Dividend Champions: 13 Increases Expected By The End Of May was published by David Fish on this Seeking Alpha site March 16. He defined Champions as companies that have paid higher dividends for 25 straight years or more. This article utilized the dogs of the index strategy to sort David's Champions as of March 23 into a suitable grouping of ten to trade.
The Dogs of the Index Metrics Selected Ten
Two key metrics determined the yields that ranked index 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.
Investors select portfolios of five or ten stocks in any one index by yield to trade. They then await results from their investments in the lowest priced, highest yielding stocks they have selected. They pray that the price of every stock they now own climbs (having locked in a high yield percentage at purchase).
This Dogs of the Index strategy, popularized by Michael B. O'Higgins in the book "Beating The Dow" (HarperCollins, 1991), revealed how high yielding stocks whose prices increased (and whose dividend yields therefore decreased) could be sold off once each year to sweep gains and reinvest seed money into higher yielding stocks in the same index.
Classic Dogs of the Index theory trades selected Dow stocks. Thus, the Dow is used as a standard of comparison to conclude this article.
Comparative Methods Used
First, David Fish's Champions list of February 29th showed 103 companies that paid increasing dividends for 25 consecutive years or more. His list was sorted by yield to reveal the top thirty stocks. Market performance of these thirty selections was then reviewed using four months of historic projected annual dividend history.
Thereafter, research assessed the relative strengths of the top ten Dividend Champions vs. the Dogs of the Dow March stock list. Annual dividends from $1000 invested in the ten highest yielding stocks in each index versus aggregate single share prices of the top ten stocks in each index provided a measure of risk.
Ten Champion stocks paying the biggest dividends for March included firms representing five market sectors. The top stock, Pitney Bowes (PBI), is one of three firms in the consumer sector. The balance of the top ten include four financial, one technology, one service, and three consumer goods firms representing market sectors.
Dividend Champion Stocks Vertical Moves
Going back four months, two firms, one financial, Old Republic International (ORI) and one consumer, Pitney Bowes Inc. alternated at the top of this list by yield.
Color code shows: (Yellow) firms listed in first position at least once between December 2011 and March 2012; (Cyan Blue) firms listed in tenth position at least once between December 2011 and March 2012; (Magenta) firms listed in twentieth position at least once between December 2011 and March 2012; (Green) firms listed in thirtieth position at least once between December 2011 and March 2012. Duplicates are depicted in color for highest ranking attained.
Click on charts below to enlarge.
Bullish vertical moves made since February 24 included: AT&T (T) dialed up a 3.89% price gain; Mercury General Corp. (MCY) inked a .323% price gain; Altria Group Inc. (MO) ignited a 1.37% price gain; HCP Inc (HCP) posted 1.15% price improvement; Bowl America A (BWL-A) rolled up a 2.97% gain.
Bearish moves for the same period were experienced by: Pitney Bowes which posted a .055% price decline; Old Republic Int'l. entered a .655% decline; Washington REIT (WRE) managed a 1.67% decline; Leggett & Platt (LEG) sagged .796% in price; ; Vectren Corp (VVC) sparked a 2.52% price swoon among the top ten.
March Dividend vs. Price Match Champions vs. Dow
Below are graphs of the relative strengths of the top ten Dividend Champion index stocks by yield and price from December to March compared to those of the Dow. Using four months of historic projected annual dividend history from $1000 invested in the ten highest yielding stocks each month and the aggregate single share prices of those ten stocks creates the data points for each month shown in green for price and blue for dividends.
Click to enlarge.
Conclusion: Champion Dogs Move On
The Champions top ten reliable dividend stocks showed price gains over the past three months. The Dow ten on the other hand exhibited a cross over in January as dividends from $1k invested in the top ten steadied while aggregate total single share prices shot above those dividends. The between February and March that single share aggregate price fell back to within $6 of the annual dividends. The ten Champions paid 44.71% higher dividends at a 33.55% lower per share price than those of the Dow
At the end of each month, a summary concludes this new series of articles showing comparative results of yield and price for six indices: Carnevale Power 25; Dividend Champions; Contenders; Challengers; Dow 30 Index.
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, unless noted otherwise, are listed without consideration of fees, commissions, taxes, penalties, or interest payable due to purchasing, holding, or selling same.