Carnevale's Power 25 Dividend Dogs In March

by: Fredrik Arnold

Seeking Alpha blogger, respected stock analyst, and creator of F.A.S.T. Graphs™, Chuck Carnevale, published, "Our 25 Dividend Growth Stocks Are Dirt Cheap" in November. He listed top 25 blue chip dividend growth stocks that: (1) were available at current valuations; (2) were significantly below their historical norms; (3) remained profitable through the great recession of 2008 and 2009.

This portfolio of companies he said "offers a three-pronged opportunity for above-average future total returns at below-average risk. We expect that each company will benefit in the future from a potential expansion in their PE ratios coupled with future earnings growth and finally followed by dividend increases offering a return kicker." That article ranked these stocks by 5 year estimated total returns ranging from a high of 38.2% down to 10.8%.

Dogs of the Index Metrics Selected Ten

Two key metrics determined the yields that ranked these 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 is ranked.

Investors select portfolios of five or ten stocks in any one index by yield to trade. They await the results from their investments in the lowest priced, highest yielding stocks they selected and pray that the price of every stock they now own climbs higher (having locked in a high yield percentage at purchase).

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 increase (and whose dividend yields therefore decrease) can be sold off once each year to sweep gains to reinvest the seed money into higher yielding stocks in the same index.

The Carnevale 25 list here was ranked by yields based on estimated annual dividends to reveal the dogs therein. Numbers after the company names in brackets [] indicate Mr. Carnevale's ranking for each stock by total estimated returns. Here's the list ranked by yield calculated as of March 23.

Carnevale Stocks Power Moves

Carnevale's top ten stocks paying the biggest dividends as of March 23 included firms representing five market sectors. The top stock as revealed by Yahoo Finance data, was one of two in the service sector, RR Donnelley & Sons (NASDAQ:RRD). The balance of the top ten included three consumer goods, one basic material, one utility, and two healthcare firms The full list of 25 stocks has five service, five healthcare, three consumer goods, one financial, three basic materials, five industrial, one utility, one technology and no conglomerate representing the market sectors.

Just one firm, RR Donnelly , has stayed at the top of this list by yield for the four months surveyed. Action takes place toward the middle of the list.

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 fifteenth position at least once between December 2011 and March 2012; (Green) firms listed in twenty fifth position at least once between December 2011 and March 2012. Duplicates are depicted in color for highest ranking attained.

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Bullish vertical price moves in these top ten were made since February 24 by: Avon Products (AVP) with a .889% price gain; Sysco (SYY) delivered a 1.95% gain; Johnson & Johnson (JNJ) wrapped up a .14% hike; Abbott Labs cooked up a 6.53% price gain along with a 6.25% annual estimated dividend boost; Pepsico price popped 3.14%; Procter & Gamble (PG) packaged a 1.08% price increase; Intel Corp.(INTC) slipped out of the top ten with a 4.42% price gain.

Bearish moves for the same period were experienced by top dog RR Donnelley & Sons whose price sagged 9.93%; Alliance Resource (ARLP) showed a 5.94% price decline; Nextera Energy (NEE) strung out a .609% decline; Chevron Corp (CVX) sunk 2.49% in price for the month to put itself within the top ten.

Dividend vs. Price Results

Below is the graph of relative strengths for the top ten Carnevale Power 25 index stocks by yield as of March 23, 2012. Four months of historic projected annual dividend history from $1000 invested in the ten highest yielding stocks 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.

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Conclusion: Carnevale Dog Prices Bound Away from Dividends

This Carnevale collection of its top ten dividend payers displayed choppy action during 2011's unsettled market conditions. Notice the interweaving pattern of dividends from $1k invested in the top ten sank below aggregate total single share prices between December and January as prices increased. Now in March aggregate single share stock price for the top ten Carnevale dogs exceed the total annual dividend returns from $1k invested in each of those stocks by over $125. Compared to the Dow, this index showed higher prices with lower yields than the dogs of the Dow. This acceleration occurred as triple digit priced CVX made the top ten by yield this month.

At the end of each month, a summary concludes this series of articles by showing results of yield and price for these Carnevale Power 25 stocks compared to the Dow dogs and David Fish's Champions, Contenders, Challengers, and Composite lists. Stay tuned and follow these intrepid dogs.

Disclosure: I am long CVX, JNJ, INTC.

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.