This article reports results for a 3x9 Sectors Index as of April 17. It also shows results for selected top yielding stocks from each of nine business sectors along with the best yielding runner-up from any sector as the tenth to perfectly diversify a top ten sector index portfolio, named 1x9+1 Sectors Index.
These two sector indices were analyzed using a once per year trading system triggered by yield, called the "Dogs of the Index" to determine the best of the best dividend stocks.
Upcoming articles in this series report April dog metrics applied to seven additional indices: Russell; NYSE International 100; S&P 500; S&P 500 Aristocrats; NASDAQ 100; Dow 30 Industrials; JPMorgan New Sovereigns.
Dogs of the Index Metrics
Two key numbers determined the yields to rank the stocks in each index: (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 they 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 increase (and whose dividend yields therefore decrease) could be sold off once each year to sweep gains and reinvest seed money into higher yielding stocks in the same index.
Investment Wisdom from the 3x9 and 1x9+1 Sectors
Listed below are the top twenty-seven 3x9 Sector stocks by yield as of 4/17/12 per Yahoo Finance data. This data was controversial since it reported estimated annual dividends that may or not be paid depending on decisions by individual corporate governing boards.
Dog dividend methodology was applied in new forward tests for April using Dogs of the Index metrics on each of eight major market sectors: Basic materials, consumer goods, financial, healthcare, industrial goods, services, technology, and utilities. This index is derived from data reported in those articles.
The rankings of 1, 2, or 3 for the nine sectors indicate the relative positions of the stocks in each sector as of April 17:
Click to enlarge:
For April, the top ten dividend paying stocks in this index represent five sectors: Three from financial; three from basic materials; two from utilities; one each from consumer and services. Top dividend yield slots were claimed by financial firms, BBVA Banco Francs S.V (BFR), and Armour Residential REIT (ARR). The March leader from basic materials, Oxford Resource (OXF) was cast off the list.
Nine top dogs and top runner-up on the above chart form the April 1x9+1 list:
Up and Down Moves by 3x9 and 1x9+1 Sector Stocks
Over the past three months four different firms bubbled to the top of the lists: CPI Corp. (CPY); Paragon Shipping (PRGN); Oxford Resource; BBVA Banco Francs S.V.. All were powered to that position by those ever-controversial, forward-looking dividend estimates reported courtesy of Yahoo finance and its Morningstar analytic resource.
Color code shows: (Yellow) firms listed in first position at least once between December 30, 2011 and April 2012; (Cyan Blue) firms listed in tenth position at least once between December 30, 2011 and April 2012; (Magenta) firms listed in nineteenth position at least once between December 30, 2011 and April 2012; (Green) firms listed in twenty seventh position at least once between December 30, 2011 and April 2012. Duplicates are depicted in color for highest ranking attained.
The top ten 1x9+1 Sector stocks showing the biggest dividend yields for April were the above mentioned two from financial, BBVA Banco Francs S.V., and Armour Residential REIT; from services, Alon Holdings - Blue Square (BSI); from basic materials, Whiting USA Trust (WHX); from consumer, Standard Register (SR); from utilities, Inergy (NRGY); from technology, Otelco (OTT); from industrial goods, Veolia Evironement (VE); from healthcare, PDL BioPharma (PDLI); from conglomerates, Rayonier Inc. (RYN).
Click charts to enlarge:
Bullish vertical moves made since March 13 included one: Whiting USA Trust whose share price increased 9.75%.
Bearish moves for the same period were dominant and experienced by: BBVA Banco Francs S.V, which slipped 10.73% and emerged top dog; Inergy declined 1.84%; Armour Residential REIT dropped 1.46% in price and claimed the second slot on this chart by yield; Standard Register posted a 32.64% decline; Niska Gas Storage Partners (NKA) tanked .2137%.
Dividend vs. Price Results for 3x9 and 1x9+1 Sector index Dogs
Below are graphs reporting relative strengths of the top ten 3x9 Sector and 1x9+1 Sector index stocks by yield as of April 17, 2012. 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 of the past five months shown in green for price and blue for dividends.
Click to enlarge:
February dividends sank as stock prices increased under a bullish trend. Notice how dividends and prices both fell in March as less expensive stocks with lower dividends ascended to the top. For April, a classic bear market pattern emerged as aggregate top ten stock price sagged 30.9% while projected dividends from $1k invested in each of the ten 3x9 Sector stocks soared 4.46%. Will price gains ever become rampant in these sectors in 2012? Stay tuned.
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.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.