This article reports results for the NASDAQ 100 Index as of June 1 using "Dogs of the Index", a once per year trading system triggered by yield, to determine the best of these dividend stocks.
Previous articles in this series reported May results from 3x9 and 1X9+1 Sector indices, the Russell 1000, S&P 500, and Dow 30 Industrials. Upcoming articles this week report Dog Metrics applied to three additional indices: S&P 500 Aristocrats; NYSE International 1000 indices; 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 NASDAQ 100
Listed below are the top thirty NASDAQ 100 Index stocks by yield as of 6/1/12 per IndexARB.com data. NASDAQ states, "The NASDAQ-100 Index includes 100 of the largest domestic and international non-financial securities listed on The Nasdaq Stock Market based on market capitalization. The Index reflects companies across major industry groups including computer hardware and software, telecommunications, retail/wholesale trade and biotechnology. It does not contain securities of financial companies including investment companies."
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Seven of the top ten stocks showing the highest forward looking yields in this May index were technology firms. Vodafone (NASDAQ:VOD) from this sector claimed the top spot as of November last year throwing 5 to 8% yields. On June 1 Vodafone was still on top at 6.95%. The remaining three firms for May consisted of two consumer goods firms and one service outfit filling out the top ten.
Up and Down Moves for NASDAQ 100 Index Dogs
As mentioned above Vodafone earned the yellow tint awarded the dog at the top of the list June 1.
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.
Bullish upward price moves since April 17 were made by not one of the top ten NASDAQ 100 dogs.
Bearish downward price moves for the same period hit the entire pack of dogs of the NASDAQ 100: Vodafone price disconnected 2.08%; Seagate Technology (NASDAQ:STX) spun down 29.8% in price; Microchip Technology (NASDAQ:MCHP) dropped 21.59% in price; PACCAR Inc. (NASDAQ:PCAR) price swooned 14.52%; Paychex (NASDAQ:PAYX) share price decreased 5.46%; Garmin (NASDAQ:GRMN) price plunged 7.9%; Mattel (NASDAQ:MAT) saw a 4.8% price slump; CA technologies (NASDAQ:CA) share price fell 9.06%; Maxim Integrated Products (NASDAQ:MXIM) showed a price drop of 13.1%; Applied Materials (NASDAQ:AMAT) grabbed the tenth spot on a 15.53% price crash.
Dividend vs. Price Results for NASDAQ 100 Dogs
Relative strengths of the top ten NASDAQ 100 Index stocks by yield was graphed as of June 1, 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.
Conclusion: A Bull Roared into March but A Bear Bumbled into May
Hints of a earlier bull market showed in the NASDAQ 100 over the first three data points graphed. Dividends from $1k invested in each of the top ten dogs decreased 7.53% as aggregate single share price for those ten jumped up 25.68% between December and March.
However, NASDAQ 100 Index dogs reflected bear market symptoms for April and May as projected dividend totals for $1000 invested in the top ten increased 15.6% while their aggregate total single share prices dropped 24.02% over the past two months.
Will the NASDAQ 100 Index ever find bullish price gains this summer? 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.