This monthly report series began in December as dog dividend methodology was applied to each of eight major market sectors. In alphabetical order those sectors were: basic materials, consumer goods, financial, healthcare, industrial goods, services, technology, and utilities.
The ninth sector, conglomerates, according to Yahoo Finance, contained just eight firms, five of which paid dividends. Thus the reporter declined to apply dogs of the index metrics to such a small group.
Dogs of the Index Metrics Selected Ten Top Basic Materials Stocks
Two key metrics determined the yields that ranked these sector 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 or sector by yield to trade. They await the results from their investments in the lowest priced, highest yielding stocks selected 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 high yielding stocks whose prices increased (and whose dividend yields therefore decreased) could be sold off once a year to sweep gains and reinvest the seed money into higher yielding stocks in the same index.
Comparative Methods Used
First, the entire list of basic materials sector companies was sorted by yield as of April 5 using Ycharts.com to reveal the top thirty. Market performance of these thirty selections was then reviewed using four months of historic projected annual dividend history from Yahoo Finance along with annual divided projections adjusted for market realities.
Thereafter, this article assessed the relative strengths of the basic materials sector top ten dividend dogs as of April 5 vs. the Dogs of the Dow March 13 stock list. Annual dividends from $1000 invested in the ten highest yielding stocks in the sector and index were compared to the aggregate single share prices of the top ten stocks in each.
Basic Materials Dividend Dogs
Ten basic materials stocks paying the biggest dividends in March were mostly represented the oil and/or gas industry: Whiting (WHX); Ferrellgas (FGP); YPF Sociedad Annima (YPF); Enerplus (ERF); BreitBurn (BBEP); Sandridge Permian Trust (PER); Pengrowth Energy (PGH). Only three of the top ten basic materials firms do not mention oil or gas in their industry description: Great Northern (GNI); Oxford (OXF); Rhino (RNO).
Vertical Moves by Basic Materials Dogs in March
In months past, two firms, one oil and gas and one steel and iron, claimed the top of this list by yield. In January the top dog was steel and iron company, Great Northern. In February oil firm Whiting USA Trust popped to the top as its price declined 5.3% resulting in a marked bump in yield. Furthermore, Great Northern Iron annual dividend projection was adjusted to equal that paid in 2011 while its share price increased 1.27% all of which allowed Whiting to take the lead. In March Whiting retained the yellow color tinted top dog title for Basic Materials.
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.
Bullish vertical moves since February 24 featured top dog Whiting whose share price increased 1.3%. Honorable mention must be given to CVR Partners (UAN) which fell out of the top ten Basic Materials Sector dogs by yield after posting a 6.85% gush in price. Also SandRidge Permian Trust jumped into the top ten dog pack by virtue of a newly estimated annual dividend of 9.82% by Morningstar as reported by Yahoo Finance.
Bearish moves for the same period were experienced by the rest of the pack. Ferrellgas Partners price sunk 26.56%; YPF Sociedad Annima fell 33.76%; Rhino Resource Partners price slid 10.43%; Enerplus Corporation dropped 13.96%; Oxford Resource Partners drilled a 42.07% price decline; BreitBurn Energy Partners swooned 2.11%; former top dog Great Northern Iron Ore Properties declined 21.24% in price while its estimated annual dividend payout dropped 43.75%; Pengrowth Energy Corporation joined the top dogs by tanking 8.27% in price as of 4/5/12.
Dividend vs. Price Results vs. Dow Dogs
Below is a graph of the relative strengths of the top ten basic materials dividend sector stocks by yield as of April 5, 2012 compared to those of the Dow. Using six months of historic 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 creates the data points for each month shown in green for price and blue for dividends.
Conclusion: Basic Material Dogs Decimated by Bear Attack
The March basic materials collection of 30 mainly oil and gas dividend payers reversed course as of April 5 price data. This sector came under a bear attack as aggregate dividends from $10k invested in each of the top ten stocks increased while aggregate prices fell.
Meanwhile, the Dow index moved back to near convergence as dividends from $1k invested in the top ten came to within $8 of their aggregate total single share prices in March. The basic materials sector top ten dogs now show $739 more dividends (with equally bigger risk) at a $155 lower aggregate share price for the top ten dogs than those of the Dow as of April 5.
Two summaries will conclude this new series of articles at the end of each month by showing comparative results of yield and price for all eight sectors reported: basic materials, consumer goods, financial, healthcare, industrial goods, services, technology, and utilities.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
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.