Some investors employ a once per year trading system triggered by yield, called the "Dogs of the Index" to find 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 use the system to select the highest yielding and lowest priced constituents in a collection of equities built by experts.
This Dogs of the Index strategy, popularized by Michael B. O'Higgins in the book Beating The Dow (HarperCollins, 1991), 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. Charts below display a snapshot of the S&P 500 Aristocrats Index as of March 14, 2012.
Two key metrics determined the yields to rank the S&P 500 Aristocrats 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 Aristocrats Index
Listed below are thirty S&P 500 Aristocrats stocks by yield as of 3/14/12 per Yahoo Finance data. McGraw Hill , publisher if this index, states:
The S&P 500® Dividend Aristocrats index measures the performance of large cap, blue chip companies within the S&P 500 that have followed a policy of increasing dividends every year for at least 25 consecutive years.
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Consumer goods firms constituted four of the top ten stocks paying the biggest dividends on the S&P 500 Aristocrats as of March 14. The leading consumer goods firm, Pitney Bowes (PBI), took over the top spot after Century Link (CTL) left the list in January when CTL failed to increase dividend in 2011 and broke the 25 year requirement to be listed.
For these thirty S&P Aristocrat dividend payers, one technology company, ten consumer goods, three financials, five services, four basic materials, two industrials, three health care, one utility, and one conglomerate represented the market sectors.
Vertical moves by S&P 500 Aristocrats index Dogs
As mentioned above, Pitney Bowes wore the yellow tint of the top dog in this index.
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 were depicted in color for highest ranking attained.
Bullish vertical moves were made by six of the ten top Aristocrat Index dogs in the past 33 days reported. AT&T Inc (T) showed a 5.4% price gain; Leggett & Platt (LEG) posted a 7.16% gain; Cincinnati Financial Co. (CINF) charted a 3.19% gain; Kimberly Clark (KMB) put up a 1.747% price improvement; Sysco Corp (SYY) delivered a 3.00% gain; Johnson & Johnson (JNJ) stock price ticked up 0.743%.
Bearish moves in the top ten for the same period were experienced by four Aristocrat dogs. At the top, Pitney Bowes (PBI) showed a 0.865% price drop; HCP Inc. (HCP) marked a 1.933% decline; Consolidated Edison (ED) sparked a 0.913% decline; Clorox Co. (CLX) price sank 0.0584%.
Dividend Vs. Price Results for S&P 500 Aristocrats Dogs
Relative strengths of the top ten S&P 500 Aristocrats Index stocks by yield were graphed as of March 14, 2012. 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 created the data points for each of the past five months shown in green for price and blue for dividends.
S&P 500 Aristocrats Index constituents reflected mixed market symptoms as projected dividend totals for $1,000 invested in the top ten decreased 2.37% as their aggregate total single share prices also decreased 8.56% over the five months graphed.
The pattern turned bullish between February and March however as S&P 500 Aristocrats top ten dividends from $1,000 invested in each of the dogs decreased 1.67% while single share prices for those stocks increased 1.21% for the month. Will the S&P 500 Aristocrats Index bullish price gains continue into April? 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.