This end of month summary compares relative strengths of six stock indexes by yield and dividend vs. price gaps using projected annual dividends from $1000 invested in the 10 highest-yielding stocks in each index: Results for the Dow are also presented as a baseline standard.
This was another chapter in the ongoing effort to respond to the question, "which dividend stocks are good, better, best, bad or ugly?" The effort also heeded Yale professor Robert Shiller's observation: "People still place too much confidence in the markets and have too strong a belief that paying attention to the gyrations in their investments will someday make them rich, and so they do not make conservative preparations for possible bad outcomes." Hence this article graphically depicts the gyrations.
Previous summaries in January and February used Dogs of the Index methodology on five indices: (1) Chuck Carnevale's Power 25 Index, David Fish's vaunted (2) Champions, (3) Contenders, and (4) Challengers, plus a (5) Composite CCC Index. March added a sixth: Dividend AchieversTM 50.
This next installment of dog strategy compares those six fabulous indexes designed By Chuck, David, and the composite to the Dow index as a baseline.
Dog Metrics Selected 10 in Each Index
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 was ranked. Investors select portfolios of five or 10 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 in an index assembled by experts and pray that the price of every stock they now own climbs higher (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 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.
Top 10 dogs for each index displayed their annual dividends from $1000 invested in the 10 highest-yielding stocks in the index compared with the aggregate single share prices of the top 10 stocks therein to produce the summary graphs shown below. Four months of historic projected annual dividend history from $1000 invested in the 10 highest-yielding stocks and the total single share prices of those10 stocks creates the data points for each month shown in green for price and blue for dividends.
Carnevale Power 25 Index
Seeking Alpha blogger, respected stock analyst, and creator of Fastgraphs, 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; and (3) remained profitable through the great recession of 2008 and 2009.
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 (RRD). The balance of the top 10 included three consumer goods, one basic material, one utility, and two healthcare firms.
Bullish vertical price moves in these top 10 were made since February 24 by: Avon Products (AVN) with a .889% price gain; Sysco (SYY) delivered a 1.95% gain; Johnson & Johnson (JNJ) wrapped up a .14% hike; Abbott Labs (ABT) cooked up a 6.53% price gain along with a 6.25% annual estimated dividend boost; Pepsico (PEP) price popped 3.14%; Procter & Gamble (PG) packaged a 1.08% price increase; and Intel Corp. slipped out of the top 10 with a 4.42% price gain.
March aggregate single share stock price for the top 10 Carnevale dogs exceeded the total annual dividend returns from $1k invested in each of those stocks by over $125. Since December aggregate single share prices of the Carnevale top 10 have increased 30.64% while dividends from $1k invested in each declined 6.36%
David Fish's 2/29/12 Champions list of 103 companies paying increasing dividends for 25 consecutive years or more were sorted by yield as of March 24 to reveal the top 30. Data for all four Fish indices is sourced from Mr. Fish's drip investing tools.
10 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 10 include four financial, one technology, one service, and three consumer goods firms representing market sectors.
(Click charts 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.
Champions top 10 reliable dividend stocks showed bullish 4.9% aggregate single share price gains since January compared with a 2.37% decline in annual projected dividends from $1k invested in each of those 10.
The Contenders list (from here) as of February 29, showed 161 companies that paid increasing dividends for 10 - 24 years. Updated with pricing information from Yahoo Finance as of March 23, the list was sorted by yield to reveal the top 10 stocks. Their market performance was then reviewed using four months of historic projected annual dividend history.
Top 10 Contender stocks paying the biggest dividends for February included firms representing four of nine market sectors. The top stock Inergy LP (NRGY) was one of two in the utilities sector. The balance of the top 10 included one consumer, three financial and four basic materials firms representing market sectors.
Bullish vertical moves since February 24, were made by just three top 10 contenders: Omega Healthcare Investors (OHI) injected a .76% price gain; Buckeye Partners LP (BPL) gushed a 1.61% price gain; National Retail Properties (NNN) built a .15% price gain.
This Contenders collection of top 10 dogs by yield show dividends from $1k invested in each of the top 10 stocks increased 3.94% as their aggregate single share prices dropped 2.6%.
David Fish's Challengers list (from here) as of February 29, showing 195 companies increasing dividends for 5 - 9 years was updated with pricing information from Yahoo Finance as of March 26, then sorted by yield to reveal the top ten.
Top 10 Challenger stocks that paid the biggest dividends for February included firms representing four of nine market sectors. Top stock Dynex Capital Inc. (DX) was one of four in the financial sector. The rest of the top 10 included one utility, one service, and four basic materials firms representing market sectors.
Bullish price moves made since February 24: Top dog Dynex Capital posted a 1.7% price gain; Triangle Capital Corp (TCAP) entered a .508% price gain; StoneMor Partners LP (STON) etched a .441% gain; Vanguard Natural Resources (VNR) grew a 1.62% price improvement; Boardwalk Pipeline Partners LP (BWP) flowed out a .366% gain.
Special mention for no movement at all went out to Natural Resource Partners (NRP) which locked in at 00.00% movement neither up nor down last month.
This Challengers collection of 5-9 year increasing dividend payers showed .083% sinking dividends from $1k invested in each of the top 10 stocks as aggregate single share prices dropped 28.97%. The drop in price was attributed to two double-digit priced stocks replaced by single digit priced stocks in the top ten.
CCC Combined Index
The combination of David Fish's lists (from here) as of February 29, of 103 Champions, 161 Contenders, and 195 Challengers were updated with pricing information from Yahoo Finance as of February 24 then sorted by yield to reveal the top 10 stocks.
Stocks in the CCC index that paid the biggest dividends come March included firms representing five market sectors. Top stock Inergy LP was the lone utility sector equity. The balance of the top ten included one service, two consumer goods, three basic materials, and three financial firms representing market sectors.
The CCC group of top 10 dividend payers showed annual dividends from $1000 invested in each of the 10 stocks soared above $1000 as their aggregate single share prices dropped below $200.
Dividend AchieversTM 50
Dividend AchieversTM 50 Index was chosen from here. The selected subset below was constituted from "the 50 U.S. companies with the highest current dividend yield as of the last trading date in December." The selected list was then updated with price data as of January 30, 2012, February 27 2012, and March 29, 2010, from historical prices available on Yahoo Finance.
Dividend Achievers top ten stocks paying the biggest dividends as of March 29, included equities representing four market sectors. The top stock as revealed by Yahoo Finance data, was one of five in the consumer goods sector, Vector Group LTD (VGR). The balance of the top ten included two financial, one technology, and one utility firm.
Bullish price moves made in these top ten since February 27, included: AT&T (T) dialed up a 1.1% gain; Mercury General Corp (MCY) documented a 1.04% gain; Altria Group (MO) stoked a 2.1% hike; Leggett & Platt Inc. (LEG) made a 4.4% price gain; Avon Products (AVP) price stepped up 4.45%; Peoples United Financial (PBCT) jumped 2.67% to exit the top ten by yield.
Dividend Achievers collection of top 10 dividend payers displayed bullish action for the period surveyed. Dividends from $1k invested in the top ten sank 2.3% toward aggregate total single share prices rising 3.9% between December and March.
Dow 30 Index
CME Group, publisher if this index, states, "The Dow Jones Industrial Average (DJIA) is a price-weighted index of 30 blue-chip U.S. companies representing nine economic sectors including financial service, technology, retail, entertainment and consumer goods."
Three technology firms paying the biggest dividends on the Dow as of March 13 were: (1) AT&T (T); (2) Verizon ; (7) Intel. The rest of the Dow 10 dogs include three healthcare, one industrial, one consumer, and two basic materials firms.
Bullish vertical moves since February 10, were made by nine of the top 10 Dow 30 dogs: AT&T Inc. share price increased 6.0%; Verizon Communications (VZ) saw a 4.14% price bump ; Merck & Company (MRK) price increased .976% but held position on the list as it's projected dividend yield from IndexArb was boosted $.02 or 1.18%; Pfizer Inc. (PFE) saw share price pop 4.56%; General Electric (GE) share price jumped 3.76% while its annual dividend estimate was boosted $.03 or 4.225%; Johnson & Johnson (JNJ) pricked up 1.13% and estimated dividend popped $.03 or 1.266%; Intel Corporation (INTC) showed a price gain of 2.96%; Procter & Gamble (PG) showed a 6.29% price boost; Dupont (DD) showed a 2.99% price improvement for March. Honorable mention needs be given to Chevron Corp (CVX) whose price shot up 5.613% to drop it out of the top ten despite IndexArb also boosting its forward looking dividend estimate $.04 or 1.22%.
Between February and March Dow 30 top 10 dividends from $1k invested in each of the dogs decreased 2.77% while single share prices for those stocks also decreased 11.83% for the month due to Chevron's exiting the top ten due to its price gain.
All Together Now
Each graph below shows monthly points of comparison between annual projected dividends resulting from $10,000 invested as $1,000 each in the top ten high yield stocks (blue points) versus the total prices of one share of each of the 10 stocks (green points) by index. Grouped together the graphs display five months of comparative gyrations of the nine indices described.
Click on graphs below to enlarge.
Dog Teams Vie for Dividend Dominance
The following graph shows annual dividends projected from $1000 invested in each of ten stocks with the top yields in nine indices.
Annual Dividends Forecast from $1k Invested in each of 10 Top Yielding Stocks in 6 Indices & Dow
The chart plotted projected yields as of a specific purchase date each
month since October. Five of the seven indices showed dividends decreasing in bull market fashion. Just the Contenders and the CCCCombo indices showed bear-like increases in dividends since December.
Projected dividend yield amounts from these six indices and the Dow over the past three months displayed seven distinct yield levels.
These indices were ranked for risk as of March 29, 2012, in the following manner: (1) Added the single share prices of the top ten stocks on an index list. Then, (2) added the total annual dividend amounts projected from $1000 invested in each of those ten stocks. Finally, (3) compared the resulting two numbers. Lesser divergence between dividend amounts above single share prices revealed the indexes with lesser risk. Stocks determined to be showing less risk of default than the sovereign U.S. Government showed negative divergence.
By that baseline standard of divergence, these six indices and the Dow rank themselves by risk as follows:
These six indices and the Dow component stocks have ongoing stories to tell. These graphs and lists will be updated again for publication following a review of each index in late April and thereafter.
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.