30 CCC Combo Dogs Cut To 10 Vs. Dow In May

by: Fredrik Arnold

It happens every Month. David Fish publishes his updated Dividend Champions, Dividend Contenders, and Dividend Challenger profiles here on Seeking Alpha. His champions have increased dividends for 25 straight years or more; contenders have increased dividends for 10-24 straight years; challengers have increased dividends for 5-9 straight years.

This article combined the top ten yielding stocks from each group then utilized the dogs of the index strategy to sort the combined index of 30 into a suitable grouping of ten to trade.

This effort was part an ongoing one to respond to the question, "which dividend stocks were good, better, best, bad or ugly in May?"

The research was also in keeping with Yale professor Robert Shiller's observation: "People still place too much confidence in the markets and have too strong a belief that paying attention to the gyrations in their investments will someday make them rich, and so they do not make conservative preparations for possible bad outcomes." Hence this article graphically depicts the gyrations.

Dogs of the Index Metrics Cull Out Current Bargains

Given the top ten dividend challengers, contenders, and challengers, 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 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 CCC combo stocks listed below were ranked by yields calculated as of May 31.

Dividend CCC Combo Index


CCC combined index dogs projecting the biggest dividend yields in May included firms representing five of nine market sectors. April's top dog Inergy LP (NRGY) was disqualified in May when it cut its dividend payment by half. The reconstituted CCC combo top ten included: three financial firms, Dynex Capital Inc. (NYSE:DX), PennantPark Investment Corp. (NASDAQ:PNNT), and Triangle Capital Corp. (NYSE:TCAP); two consumer goods, Pitney Bowes Inc. (NYSE:PBI), and Vector Group Ltd. (NYSE:VGR); three basic materials firms, Exterran Partners LP (EXLP), Natural Resource Partners LP (NYSE:NRP), and Vanguard Natural Resources LLC (NYSE:VNR); one service, StoneMor Partners LP (NASDAQ:STON); one utility, Suburban Propane Partners LP (NYSE:SPH), representing market sectors.

Up and Down Moves for CCC Combination Dogs

In May Dynex Capital Inc. claimed the yellow tint at top of this list by yield. 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 rank attained.

Bullish upward price moves since March 26 were made by just one of the top ten CCC combo stocks: Triangle Capital Corp posted a .296% price gain.

Bearish downward price moves for the same period hit the rest of the top ten CCC combo index dogs: Top dog Inergy LP was disqualified for its dividend cut; Dynex Capital entered a 1.7% price drop; PennantPark Investment Corp. inked a 7.23% price decline; Pitney Bowes posted a 4.49% price decline; Exterran Partners LP notched a 4.44% price decline; Vanguard Natural Resources slumped 16.29% in price; Vector Group Ltd. flicked off a 4.48% decline in price; Natural Resource Partners dropped 6.94% in price; StoneMor Partners LP etched a 5.1% decline; Suburban Propane Partners LP leaked 23.28% in price to join the top ten.

CCC Combo Dogs Meet Dow for Dividend vs. Price Results

Graphs below show relative strengths of the top ten dividend CCC combo index stocks by yield and price from February to May along with those of the Dow Index. Using four months of historic projected annual dividends from $1000 invested in the ten highest yielding stocks each month and the aggregate single share prices of those ten stocks created the data points for each month shown in green for price and blue for dividends.

Conclusion: CCC Dog Dividends Peak as Price Levels; Dow Dog Dividends Level as Price Peaks

The CCC group of top ten dividend stocks by projected yield in May showed annual dividends from $1000 invested in each of the ten stocks inclining 2.62% to again exceed the $1000 level. Aggregate single share prices rebounded 1.32% toward the $200 mark.

The Dow index on the other hand saw the dividend from $1k invested in each of the top ten stay level near the $400 mark in May. Aggregate total single share price jumped 11.18% to exceed dividends by $73.68 past the $400 mark escalating an overbought condition.

The top ten CCC Composite Index stocks currently project 153.22% higher annual dividends from an aggregate single share price 58.13% lower than that of the Dow.

Conclusion Too:

CCC Combo Dogs Bow to Dow .57% to 3.27% in December 1 to June 1 Gains

Results from semi-annual investments in the lowest priced, highest yielding stocks in these two indices resulted in CCC Combo gains losing out to those of the Dow. The box score below shows CCC Combo net gains swamped by those of Dow dogs by over $270 or 2.7% from $10k invested since December 1, 2011.

The CCC Combo index sale of Omega Healthcare Investors (NYSE:OHI) shares for gains, failed to offset losses from sales of Inergy LP and National Presto Industries (NYSE:NPK) at June 1, 2012 closing prices. In comparison, Dow dogs counted two sales of Intel (NASDAQ:INTC) and Kraft (KFT) for gains as of June 1.

Net returns were calculated by adding all the actual dividends paid by the top ten dogs in each index since December plus stock sale gains minus brokerage fees of $10 per trade for securities sold off. The semi-annual timeline for this example was dictated by the volatility and available history for the CCC Combo index. (NPK dropped off the index in May and NRGY left in May. My reporting for this composite index only went back to October.)

Stay Tuned

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.

Disclosure: I am long T, VZ, INTC, JNJ, CVX.

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.