This monthly report series began applying dog dividend methodology to each of eight major market sectors in December. The sectors were, in alphabetical order: basic materials; consumer goods; financial; healthcare; industrial goods; services; technology; utilities.
A ninth sector, conglomerates, according to Yahoo Finance, contained just eight firms, five of which paid dividends. Thus the reporter declined to apply dog metrics to such a small group.
Dogs of the Index Metrics Selected Ten Top Healthcare Stocks by Yield
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 selected portfolios of five or ten stocks in any one index or sector by yield to trade. They awaited the results from their investments in the lowest priced, highest yielding stocks selected and prayed that the price of every stock they now owned climbed 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 healthcare 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 healthcare 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.
Healthcare Dividend Dogs
Ten healthcare sector stocks paying the biggest dividends in March represented six industries. Top healthcare sector stock PDL BioPharma (PDLI) was the only biotechnology firm in the top ten. Five drug manufacturers - major firms appeared as top ten dogs: AstraZeneca Group (AZN); GlaxoSmithKline (GSK); Eli Lilly (LLY); Sanofi (SNY); Novartis (NVS). Daxor (DXR) represented the medical instruments & supplies industry. Psychemedics (PMD) appeared as a medical laboratories and research firm. PetMed Express (PETS), represented drug delivery firms. Advocat (AVCA) completed the March dog list as a long-term care facility firm.
March Moves by Healthcare Dogs
Going back four months, NeoStem (NBS) appeared on the dog list by virtue of a fictitious dividend report. The NeoStem company announced its sale to Maxim in March. Meanwhile, PDL Biopharma remained tinted yellow as the top healthcare dog in March.
Color code revealed: (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 were depicted in the color for highest ranking attained.
Four healthcare dogs made bullish vertical moves since February 24: GlaxoSmithKline share price increased .874%; Eli Lilly & Company jumped 3.66%; PetMed Express showed a 5.7% price gain; February's ninth position dog, Merck (MRK) exited the top ten as a result of its 1.78% price spike.
Bearish moves for the same period were experienced by six dogs in the top ten: Top dog PDL BioPharma had a 1.24% price swoon; AstraZeneca Group climbed higher on the top ten healthcare list by yield after posting a 2.73% price decline combined with a $1.00 or 5.56% estimated annual dividend increase. Psychemedics Corporation price was depressed .0097%; Sanofi showed a 1.8% decrease; Daxor declined 5.26%; Advocat had a 17.07% price sag to drive it into the top dog echelon.
Dividend vs. Price Results vs. Dow Dogs
Below is a graph of the relative strengths of the top ten healthcare sector dogs by yield as of April 5, 2012 compared to those of the Dow. Four 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 created the data points for each month shown in green for price and blue for dividends.
Conclusion: Healthcare Dogs Sit and Stay
The March healthcare collection of top ten dividend payers showed 43.8% higher market performance in price through the six monthly points surveyed. However the projected dividends from $1k invested in each of the top ten declined 3.8% for that same period confirming a bull trend.
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. As of April 5 healthcare sector top ten dogs showed $182 (46.03%) more dividends (with equally bigger risk) at a $138 (34.21%) lower aggregate share price than those of the Dow.
A monthly summary will soon compare results in yield and price for all eight sectors reported in this series: 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.