Results for the S&P 500 Aristocrats Index as of July 2 are reported in this article. "Dogs of the Index," a once per year trading system triggered by yield, is used here to determine the most lucrative of these dividend stocks.
Previous articles in this series reported June results from two sector indices, the Russell 1000, S&P 500, NYSE International 100, Nasdaq 100, and Dow 30 indices. The upcoming article will report dog metrics applied to one additional index: JPMorgan New Sovereigns. Thereafter, a monthly summary will compare results in yield and price for all nine indices reported in this series.
Dogs of the Index Metrics
Two key numbers determined the yields that ranked stocks in each index: (1) stock price, and (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 increase (and whose dividend yields therefore decrease) could be sold off once each year to sweep gains and reinvest seed money into higher yielding stocks in the same index.
Investor Empowerment from S&P 500 Aristocrats
Listed below are 30 S&P 500 Aristocrats stocks by yield as of 6/4/12 per Yahoo Finance data. McGraw Hill, publisher if this index, states, "The S&P 500® Dividend Aristocrats index measures the performance of large cap, blue chip companies within the S&P 500 that have followed a policy of increasing dividends every year for at least 25 consecutive years."
June top ten Aristocrats by yield encompassed six of nine business sectors. Two of three consumer goods firms led these top ten dogs by showing the biggest dividend yields as of July 2. Pitney Bowes Inc. (NYSE:PBI) led; Leggett & Platt (NYSE:LEG) was second; Procter & Gamble (NYSE:PG) placed ninth for the consumer goods contingent. The remaining dogs in the top ten represent six sectors: one technology, AT&T (NYSE:T) in third place; two financials, HCP Inc. (NYSE:HCP) and Cincinnati Financial Corp. (NASDAQ:CINF) parked in fourth and fifth place; one utility, Consolidated Edison Inc. (NYSE:ED) placed sixth; one basic materials firm, Nucor Corporation (NYSE:NUE) was seventh; two service firms, Walgreen Co. (WAG) and Sysco Corp. (NYSE:SYY) placed eighth and tenth.
For the 30 June S&P Aristocrat dividend payers, nine consumer goods, two technology companies, three financials, one utility, three basic materials, four services, four health care, three industrial goods, and one conglomerate represented the market sectors.
Dividend vs. Price Results for S&P 500 Aristocrats Dogs
Relative strengths of the top ten S&P 500 Aristocrats Index stocks by yield was graphed as of July 2, 2012. Projected annual dividend history from $1,000 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 the past six months (shown in green for price and blue for dividends).
Conclusion: Aristocrats Top Dogs Drop in Dividend and Price
S&P 500 Aristocrats Index constituents continued to be chased by a bear as projected dividend totals for $1,000 invested in the top ten dropped 7.18% due to two $2-plus dividend payers KMB and JNJ dropping out of the top ten. Meanwhile, their aggregate total single share prices dropped 8.00% between June 4 and July 2.
Since December 30, 2011, S&P 500 Aristocrats top ten dividends from $1,000 invested in each of the dogs have stayed near the $475 level, while single share prices for those stocks dropped 21.56% from $479.79 to $376.34 for the period. The Aristocrats are in a Bear Marathon.
Conclusion, Part 2: Analysts Forecast July 2013 Net Gains up to 13.58% for S&P 500 Aristocrats Dogs
Top ten dogs for this index component list were graphed below to show relative strengths by dividend and price as of July 2, 2012 and those projected to July 2, 2013.
Historic prices and actual dividends paid from $1,000 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 $1,000 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).
For the coming year, Yahoo Finance projected a 7.03% lower dividend from $1,000 invested in each stock within this group, while aggregate single share price for the ten was projected by analysts to increase by 4.2%.
Probable profit-generating Aristocrats dog trades one year from now revealed by analysts as reported by Yahoo Finance were: Pitney Bowes Inc. netting $273.40 based on mean target price set by 3 analysts; Leggett & Platt netting $332.19 based on mean target price set by 3 analysts; Nucor Corporation netting $217.39 based on mean target price set by 15 analysts; Walgreen Co. netting $211.41 based on mean target price set by 18 analysts; Procter & Gamble netting $113.85 as of next July based on mean target price set by 15 analysts.
The resulting top ten Aristocrats dog net gain to 2013 from dividends and swept price gains was forecast at 13.58% from $10,000 invested, according to analyst estimates.
Will S&P 500 Aristocrats Index dog price gains come back in the fall or will they continue to pull back? Look also for periodic updates on how well or whether analyst-projected 13.58% gains for the Aristocrats in 2013 hold.
A monthly summary will soon compare results in yield and price for all nine indices reported in this series: 3x9 and 1X9+1 Sector indices, Russell 1000, S&P 500, NYSE International 100, Nasdaq 100, Dow 30, S&P 500 Aristocrats, and JPMorgan Sovereigns.
Disclaimer: This article is for informational and educational purposes only and should 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.