This monthly report series began applying dog dividend methodology to each of eight major market sectors in December. 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 a sector containing fewer than ten dividend paying equities.
Dogs of the Index Metrics Selected Ten Top Healthcare 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 healthcare sector companies was sorted by yield as of June 1 and July 2 using Ycharts.com to reveal the top thirty. Market performance of these thirty selections was then reviewed using four months of historic projected annual dividend history from Yahoo Finance along with annual dividend projections adjusted for market realities.
Thereafter, this article assessed the relative strengths of the financial sector top ten dividend dogs as of June 1 ad 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.
Healthcare Dividend Dogs
Ten healthcare sector stocks paying the biggest dividends in May and June represented six industries. Top healthcare sector stock PDL BioPharma (NASDAQ:PDLI) was the only biotechnology firm in the top ten. Five drug manufacturers - major firms appeared as top ten dogs: AstraZeneca Group (NYSE:AZN); GlaxoSmithKline (NYSE:GSK); Eli Lilly (NYSE:LLY); Sanofi (NYSE:SNY); Novartis (NYSE:NVS). Psychemedics (NASDAQ:PMD) appeared as a medical laboratories and research firm. PetMed Express (NASDAQ:PETS), represented drug delivery firms. Daxor (NYSEMKT:DXR) represented medical instruments and supplies. Nordion (NYSE:NDZ) completed the May and June top ten dog lists offering specialized health services.
Dividend vs. Price Results Compared to Dow Dogs
Below is a graph of the relative strengths of the top ten healthcare 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 each of 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: Healthcare Dog Price & Dividends Bullish through June
The June healthcare collection of top ten dividend payers showed a 45.39% increase in aggregate single share price through the six monthly points surveyed. However, projected dividends from $1k invested in each of the top ten decreased 6.04% for that same period continuing a bullish trend. In the month past, price grew just 1.32% while dividends sagged 1.5%.
Meanwhile, the Dow index has stabilized in an overbought pattern where aggregate single share price exceeds the annual estimated dividends from $1k invested in those ten by $75 or 18.75% as of June 14.
As of July 2 healthcare sector top ten dogs showed $126, or 31.4%, more dividend return from $1k invested in each of the top ten stocks by yield (with equally bigger risk) at a $197, or 41.54% lower aggregate share price than those of the Dow.
2013 Projects Possible 9.96% Net Gain from 10 Healthcare Sector Dogs
Top ten dogs for the healthcare (Health) 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 3.67% higher 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 4.26% in the coming year. Probable profit generating trades revealed by Yahoo for 2013 were AstraZeneca Group netting $152.51, GlaxoSmithKline netting $144.58, Sanofi netting $123.20, Novartis netting $93.60, and Nordion netting $187.26 in the coming year to make the total net gain from dividends and swept price gains 9.96% 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.
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.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.