This monthly series, which was started in December, has applied dog dividend methodology to each of the following eight major market sectors: basic materials, consumer goods, financial, healthcare, industrial goods, services, technology, and utilities.
A ninth sector, conglomerates (according to Yahoo Finance), contained just eight firms, five of which paid dividends. Thus we declined to apply dog metrics to such a small group.
Dogs of the Index Metrics Selected 10 Top Utilities 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 10 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 utility sector companies was sorted by yield as of April 5 using Ycharts.com to reveal the top 30. Market performance of these 30 selections was then reviewed using 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 sector top 10 dividend dogs as of April 5 vs. the Dogs of the Dow March 13 stock list. Annual dividends from $1,000 invested in the 10 highest-yielding stocks in the sector and index were compared to the aggregate single share prices of the top 10 stocks in each.
Utility Dividend Dogs
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Ten utilities sector stocks showing the biggest dividend yields in March represented four industries: gas; electric; diversified; foreign. Four gas firms clustered at or near the top of the list were: Inergy, L.P. (NRGY); Niska Gas Storage (NYSE:NKA); Suburban Propane (NYSE:SPH); Amerigas Partners (NYSE:APU). Two Electric Utilities were listed: Atlantic Power Corporation (NYSE:AT); Pepco Holdings, Inc. (NYSE:POM). Three Diversified Utilities made the list: TransAlta Corporation (NYSE:TAC); Otter Tail Corporation (NASDAQ:OTTR); Exelon Corporation (NYSE:EXC). One Foreign Utility was listed: CPFL Energia (CPL).
Vertical Moves in Utilities Dividend Dog Stocks
Spending months at number two, Inergy, L.P. finally got the yellow tint as top dog in February and retained it in March.
The color code below 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 were depicted in the color for highest ranking attained.
Just two utilities sector stocks made bullish vertical moves since February 24: Niska Gas Storage Partners stayed in the second slot by yield after posting a .316% price increase; Otter Tail Corporation slid lower two slots as it slapped a 0.1375% price increase.
Bearish moves for the same period were experienced by the other eight firms in the utility top 10 dog pound: Inergy, L.P. had a 9.62% price decline; Atlantic Power Corporation dropped 7.73%. Suburban Propane Partners slid 3.23% in price; Amerigas Partners price tanked 13.07%; TransAlta Corporation stock price sagged 13.23%; Pepco Holdings, Inc. popped a 6.1% price drop; Exelon too dropped 2.29% in price; CPFL Energia hemorrhaged 4.51%.
Dividend vs. Price Results for Utilities Sector vs. Dow Dogs
Below is a graph of the relative strengths of the top 10 utilities sector stocks by yield as of April 5, 2012 compared to those of the Dow index. Using six months of historic projected annual dividends from $1000 invested in the 10 highest-yielding stocks and the total single share prices of those 10 stocks created the data points for each month shown in green for price and blue for dividends.
Conclusion: Utilities Sector Dogs Gasp
The March utilities group of 10 top dividend payers showed a 6.22% decrease in aggregate single share price since Feb. 24. Projected annual dividends from $1k invested in each of the top 10 increased 12.43% for that period. Dogs gasped as a bear got loose in the utilities sector.
Meanwhile, the Dow index moved back to near convergence as dividends from $1k invested in the top 10 came to within $8 of their aggregate total single share prices in March. Dow index 10 top dividend payers showed a 11.83% decline in aggregate single share prices in the past month. Dividends from $1k invested in each of the top 10 Dow dogs also declined 2.78% for that period.
As of April 5, utilities sector top 10 dogs showed $423 or 107.05% more dividends (with equally bigger risk) at a $152 or 37.34% lower aggregate single share price than the Dow top 10.
At the end of each month, two summaries will conclude this new series of articles 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.
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.