Dividend Achievers Dogs Turn Bearish In May

by: Fredrik Arnold

In February The Dividend Achievers of 2012 announced annual additions and deletions to the Broad Dividend Achievers Index which is comprised of companies:

  1. Incorporated in the United States or its territories
  2. Trade on the NYSE, NASDAQ or AMEX
  3. Have increased dividends 10 or more consecutive years
  4. Have an average daily trading volume $500,000 per day

These Companies are said to be weighted based on their market capitalization as of the last trading date in December. No constituent may weigh more than 5% of the index on the annual reconstitution date or quarterly rebalance date. The index was reconstituted on the last trading date in January.

For this article the Dividend AchieversTM 50 Index was chosen from here. The selected subset below was constituted from "the 50 US companies with the highest current dividend yield as of the last trading date in December." The selected list was then updated with price data as of 1/30; 2/27; 3/29; 4/27; 6/1/2012 from historical prices available on Yahoo Finance.

Dogs of the Index Metrics Cull Out Current Bargains

Given the Dividend AchieversTM 50 Index, this article used two key numbers to rank those stocks: (1) stock price; (2) annual dividend. Dividing the annual dividend by the price declared the percentage yield by which each dog stock was ranked.

Historically Investors have utilized this ranking system to select portfolios of five or ten stocks in any one index or sector 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).

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) can be sold off once each year to sweep gains to reinvest the seed money into higher yielding stocks in the same index.

The top thirty stocks in the Dividend AchieversTM 50 Index listed below were ranked by yields calculated as of June 1.

Dividend Achievers top ten stocks paying the biggest dividends as of June 1 included equities representing five market sectors. The top stock as revealed by Yahoo Finance data, was another one of four in the consumer goods sector, Pitney Bowes Inc (NYSE:PBI), which replaced April's top dog, Vector Group LTD (NYSE:VGR). The other two consumer goods firms were Avon Products Inc (NYSE:AVP), and Leggett & Platt Inc (NYSE:LEG). The balance of the top ten included: three financial, Old Republic International (NYSE:ORI), Mercury General Corp (NYSE:MCY), and Peoples United Financial (NASDAQ:PBCT); one service, Meredith Corp (NYSE:MDP); one utility, PPL Corporation (NYSE:PPL); one technology, AT&T Inc (NYSE:T) representing the sectors.

Up and Down Moves for Dividend Achievers Dogs

Vector Group LTD, stayed at the top of this list by yield for three of the four months surveyed. Come May, Pitney Bowes took the top slot.

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

Bullish upward price moves since April 27 were made by just two of the top ten April Dividend Achiever dogs: AT&T dialed up a 3.7% gain; PPL Corporation generated a .549% price surge.

Bearish downward price moves for the same period hit the rest of the top ten April Dividend Achiever dogs: Top dog Vector Group LTD price dragged down 5.52%; but Pitney Bowes Inc cranked out a bigger 21.47% price drop to replace Vector at the top; Old Republic International posted a 4.93% decline; Leggett & Platt Inc. made a 7.72% price decline; Peoples United Financial swooned 8.33%; Mercury General Corp documented a 6.71% drop; Altria Group (NYSE:MO) burned off 1.4% in price but still exited the top ten; Avon Products price dropped 27.35% to put it back into the top ten.

Dividend vs. Price Results

Relative strengths for the Dividend Achievers top ten index stocks by yield was graphed as of June 1, 2012. Four months of historic projected annual dividend history from $1000 invested in the ten highest yielding stocks 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.

Conclusion: Bears Prevail

This Dividend Achievers collection of top ten dividend payers displayed bearish action for the five months surveyed. Dividends from $1k invested in the top ten rose 9.87% to stay above aggregate total single share prices which dropped 5.83% between January and May.

This past month, however, the Achiever top ten showed intensified bearish action as projected annual dividends from $1k invested in each stock soared 8.47% while the aggregate single share price of those stocks plummeted 10.86%. May aggregate single share stock price for the top ten Achiever dogs exceeded the total annual dividend returns from $1k invested in each of those stocks by over $448 or 204.8%.

Compared to the Dow in April these Achievers showed a 53.73% lower aggregate single share price along with 65.87% greater dividends from $1k invested in each of the top ten stocks than the dogs of the Dow.

At the end of each month, a summary concludes this series of articles by showing results of yield and price for these Dividend Achievers, the Carnevale Power 25 and new Super 29 indexes, along with David Fish's Champions, Contenders, Challengers, and Composite lists. Stay tuned and follow these intrepid dogs for fun and net gains.

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, VZ, JNJ, CVX, INTC.