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I recently wrote an article listing the top paying dividend stocks from a range of industries. The purpose of the article was to provide readers with a list of stocks to investigate as potential additions to their portfolios. One of the comments suggested that I track their performance to see how dividend yield might correlate to future performance. While I can start tracking this most recent list, I can also review the performance of the previous set of top paying dividend stocks from my July 7, 2011, article. The main table is replicated below:

Top Paying Dividend Stocks July 2011

Ticker Name Industry Market Cap ($ Millions) Dividend Yield
HHS Harte-Hanks, Inc. Advertising 529 3.9%
LMT Lockheed Martin Corporation Aerospace & Defense 28,301 3.7%
CZZ Cosan Limited Agriculture Crops 2,160 2.1%
UPS United Parcel Service, Inc. Air Courriers 72,763 2.8%
RYAAY Ryanair Holdings plc Airlines 8,539 12.2%
TAP Molson Coors Brewing Company Alcoholic Beverages 7,423 2.8%
VFC V.F. Corporation Apparel 12,154 2.3%
OTCPK:ELUXY Elextrolux Appliance & Tools 7,657 3.5%
PHG Koninklijke Philips Electronics, N.V. Audio Video Equipment 24,073 3.4%

OTCPK:VOLVY

Volvo Auto & Truck Manufacturing 35,736 2.0%
GPC Genuine Parts Company Auto & Truck Parts 8,744 3.2%
AZN Astrazeneca PLC Biotechnology & Drugs 71,973 7.2%
SJR Shaw Communications Inc. Broadcasting & Cable TV 9,410 4.0%
CODI Compass Diversified Holdings Business Services 775 8.7%
THO Thor Industries, Inc. Campers & RV Vehicles 1,613 1.4%
ASCA Ameristar Casinos, Inc. Casino & Gaming 770 1.8%
TNH Terra Nitrogen Company, L.P. Chemical Manufacturing 2,564 14.0%
SHLM A. Schulman, Inc. Chemicals: Plastics & Rubber 787 2.4%
PVR Penn Virginia Resource Partners LP Coal Mining 1,913 7.1%
NOK Nokia Corporation Communications Equipment 23,668 6.5%
PT Portugal Telecom SGPS, S.A . Communications Services 8,540 17.7%
HPQ Hewlett-Packard Company Computer Hardware 75,644 1.3%
JKHY Jack Henry & Associates, Inc. Computer Networking Equipment 2,633 1.4%
CAJ Canon, Inc. Computer Peripherals 58,598 3.0%
ELNK EarthLink, Inc. Computer Services 860 2.6%
STX Seagate Technology. Computer Storage Devices 6,967 4.4%
TYC Tyco International, Ltd. (Switzerland) Conglomerate 23,302 2.0%
VMC Vulcan Materials Company Construction - Raw Materials 5,107 2.5%
MAS Masco Corporation Construction - Supplies & Fixtures 4,394 2.4%
DE Deere & Company Construction & Agricultural Equipment 35,608 1.9%
MDC M.D.C. Holdings, Inc. Construction Services 1,196 4.0%
GE General Electric Company Consumer Financial Services 201,928 3.2%
IP International Paper Company Containers & Packaging 13,061 3.5%
AT Atlantic Power Corporation Electric Utilities 1,060 7.1%
MOLX Molex Incorporated Electronic Instruments & Control 4,576 3.1%
CSL Carlisle Companies Incorporated Fabricated: Plastics & Rubber 3,035 1.4%
CALM Cal-Maine Foods, Inc. Fish & Livestock 775 5.8%
BGS B&G Foods Holdings Corp. Food Manufacturing 1,014 4.0%
NKE Nike, Inc. Footware 43,497 1.4%
WY Weyerhaeuser Company Forestry & Wood Products 11,930 2.7%
LEG Leggett & Platt, Incorporated Furniture & Fixtures 3,538 4.4%
NEM Newmont Mining Corporation (Holding Company) Gold and Silver Mining 26,819 1.5%
VIVO Meridian Bioscience Inc. Health Equipment 1,011 3.1%
NHC National HealthCare Corporation Healthcare Facilities 673 2.5%
IHG Intercontinental Hotels Group Hotels & Motels 6,145 2.2%
AFL Aflac Incorporated Insurance (Accident & Health) 21,725 2.6%
SLF Sun Life Financial Incorporated Insurance (LIFE) 17,641 4.7%
AJG Arthur J. Gallagher & Co. Insurance (Miscellaneous) 3,198 4.6%
OB OneBeacon Insurance Group, Ltd. Insurance (Property) 1,242 6.4%
BBEP BreitBurn Energy Partners, L.P. Integrated Oil 1,165 8.5%
PVD Administradora de Fondos de Pensiones-Provida, S.A. Investment Services 1,598 7.2%
TX Ternium S.A. Iron & Steel 6,112 4.9%
GSK GlaxoSmithKline PLC Major Drugs 111,656 4.9%
SCCO Southern Peru Copper Corporation Metals 27,804 6.9%
WSO Watsco, Inc. Miscellaneous Capital Goods 2,235 3.4%
SJT San Juan Basin Royalty Trust Miscellaneous Financial Services 1,136 6.1%
PAC Grupo Aeroportuario Del Pacifico, S.A. de C.V. Miscellaneous Transportation 1,954 5.5%
NKA Niska Gas Storage Partners LLC Natural Gas 575 8.2%
DPS Dr Pepper Snapple Group, Inc Non-alcoholic Beverages 9,461 3.0%
CMP Compass Minerals Intl Inc Non-metallic mining 2,853 2.1%
XRX Xerox Corporation Office Equipment 14,811 1.6%
DLX Deluxe Corporation Office Supplies 1,337 3.9%
ENP Encore Energy Partners LP Oil Production 987 9.0%
TLP Transmontaigne Partners L.P. Oil Well Services & Equipment 509 6.9%
OTCQX:SEOAY STORA ENSO CORP Paper and Pulp 8,239 2.7%
KMB Kimberly-Clark Corporation Personal & Household Products 26,134 4.2%
STON StoneMor Partners L.P. Personal Services 543 8.3%
RRD R.R. Donnelley & Sons Company Printing 4,156 5.2%
SID National Steel Corporation Product Fabrication 18,370 5.1%
TRI Thomson Reuters Corp Publishing 31,240 3.3%
GSH Guangshen Railway Company Limited Railroads 3,000 2.9%
ARR Armour Residential Real Estate Operations 520 19.2%
TRK Speedway Motorsports, Inc. Recreational Activities 599 2.8%
MAT Mattel, Inc. Recreational Products 9,701 3.3%
TAL TAL International Group, Inc. Rental & Leasing 1,164 5.7%
MCD McDonald's Corporation Restaurants 88,858 2.9%
AEO American Eagle Outfitters, Inc. Retail (Apparel) 2,516 3.4%
WMT Wal-Mart Stores, Inc. Retail (Department) 185,400 2.7%
WAG Walgreen Company Retail (Drug Stores) 39,118 1.6%
HD Home Depot, Inc. (The) Retail (Furnishings) 58,260 2.7%
SVU SuperValu Inc. Retail (Grocery) 1,994 3.7%
UNTD United Online, Inc. Retail (Specialty) 554 6.4%
BBY Best Buy Co., Inc. Retail (Technology) 12,532 1.9%
STRA Strayer Education, Inc. Schools 1,606 3.1%
LDR Landauer, Inc. Scientific Instruments 593 3.5%
DBD Diebold, Incorporated Security Services and Products 2,068 3.5%
TSM Taiwan Semiconductor Manufacturing Company Limited Semiconductors 65,915 6.2%
MSFT Microsoft Corporation Software & Programming 219,505 2.5%
IFSIA Interface, Inc. Textiles - non apparel 1,301 0.4%
CTB Cooper Tire & Rubber Company Tires 1,225 2.1%
MO Altria Group Tobacco 55,684 5.7%
KNX Knight Transportation, Inc. Trucking 1,429 1.4%
WM Waste Management, Inc. Waste Management Services 17,839 3.6%
NMM Navios Maritime Partners LP Water Transportation 854 9.3%
CWT California Water Service Group Holding Water Utilities 780 3.3%
Source: Data provided by Zacks.com services and downloaded on July 6, 2011. Classifications provided by EDGAR Online's I-Metrix Professional, XBRL-enabled application.

One thing to notice is that some stocks will post high yields simply because their share price is declining and they have not yet cut their dividend, despite a challenging outlook. Hence, I would expect this list to also include several poor performers. Another observation is that the market, as measured by the SPDR S&P 500 Trust ETF (SPY), has declined 2.7% since then. For each stock, I went through and added up their dividends since July 2011 and their closing prices as of June 1, 2012, to provide a total return. Unfortunately, the results were quite disappointing. The group average was -8.0%, substantially worse than SPY. The following table shows the results:

Top Paying Dividend Stocks' Performance
Ticker Closing Price (July 5, 2011) $ Dividends $ Closing Price (June 1, 2012) $ Total Return
TNH 138.60 16.24 202.1 57.5%
AEO 12.91 0.44 18.56 47.2%
STX 16.20 0.86 21.74 39.5%
HD 36.59 1.12 47.96 34.1%
WMT 53.39 1.53 65.55 25.6%
MO 26.60 1.23 31.69 23.8%
AJG 28.65 1.00 34.21 22.9%
VFC 111.10 2.07 134.35 22.8%
KMB 66.52 2.14 78.28 20.9%
DBD 31.67 1.13 35.5 15.7%
NKE 91.74 1.39 104.6 15.5%
BGS 21.16 0.71 23.38 13.8%
TRK 14.40 0.50 15.84 13.5%
MAT 27.91 1.08 30.56 13.4%
GPC 55.58 1.40 61.08 12.4%
MSFT 26.03 0.76 28.45 12.2%
WSO 67.89 2.38 72.28 10.0%
CALM 32.48 0.84 34.84 9.8%
ARR 7.50 1.23 6.94 8.9%
PVD 72.35 7.03 71.58 8.7%
MDC 25.29 1.00 26.47 8.6%
GSK 43.26 2.48 43.45 6.2%
TYC 49.69 1.00 51.48 5.6%
LMT 80.97 3.75 81.22 4.9%
MCD 85.64 2.71 86.71 4.4%
OB 13.15 0.63 12.94 3.2%
HHS 8.30 0.33 8.21 2.9%
THO 28.89 0.45 29.17 2.5%
ELNK 7.82 0.15 7.86 2.4%
UPS 73.78 2.18 73.25 2.2%
CSL 49.58 0.72 49.81 1.9%
MAS 12.27 0.30 12.04 0.6%
GE 19.04 0.49 18.54 -0.1%
IP 29.87 1.05 28.13 -2.3%
DPS 42.74 0.98 40.63 -2.6%
CWT 18.67 0.62 17.36 -3.7%
TLP 35.22 2.50 31.13 -4.5%
CZZ 12.39 0.28 11.51 -4.8%
NEM 54.37 1.00 50.3 -5.6%
BBEP 19.73 1.76 16.46 -7.6%
PVR 26.95 2.02 22.8 -7.9%
AT 15.47 1.03 13.14 -8.4%
PAC 40.97 1.49 35.3 -10.2%
WY 22.15 0.60 19.11 -11.0%
DLX 26.00 1.00 22.1 -11.2%
NHC 48.64 0.90 42.11 -11.6%
WM 37.62 1.04 32.16 -11.8%
MOLX 26.00 0.60 22.31 -11.9%
TAP 45.06 1.28 38.33 -12.1%
AFL 46.45 1.29 38.65 -14.0%
DE 84.84 1.28 71.52 -14.2%
LEG 24.76 0.84 20.3 -14.6%
SHLM 25.51 0.69 21.04 -14.8%
CODI 16.59 1.44 12.62 -15.3%
CMP 86.80 1.89 71.51 -15.4%
SJR 22.82 0.86 18.38 -15.7%
VMC 39.56 0.27 32.97 -16.0%
AZN 51.08 2.80 40.08 -16.1%
WWE 9.64 0.36 7.64 -17.0%
LDR 62.98 1.65 49.96 -18.1%
NMM 18.41 1.76 13.21 -18.7%
VIVO 24.66 0.76 18.91 -20.2%
GSH 21.13 0.79 16 -20.5%
NKA 17.02 1.40 11.7 -23.0%
ASCA 23.91 0.46 17.81 -23.6%
CTB 19.72 0.42 14.52 -24.2%
WAG 42.73 0.90 29.93 -27.8%
PHG 25.41 1.00 17.32 -27.9%
UNTD 6.25 0.40 4 -29.6%
STRA 131.17 4.00 86.9 -30.7%
XRX 10.57 0.13 7.12 -31.4%
SLF 30.51 1.43 19.39 -31.8%
TX 30.49 0.75 18.32 -37.5%
IFSIA 19.88 0.08 12.18 -38.3%
SJT 24.38 1.25 13.25 -40.5%
HPQ 36.47 0.36 21.25 -40.7%
BBY 32.24 0.48 18.3 -41.7%
RRD 20.03 1.04 10.33 -43.2%
SEOAY 10.57 0.39 5.2 -47.1%
SID 12.60 0.43 6.22 -47.2%
SVU 9.40 0.35 4.29 -50.6%
PT 9.75 0.85 3.9 -51.3%
NOK 6.32 0.26 2.64 -54.1%
Source: Data provided by Zacks.com services and downloaded on June 3, 2012. Dividends from Yahoo!Finance.

In the previous article, I noted that stocks like Nokia (NOK) might have dividend sustainability issues. This turned out to be true, as Nokia posted the worst performance in the group, declining around 54%. Portugal Telecom (PT) was the second-worst performer, declining 51%. Several stocks on the list also appeared to discontinue their dividends. However, there were several strong performers as well, including clothing and apparel companies such as American Eagle Outfitters (AEO) and V.F. Corporation (VFC).

One filter to consider might be proximity to 52-week lows. Overall, 39 of 96 (41%) stocks outperformed SPY. If one considered just stocks more than 10% off their 52-week lows, then 33 of 76 (43%) outperformed SPY. This second result is marginally better. Other percentages give similar variations. Surprisingly, proximity to a 52-week low is not a clear filter. I still think one should be cautious in understanding the drivers of high yield.

The initial list was also constructed to eliminate stocks with a market capitalization above $500 million. Taking size into consideration does have an impact. As I filtered the stocks based on market capitalization, the results improved. Using $1 billion as the cutoff resulted in 34 of 73 (47%) stocks outperforming SPY. Raising this to $10 billion gave results of 16 of 30 (53%) outperforming SPY. At $25 billion, the result was 12 of 17 for 71%. The average return among these 17 stocks was 2.0%, which is small but still much better than the SPY at -2.7%.

So, as noted in the original article, these dividend yield lists might be a good place to start researching potential investments; however, it is not a list for blind investment. The size analysis also suggests that perhaps larger capitalization stocks are better bets. Perhaps the price of the stock has temporarily dipped, pushing up the yield. Over time, the price then reverts to a more normal level. So when looking at high yields, it appears to also be important to consider the size of the company as well.

Investors should do thorough research and analysis prior to making any investment decision, no matter how tempting the dividend yield might be.

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.

Source: Revisiting Top Paying Dividend Stocks - Size Matters