Healthcare Dogs Stay Steady In April

by: Fredrik Arnold

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. The editorial decision was not to apply dogs of the index metrics a sector containing fewer than ten dividend paying equities.

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.

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 healthcare sector companies was sorted by yield as of May 16 using 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 dividend projections adjusted for market realities.

Thereafter, this article assessed the relative strengths of the healthcare 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.

Healthcare Dividend Dogs

Ten healthcare sector stocks paying the biggest dividends in March represented six industries. Top healthcare sector stock PDL BioPharma (NASDAQ:PDLI) was the only biotechnology firm in the top ten. Five drug manufacturers - major firms appeared as top ten dogs: AstraZeneca Group (NYSE:AZN); GlaxoSmithKline (NYSE:GSK); Eli Lilly (NYSE:LLY); Sanofi (NYSE:SNY); Novartis (NYSE:NVS). Psychemedics (NASDAQ:PMD) appeared as a medical laboratories and research firm. PetMed Express (NASDAQ:PETS), represented drug delivery firms. Advocat (AVCA) represented long-term care facilities. Nordion (NYSE:NDZ) completed the March dog list offering specialized health services.

Up and Down Moves by Healthcare Dogs

Going back four months, PDL Biopharma remained tinted yellow as the top healthcare dog through April.

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.

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Bullish upward price moves among the top ten healthcare dogs since March 30 included six of the March top ten dogs: Psychemedics Corporation price hyped .305%; Eli Lilly & Company jumped 2.075%; Sanofi showed a 3.15% price increase; PetMed Express popped a 2.74% price gain; Novartis price flared 1.75%; Daxor (NYSEMKT:DXR) exited the top ten as its price bloomed 3.56%.

Bearish downward price moves for the same period were experienced by five dogs: PDL BioPharma price sagged .942%; AstraZeneca Group posted a .204% price decline; GlaxoSmithKline share price dropped 1.49%; Advocat had a .792% price swoon; Nordion tanked .326% to climb into the top healthcare dog echelon.

Price gainers outnumbered losers 6 to 5 for April among the healthcare dogs.

Dividend vs. Price Results Compared to Dow Dogs

Below is a graph of the relative strengths of the top ten healthcare sector dividend 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.

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Conclusion: Healthcare Dog Price & Dividends Steady through April

The April healthcare collection of top ten dividend payers showed a 40.1% increase in aggregate single share price through the four monthly points surveyed. However, projected dividends from $1k invested in each of the top ten also increased .74% for that same period continuing a neutral to slightly bullish trend. In the month past, price grew just 1% while dividends sagged 2.29%.

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.

As of April 30 healthcare sector top ten dogs showed $160, or 39.81%, more dividends from $1k invested in each of the top ten stocks by yield (with equally bigger risk) at a $206, or 51% 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 am long T, VZ, JNJ, CVX.

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.