This article reports results for the JPMorgan Sovereigns Index as of June 4 using the "Dogs of the Index" once per year trading system based on yield to determine the best buy opportunities for these large cap dividend stocks.
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 JP Morgan Sovereigns
Twenty-two JPMorgan Sovereigns Index stocks were listed below by yield as of June 4, 2012 per Yahoo Finance data. This collection came to light on July 22, 2011 when Thomas Lee, an equity strategist with J.P. Morgan, published a note titled "Corporates are the New Sovereigns: 22 stocks to own around sovereign default." The Barron's article covering Lee's announcement defined a Sovereign as an entity which can print money or tax at will. Lee's report listed 22 corporate stocks that show less risk of default than the sovereign U.S. government, based on five-year credit spreads, free cash flow yields exceeding bond yields, ratings of overweight by J.P. Morgan, and showing upside to their target prices.
Top ten stocks that showed the biggest yields in April included firms from five of nine business sectors: two industrial goods; two healthcare firms; two basic materials; two services; two consumer goods.
For the whole twenty two JPMorgan Sovereign dividend payers, four technology companies, three consumer goods, no financial, five services, two basic materials, two industrial, four health care, no utility, and two conglomerates represented the market sectors.
Up and Down Moves for JP Morgan Sovereign Dogs
Lockheed Martin Corp. (LMT) was wearing the yellow tint at the top from January to April until ConocoPhillips (COP) took over this month. Colors on the charts below revealed: (Yellow) firms listed in first position at least once between February and June 2012; (Cyan Blue) firms listed in fifth position at least once between February and June 2012; (Magenta) firms listed in tenth position at least once between February and June 2012; (Green) firms listed in fifteenth 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 19 were made by just two of the top ten JPM Sovereign dogs: Abbott Laboratories (ABT) scripted a 1.87% price gain; Pepsico (PEP) poured out a 2.01% gain in share price.
Bearish downward price moves for the same period hit over 80% of the top dogs of the JPMorgan Sovereigns. Conoco Phillips drilled a 29.74% price slump to take the top slot; Lockheed Martin piloted a 10.28% single share price drop to move into second place; Merck (MRK) infected a 2.35% price swoon; Raytheon (RTN) flashed a 6.15% drop; Freeport-McMoRan (FCX) dug a 14.99% share price trench; United Parcel Service (UPS) delivered a 8.634% drop; Norfolk Southern (NSC) rolled away a 7.29% price decline; Honeywell (HON) tanked 8.28% in price to replace Coke in the top ten; Coca-Cola Company (KO) merely fizzled a .244% decrease to exit the top ten.
Dividend Vs. Price Results for for JPMorgan Sovereigns index Dogs
Below is a graph of the relative strengths of the top ten JPMorgan Sovereigns index stocks by yield as of June 4, 2012. Five 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 creates the data points for each month shown in green for price and blue for dividends.
Conclusion: JPMorgan Sovereigns Top Dogs Depressed in May
JPMorgan Sovereigns Index constituents reflected bear market symptoms as projected dividend totals for $1000 invested in the top ten popped 5.72% as their aggregate total single share prices dropped 4.65% between the first and fifth points graphed.
The bearish pattern accelerated between April and May as JPMorgan Sovereigns Index top ten projected dividends from $1k invested in each of the dogs jumped 14.11% while aggregate single share prices for those stocks sagged 11.06% for the month.
What direction will JPMorgan Sovereigns prices and dividends go this 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 have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.