This monthly report series was initiated in December 2011 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 a sector containing fewer than ten dividend equities.
Dogs of the Index Metrics Selected Ten Top Consumer Goods 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.
Historically dividend dog investors utilized this ranking system to select portfolios of five or ten stocks in any one index, sector, or survey to trade. They awaited the results from their investments in the lowest priced, highest yielding stocks 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 consumer goods sector companies was sorted by yield as of May 16 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 consumer goods sector top ten dividend dogs as of May 1 opening prices vs. the Dogs of the Dow May 11 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.
Consumer Goods Dividend Dogs
The top ten consumer goods stocks showing the biggest dividend yields in April represented six industries. Top stock, Vector (NYSE:VGR) was from the cigarettes industry. Three of the top ten basic materials firms were in the same cigarettes industry group, Reynolds (NYSE:RAI), and British American Tobacco (NYSEMKT:BTI) were the others. The one equipment firm is Pitney Bowes (NYSE:PBI). Two textiles - apparel clothing firms are, Cherokee (NASDAQ:CHKE), and Crown Crafts (NASDAQ:CRWS). There are also two personal products industry firms: CCA Industries (NYSEMKT:CAW), and United - Guardian (NASDAQ:UG). The balance of the top ten are: auto parts, Douglas Dynamics (NYSE:PLOW); home furnishings and fixtures, Leggett & Platt (NYSE:LEG).
Up and Down Moves by Consumer Goods Dogs
Going back four months, Vector had the top of this list by yield. In February Standard Register (NYSE:SR) became top dog with a yellow tint by virtue of a share price slump of 22.92% and held the tint in March. Come April Standard Register share price fell below one dollar and in May the company was granted six months by the NYSE to cure the share price with a reverse stock split. Their May dividend was presumed to drop to $.01.
Color code shows: (Yellow) firms listed in first position at least once between January and April 2012; (Cyan Blue) firms listed in tenth position at least once between January and April 2012; (Magenta) firms listed in twentieth position at least once between January and April 2012; (Green) firms listed in thirtieth position at least once between January and April 2012. Duplicates were depicted in color for highest ranking attained.
Bullish upward price moves among the top ten dogs since March 30 included seven firms: Pitney Bowes cranked out a .408% gain; Cherokee laced up a 4.24% boot in price; Douglas Dynamics saw a 7.87% price push; CCA Industries price sparkled 1.95%; Altria (NYSE:MO) smoked a 2.84% gain to exit the top ten; Crown Crafts price jumped 4.26% while its projected dividend rose 60% to propel CRWS into the top ten; similarly British American Tobacco was declared to have a 122.36% spike in dividend by Yahoo Finance along with a 2.34% flair in price to hit the high yielding ten. Unfortunately divided history shows the BTI semi-annual dividend payout come fall to be about half that of the one in the spring. Thus the Yahoo Finance BTI dividend projection was likely inaccurate.
Bearish downward price moves for the same period were experienced by the rest of the pack: Standard Register exited the top spot based on a projected 80% drop in dividend as its price also declined 21.9%; Vector Group price was crushed 22%; Deer Consumer Products price stumbled 10.38%; Reynolds fell 2.76%; Leggett & Platt price dropped 6.21% to propel the firm into tenth place by yield.
Dividend vs. Price Results Compared to Dow Dogs
Below is a graph of the relative strengths of the top ten consumer goods dividend sector stocks by yield as of market close 5/1/2012 compared to those of the Dow. Using 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.
(click to enlarge)
Conclusion: Consumer Goods Dogs Chase A Bull
Reversing course from last month, between March 30 and April 30, your top ten consumer goods dogs aggregate single share price elevated 62.39% while projected dividends from $1k invested in each of those ten stocks dropped 15.92%.
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. Since then however the Dow aggregate single share price for the top ten has rallied up 17.56% into May.
Consumer goods sector top ten dogs now show $236 or 58.45% more dividends (with equally bigger risk) at a $232 or 49% lower aggregate share price for the top ten dogs than those of the Dow as of April 30.
Two summaries conclude this new series of articles at the end of each month showing comparative results of yield and price for all eight sectors reported: basic materials, consumer goods, financial, healthcare, industrial goods, services, technology, and utilities. 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.