In December, this monthly report began applying dog dividend methodology to each of eight major market sectors. The sectors were, in alphabetical order: basic materials; consumer goods; financial; healthcare; industrial goods; services; technology; utilities.
A ninth sector, conglomerates, according to Yahoo Finance, contained just eight firms, five of which paid dividends. The editorial decision was not to apply dogs of the index metrics to a sector containing fewer than ten dividend paying equities.
Dogs of the Index Metrics Selected Ten Top Services Stocks by Yield
Two key metrics determined the yields that ranked these sector dog stocks: (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 increased (and whose dividend yields therefore decreased) could be sold off once a year to sweep gains and reinvest the seed money into higher yielding stocks in the same index.
Comparative Methods Used
First, the entire list of services sector companies was sorted by yield as of June 1 and July 2 using Ycharts.com to reveal the top thirty each month. Market performance of these selections was then reviewed using six months of historic projected annual dividend history from Yahoo Finance, along with annual divided projections adjusted for market realities.
Thereafter, this article assessed the relative strengths of the top ten services sector dividend dogs as of June 1 and July 2 opening prices vs. the Dogs of the Dow May 11 and June 14 stock lists. Annual dividends from $1000 invested in the ten highest yielding stocks in the sector and index were compared to the aggregate single share prices of the top ten stocks in each.
Finally, analyst mean target prices and estimated forward looking dividends as reported by Yahoo Finance were used to report estimated price and dividends as of June 2013.
Services Dividend Dogs
The top ten services sector stocks showing the biggest dividend yields in May and June represented four industries. Top sector stock RadioShack Corporation (NYSE:RSH), was the lone representative of electronic stores. Second dog Navios Maritime Partners (NYSE:NMM) was one of seven representing the shipping industry. The other six shippers were: Tsakos Energy Navigation (NYSE:TNP); Capital Product Partners (NASDAQ:CPLP); Teekay Tankers (NYSE:TNK); Knightsbridge (VLCCF); Diana Containerships (NASDAQ:DCIX); Globus Maritime (NASDAQ:GLBS). The remaining two sector representatives were both from separate industries: Educational Development Corporation (NASDAQ:EDUC), wholesale, other; Compass Diversified Holdings (NYSE:CODI), staffing & outsourcing services.
Dividend vs. Price Results Compared to Dow Dogs
Below is a graph of the relative strengths of the top ten services sector dividend stocks by yield as of market close 7/2/2012 compared to those of the Dow. Using six 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 created the data points for each month shown in green for price and blue for dividends.
Conclusion: Services Sector Dogs Chased By A Bear Since February
The services collection of 10 top dividend payers showed a 23.06% decline in aggregate single share prices over the four months after February. Dividends from $1k invested in each of the top ten increased 16.17% for that period.
Meanwhile, the Dow index has stabilized in an overbought pattern where aggregate single share price exceeded the annual estimated dividends from $1k invested in those ten by $75 or 18.75% as of June 14.
As of July 2, the services sector top ten dogs showed $769, or 192.13%, more dividends from $1k invested in each of the top ten stocks by yield (with equally bigger risk) at a $403, or 84.86% lower aggregate share price than those of the Dow.
Possible 32.22% Net Gain From 10 Services Sector Dogs in 2013
Top ten dogs for the services (Svcs) sector were graphed below to show relative strengths by dividend and price as of June 1, 2012 and those projected to June 1, 2013.
Historic prices and actual dividends paid from $1000 invested in the ten highest yielding stocks and the aggregate single share prices of those ten stocks created the data points for 2012. Projections based on estimated increases in dividend amounts from $1000 invested in the ten highest yielding stocks and aggregate one year analyst mean target prices as reported by Yahoo Finance created the 2013 data points green for price and blue for dividends.
Yahoo Finance projected a 19.75% lower dividend from $1k invested in each stock within this group, while aggregate single share price for the ten was projected by analysts to increase by 29.8% in the coming year. Probable profit generating trades revealed by Yahoo for 2013 were RadioShack Corporation netting $508.65, Navios Maritime Partners netting $428.12, Tsakos Energy Navigation netting $899.92, Knightsbridge Tankers netting $438.69, and Diana Containerships netting $354.66 in the coming year to make the total net gain from dividends and swept price gains 32.22% from $10k invested according to analyst estimates.
A summary will conclude this series of articles each month showing comparative results of yield and price for all eight sectors reported: basic materials, consumer goods, financial, healthcare, industrial goods, services, technology, and utilities. Stay tuned also for periodic updates on how well or whether the projected gains for 2013 hold.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
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.