points for each of the past five months shown in green for price and blue for dividends.
S&P 500 constituents showed projected dividend totals for $1000 invested in the top ten dropping dramatically toward their aggregate total single share prices. The bulls did hold sway since February and S&P top ten dividend yields dropped as stock prices increased. In the past month, dividends from $1k invested in each of the top ten S&P stocks by yield declined 13.47% while single share prices for those stocks inclined 3.88%.
Will the S&P 500 price gains continue into April? Stay tuned.
Disclosure: I am long T.
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.