S&P 500 Aristocrats Top Dogs Tumble In May

|
Includes: CINF, ED, HCP, JNJ, KMB, LEG, NUE, SYY, T
by: Fredrik Arnold

This article reports results for the S&P 500 Aristocrats as of June 4 using a once per year trading system triggered by yield, called the "Dogs of the Index" to determine the best of the Aristocrats dividend stocks.

Previous articles in this series reported April results from 3x9 and 1X9+1 Sector indices, the Russell 1000, S&P 500, and Dow 30 indices. Upcoming articles this week report dog metrics applied to NYSE International 100, NASDAQ 100, and JPMorgan New Sovereigns.

Dogs of the Index Metrics

Two key numbers determined the yields that ranked 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.

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 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.

Investor Empowerment from the S&P 500 Aristocrats

Listed below are thirty S&P 500 Aristocrats stocks by yield as of 6/4/12 per Yahoo Finance data. McGraw Hill, publisher if this index, states, "The S&P 500® Dividend Aristocrats index measures the performance of large cap, blue chip companies within the S&P 500 that have followed a policy of increasing dividends every year for at least 25 consecutive years."

Consumer goods firms constituted three of the top ten stocks paying the biggest dividends on the S&P 500 Aristocrats as of June 4. The remaining dogs in the top ten represent six sectors: one technology; one basic materials, two financials; one utility; one healthcare; one service.

For these thirty June S&P Aristocrat dividend payers, two technology companies, nine consumer goods, three financials, four services, three basic materials, three industrial goods, four health care, one utility, and one conglomerate represent the market sectors.

Up and Down Moves for S&P 500 Aristocrats index Dogs

As mentioned above, Pitney Bowes wears the yellow tint as top dog in this index.

Color code shows: (Yellow) firms listed in first position at least once between February and June 2012; (Cyan Blue) firms listed in tenth position at least once between February and June 2012; (Magenta) firms listed in twentieth position at least once between February and June 2012; (Green) firms listed in thirtieth position at least once between February and June 2012. Duplicates (if any) are depicted in color for highest ranking attained.

Click to enlarge

Click to enlarge

No new members joined the top ten Aristocrats in May. The top dogs just changed ranks.

Bullish upward price moves since April 17 were made by five present and former ten top Aristocrat index dogs: AT&T Inc (NYSE:T) showed a 11.06% price jump; HCP Inc. (NYSE:HCP) marked a .153% increase; Cincinnati Financial Co. (NASDAQ:CINF) charted a 1.77% pop; Consolidated Edison (NYSE:ED) sparked a 4.64% price incline; Kimberly Clark (NYSE:KMB) put up a 4.23% price improvement.

Bearish downward price moves for the same period hit the rest of the dogs of the S&P 500 Aristocrats. Top dog Pitney Bowes showed a 22.4% price drop; Leggett & Platt (NYSE:LEG) posted a 14.52% decline; Sysco Corp (NYSE:SYY) delivered a 6.47% drop; Johnson & Johnson (NYSE:JNJ) stock price ticked down 1.45%; Nucor Corporation (NYSE:NUE) milled a 15.47% price decline.

Dividend Vs. Price Results for S&P 500 Aristocrats Dogs

Relative strengths of the top ten S&P 500 Aristocrats Index stocks by yield was graphed as of June 4, 2012. Projected annual dividend history from $1000 invested in each of the ten highest yielding stocks each month and the total single share prices of those ten stocks created the data points for the past six months shown in green for price and blue for dividends.

Click to enlarge

Conclusion: Aristocrats Top Dogs Tumble in May

S&P 500 Aristocrats Index constituents continued to be chased by a bear as projected dividend totals for $1000 invested in the top ten increased 8.29% as their aggregate total single share prices decreased 15.21% over the six months graphed.

The above graph turned more bearish between April 17 and June 4 as S&P 500 Aristocrats top ten dividends from $1k invested in each of the dogs increased 7.41% while single share prices for those stocks decreased 1.59% for the month.

Will S&P 500 Aristocrats Index bullish price gains emerge come Summer? Stay tuned.

Meanwhile, a monthly summary will soon compare results in yield and price for all nine indices reported in this series: 3x9 and 1X9+1 Sector indices; Russell 1000; S&P 500; NYSE International 100; NASDAQ 100; Dow 30; S&P 500 Aristocrats; JPMorgan Sovereigns.

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 am long T, JNJ.