Each month David Fish publishes his updated Dividend Champions profile here in Seeking Alpha. David's dividend champion stocks are distinguished as companies that have paid higher dividends for 25 straight years or more.
Dogs of the Index Metrics Cull Out Current Bargains
Given the Dividend Champions, 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 grouping to trade. They optimistically 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.
Classic Dogs of the Index theory trades selected Dow stocks. Thus, the Dow is used as a standard of comparison to conclude this article.
The top thirty dividend champions stocks listed below were ranked by yields calculated as of May 31.
Ten Champion dogs that promised the biggest dividend yields in May included firms representing five market sectors. The top stock Pitney Bowes (PBI) was one of three firms in the consumer sector. The other two consumer goods top dogs were Leggett & Platt Inc. (LEG), and Altria Group Inc. (MO). The balance of the top ten included: four financial, Old Republic International (ORI), Washington REIT (WRE), Mercury General Corp. (MCY), and United Bankshares Inc. (UBSI); one technology, AT&T Inc. (T); one service, Bowl America Class A (BWL.A); one healthcare, HCP Inc. (HCP) representing market sectors.
Up and Down Moves for Dividend Champions Dogs
Pitney Bowes has remained at the top of this list by yield for the four months surveyed.
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 the color for highest attained rank.
Bullish upward price moves since April 27 were made by just two of the top ten Dividend Champion Dogs: AT&T Inc dialed up a 4.53% price gain; Altria Group Inc. ignited a .156% price gain.
Bearish downward price moves for the same period hit most of the top ten dogs: Pitney Bowes posted a 20.65% price decline; Old Republic Int'l. managed a 2.57% decline; Washington REIT dropped 4.87%; Mercury General Corp. red inked a 4.28% price slump; Leggett & Platt sagged 5.5% in price; Bowl America A rolled a 1.06% gutter ball; HCP Inc bedded a 1.233% price swoon; Vectren Corp (VVC) degenerated .238%; United Bankshares Inc. debited its price 3.89% to re-join the Champion top ten by yield.
Dividend vs. Price Results
Relative strengths of the dividend champions top ten index stocks by yield were graphed below as of May 31, 2012 and compared to those of the Dow. 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: Champions Drop As Dow Dogs Jump
The Champions top ten reliable dividend stocks showed a 4.14% ten share price drop over the past month while their dividends soared 5.68%. The Dow ten on the other hand increased their over-valuation since January as their aggregate total single share price climbed 5.74% while dividends from $1k invested in each of the top ten stayed steady at the $400 level.
Ten Champions projected 49.44% higher dividends at a 44.72% lower aggregate share price than those of the Dow in May.
Conclusion Two: Champion Dogs Beat Dow 30 10.65% to 6.68% in 2011 to 2012 Gains as of June 1
Results from annual investments in these two indices' lowest priced, highest yielding stocks showed Champions bested the Dow. The box score below shows Champion dogs exceeding Dow dogs by $397.31 or 39.73% in net returns from $10k invested since June 1, 2011.
The sale of Cincinnati Financial (CINF), Universal Corp (UVV) and Vectren Corp. at June 1, 2012 closing prices generated the larger net return for the champions. Dow dogs only counted two sales of Intel (INTC) and Kraft (KFT) as of June 1. Net returns were calculated by adding all the actual dividends paid by the top ten dogs in each index plus stock sale gains minus brokerage per trade fees of $10 per trade for securities sold.
At the end of each month, a summary concludes this series of articles showing results of yield and price for the Russell 50, Dividend Achievers, the Carnevale Power 25 and new Super 29 indices, along with David Fish's Champions, Contenders, Challengers, and Composite lists. Stay tuned to follow these intrepid dogs.
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 (except as noted) are listed without consideration of fees, commissions, taxes, penalties, or interest payable due to purchasing, holding or selling same.