Yield Gyrations And 8 Dogs Fit To Net Up To 98.99% Annually

 |  Includes: ERF, FCX, GRMN, HSH, JPM, LEG, RRD, SID
by: Fredrik Arnold

This end of month installment refines and concludes results from a series of articles that compared the relative strengths of nine stock indices by (1) yield and (2) dividend vs price gaps using projected annual dividends from $1,000 invested in the 10 highest yielding stocks in each index. The articles in this series reported results for June from 3x9 and 1X9+1 Sector indices, the Russell 1000, S&P 500, NYSE International 100, NASDAQ 100, Dow 30, S&P 500 Aristocrats, and JPMorgan Sovereigns indices as of July 2.

This effort was part an ongoing one responding to the question, "which dividend stocks were good, better, best, bad or ugly for June?"

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.

Dog Metrics Selected 10 In Each Index

Two key numbers determined the yields that ranked stocks in each index: (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.

All Together Now

Each graph below shows monthly points of comparison between annual projected dividends resulting from $10,000 invested as $1,000 each in the top 10 high yield stocks (blue points) versus the aggregate price for one share of each of the 10 stocks (green points) by index. Grouped together, the graphs display six months of comparative gyrations of the nine indices described in previous articles.

(click images to enlarge)

Click to enlargeClick to enlargeClick to enlarge

Dog Teams Go For Dividend Dominance

The following graph shows annual dividends projected from $1,000 invested in each of 10 stocks with the top yields in nine indices. The chart plotted projected yields as of a specific purchase date each month since January. Generally, projected yields increased in the indices when average stock prices fell. However yield projections were subject to corporate fiscal considerations so yields also plunged when times got tough.

Annual Dividends Forecast from $1k Invested in Each of 10 Top Yielding Stocks in 9 Indices

Click to enlarge

Relative yield strengths differentiated the indices graphed.

The JPMorgan Sovereigns showed the lowest dividends from $1,000 invested in each of those 10 top stocks, with a low trajectory swing down 1.73% over six data points from January.

The Dow and NASDAQ dividends behaved like a braided cord until April, but separated thereafter, with the NASDAQ top 10 showing a higher aggregate dividend from $1,000 invested in each of the 10 stocks. The Dow yield projections are even to within $1 since January, while the NASDAQ 100 top 10 popped up 2.03% for the period.

Aristocrats dividends stayed within $2.50, and S&P 500 projected dividends dropped 1.74%, both since January. NYSE International 100 dividends from $1,000 invested in the top 10 stocks now show a 2.25% drop between January and June after spiking 23.7% in April.

Russell index dogs projected dividend yields dropped 18.7% in projected dividend between January and April, but have recovered to a 11.99% drop as of June.

Projected dividends from top 10 1x9+1 sector dogs have dropped 33.17% since January; 3x9 sector dogs dividends dropped 28.16%.

June Relative Risk For Dogs By Index

A reader request to "add relative financial data on the companies selected" for an early article comparing indices only by annual yield projections has inspired a simple tool to gauge investment risk. The tool is best applied prior to the purchase of any five or 10 Dogs of the Index stocks at any point during the year. This information will continue to be reviewed monthly as one step toward Robert Schiller's admonishment to "make conservative preparations for possible bad outcomes."

Divergence from Share Price Ranked Investor Risk by Index

The charts and accompanying graphs below show the June Divergence ranks of the nine indices for investment risk from high to low.

Click to enlarge

Conclusion: Analyst Forecasts Reveal Eight Dogs Deemed Fit To Net 23.98% To 98.99% by July 2013

Top 10 dogs for this index component list were graphed below to show relative strengths by price as of July 2, 2012, and those projected to July 2, 2013. Historic aggregate single share price of the 10 highest yielding stocks created the numbers for 2012. Projections based on aggregate one year analyst mean target prices as reported by Yahoo Finance created the 2013 numbers for each index.

This became a graph of upside potential, since all the analyst estimates showed positive price gains for each sector, ranging from 4.73% for the 10 S&P500 Aristocrat dogs to 20.07% for the 10 1x9+1 Sector dogs.

Click to enlarge

The top profit generating dog trades one year from now were revealed by analysts for each of eight sectors. The chart below is derived from analyst data reported by Yahoo Finance.

Click to enlarge

Companhia Sideurrgica Nacional (NYSE:SID) in the NYSE 100 International index is projected to net a 98.99% price gain based on mean target price set by seven analysts.

Enerplus Corporation (NYSE:ERF) netting a 67.85% price gain in the Sectors index is determined by a mean target price set by four analysts.

Hillshire Brands (formerly Sara Lee) (NYSE:HSH) netting a 60.43% price gain in the Russell 1000 index was based on a mean target price set by eight analysts.

Freeport-McMoRan (NYSE:FCX) netting a 46.96% annual gain in the JPM Sovereigns index was based on mean target pricing set by 19 analysts.

R.R. Donnelley & Sons Company (NASDAQ:RRD) netting a 45.92% net gain in the S&P500 index as of next July was based on a mean target price set by five analysts.

Leggett & Platt (NYSE:LEG) netting a 29.90% net gain in the S&P500 Aristocrats index next year was based on a mean target price set by three analysts.

Garmin (NASDAQ:GRMN) netting a 29.78% net gain in the NASDAQ index annually was based on a mean target price set by nine analysts.

JPMorgan Chase (NYSE:JPM) netting a 23.98% net gain in the Dow index next year was based on a mean target price set by 29 analysts

Nine indices and their component stocks will have ongoing stories to tell. These graphs, charts, and lists of companies will be updated each month.

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 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.