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Fredrik Arnold
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Fredrik Arnold is my pen name. In 2012 I retired from doing quality service analysis for John Hancock Long Term Care Insurance in Boston then moved to North Carolina in 2013. My fascination with capital preservation, fixed fractional trading, and trading systems keeps me blogging for Seeking... More
  • Carnevale's 25 Power And 29 Super Dogs Top Dow In May  0 comments
    Jun 21, 2012 7:48 AM | about stocks: RRD, SYY, AVP, PG, ARLP, CVX, NEE, NVS, JNJ, AFL, LEG, UBSI, BWL.A, NUE, RPM, ED, NWN, CWT, CTWS

    Talk about your smack down! Here's how the contestants stack up:

    First, November 23, 2011, Seeking Alpha blogger, respected stock analyst, and creator of Fastgraphs, Chuck Carnevale, published Our 25 Dividend Growth Stocks Are Dirt Cheap. There he listed top 25 blue chip dividend growth stocks that: (1) were available at current valuations; (2) were significantly below their historical norms; (3) remained profitable through the great recession of 2008 and 2009.

    This portfolio of companies he said "offers a three-pronged opportunity for above-average future total returns at below-average risk. We expect that each company will benefit in the future from a potential expansion in their PE ratios coupled with future earnings growth and finally followed by dividend increases offering a return kicker." That article ranked these stocks by 5 year estimated total returns ranging from a high of 38.2% down to 10.8%.

    In this article these are known as the Carnevale Power 25 stocks.

    Second, April 2, 2012, Seeking Alpha blogger, respected stock analyst, and creator of Fastgraphs, Chuck Carnevale, published 29 Dividend Champions That Beat The Market, Inflation & 2 Recessions Since 2001. He listed top 29 blue chip dividend growth stocks that: (1) consistently raised dividends for 37 years (or more); (2) were at or below fair market value in 2001; (3) outperformed the S&P 500 on a total return basis.

    Mr. Carnevale's April 2 article was a follow-up to an earlier article on March 28, that was stimulated by commentary on an article on March 16 by David Van Knapp titled Has Dividend Growth Kept Up With Inflation? He noted that culling companies overvalued in 2001 eliminated many of his personally biased favorites. His April 2 article was "offered as an in-depth look at each of these select Dividend Champions and how they all produced different results based on their own specific operating histories".

    In this article these are known as the Carnevale Super 29 stocks.

    Dogs of the Index Metrics Cull Out Current Bargains

    Given the Carnevale Power 25 index, and the Carnevale Super 29 index lists this article used two key numbers as of May 29 to rank his 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 Investors utilized this ranking system to select portfolios of five or ten stocks in any one index or sector 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).

    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.

    The Carnevale Power 25 and Super 29 lists below were ranked by yields based on estimated annual dividends to reveal the dogs therein.

    Since Dogs of the Index system was invented as a tool to evaluate the Dow index, the Dow is use as a standard of comparison for our two Carnevale contenders.

    Below both lists are ranked by yield calculated as of May 29.

    The Carnevale Power 25 for May

    For the Power 25 list Numbers after the company names in brackets [] indicate Mr. Carnevale's ranking for each stock by total estimated returns.

    Carnevale's top ten Power 25 stocks paying the biggest dividends as of May 29 included firms representing six market sectors. The top stock as revealed by Yahoo Finance data, was one of two in the service sector, RR Donnelley & Sons (NASDAQ:RRD), and Sysco Corporation (NYSE:SYY) in sixth place. The balance of the top ten Power 25 included: two consumer goods, Avon Products (NYSE:AVP), and Procter & Gamble (NYSE:PG); two basic materials, Alliance Resource (NASDAQ:ARLP), and Chevron Corp. (NYSE:CVX); one utility, Nextera Energy (NYSE:NEE); two healthcare firms, Novartis AG (NYSE:NVS), and Johnson & Johnson (NYSE:JNJ); one financial, Aflac Inc.(NYSE:AFL), representing market sectors. The full list of 25 stocks has five service, five healthcare, three consumer goods, one financial, three basic materials, five industrial, one utility, one technology and no conglomerates representing market sectors.

    The Carnevale Super 29 for May

    Numbers after the Super 29 company names in brackets [] indicate Mr. Carnevale's ranking for each stock in order of highest annualized performance to lowest, which was a total return number that included dividends but not reinvested.

    Carnevale's Super 29 top ten stocks showing the biggest dividend yields as of May 29 included firms representing five market sectors. The top stock as revealed by Yahoo Finance data, was one of two consumer goods firms, Leggett & Platt Inc. (NYSE:LEG), Procter & Gamble Co. the other consumer goods firm was in seventh position. The balance of the top ten included: one financial firm, United Bankshares Inc. (NASDAQ:UBSI); one in the service sector, Bowl America Class A (NYSEMKT:BWL.A); two basic materials firms, Nucor Corp.(NYSE:NUE), and RPM International Inc. (NYSE:RPM); four utilities, Consolidated Edison (NYSE:ED), Northwest Natural Gas (NYSE:NWN), California Water Service (NYSE:CWT), and Connecticut Water Service (NASDAQ:CTWS). The full list of 29 stocks has four service, two healthcare, six consumer goods, two financial, three basic materials, six industrial goods, four utility, no technology, and one conglomerate representing eight of nine market sectors.

    Up and Down Moves for Carnevale 25 Power Dogs

    Just one firm, RR Donnelly, has stayed at the top of this list by yield for the four months surveyed.

    Color code shows: (Yellow) firms listed in first position at least once between February and May 2012; (Cyan Blue) firms listed in tenth position at least once between February and May 2012; (Magenta) firms listed in fifteenth position at least once between February and May 2012; (Green) firms listed in twenty fifth position at least once between February and May 2012. Duplicates are depicted in color for highest ranking attained.

    (click to enlarge)(click to enlarge)

    Bullish upward price moves in the past month (since April 26) were made by only two of the top ten Power 25 dogs: Nextera Energy Inc. connected with a .2483% surge; Pepsico (NYSE:PEP) popped 1.72%.

    Bearish downward price moves for the same period hit the rest of the top ten Carnevale Power 25 dogs: top dog RR Donnelley & Sons price sagged 18.08%; Alliance Resource showed a 9.43% price decline; Novartis dropped 5.95% in price; Avon Products applied a 28% price drop; Johnson & Johnson wrapped up a 4.59% swoon; Abbott Labs (NYSE:ABT) fell 2.17% in price and out of the top ten; Sysco delivered a 4.74% price drop; Proctor & Gamble packaged a 7.96% price decline; Chevron Corp leaped back into the top ten as it's share price dropped 9.24%; Aflac Inc. price plunged 14.15% to propel it into the doggie ten.

    Up and Down Moves for Carnevale Super 29 Dogs

    Two firms, Bowl America Class A, and Leggett & Platt Inc. traded places at the top of this list by yield for the periods surveyed since February 27.

    Color code shows: (Yellow) firms listed in first position at least once between February and May 2012; (Cyan Blue) firms listed in tenth position at least once between February and May 2012; (Magenta) firms listed in twentieth position at least once between February and May 2012; (Green) firms listed in twenty ninth position at least once between February and May 2012. Duplicates (if any) are depicted in color for highest ranking attained.

    (click to enlarge)(click to enlarge)

    Bullish upward price moves in the past month (since April 26) were made by two utilities in the top ten Super 29 dogs: Consolidated Edison connected with a 2.15% gain; Northwest Natural Gas popped a 1.54% gain.

    Bearish downward price moves for the same period hit the rest of the top ten Carnevale Super 29 dogs: Leggett & Platt Inc. made a 13.98% price shaving; Bowl America Class A price guttered 1.06%; United Bankshares Inc. deposited a 9.9% price decline; Nucor Corp. milled a 9.07% price drop; Procter & Gamble Co. packaged a price plunge of 7.98%; California Water Service oozed 3.39%; Conn. Water Service flushed out a 3.7% price plunge; RPM International Inc. extracted a 5.75% price drop for the month.

    Dividend vs. Price Results

    Below are graphs of relative strengths for the top ten Carnevale Power 25 index and Carnevale Super 29 index stocks by yield as of May 29, 2012 compared to those of the Dow index. Five months of historic projected annual dividend history from $1000 invested in the ten highest yielding stocks and the total single share prices of those ten stocks creates the data points for each month shown in green for price and blue for dividends.

    (click to enlarge)(click to enlarge)

    Conclusion: Carnevale Power 25 Dog Price vs. Dividend Pull Out of Overbought State Unlike Dow

    The Carnevale Power 25 collection of top ten dividend dogs by yield displayed aggregate single share stock price for the top ten Carnevale dogs in March exceeding the total annual dividend returns from $1k invested in each of those stocks by over $125 or 29.28%. In April the price over dividend gap retreated to just over $55 or 12.57% for this collection of low risk but overvalued power dogs.

    Now the dividends are back on the higher side of price by $18.94 or 3.9% showing a healthier balance of between aggregate single share prices and projected dividends from $1k invested in each of those top ten stocks.

    Compared to the Dow in May the Power 25 Dogs showed 11.14% higher aggregate single share price with 24.93% higher projected annual dividends than the dogs of the Dow.

    Conclusion: Carnevale Super 29 Dogs Keep Prices Down Throwing More Dividends at Lower Price Than Dow

    The Carnevale Super 29 collection of top ten dividend dogs continued to display remarkable calm over the five months graphed. Overall dividends from $1k invested in each of the top ten popped 4.83% from December 30 to May 29. Meanwhile aggregate single share stock price for these Carnevale Super 29 increased 5.45% for the period.

    Compared to the Dow this Super 29 index showed $142 or 30% lower aggregate share price and also $13.75 or 3.41% more annual dividends projected from $1k invested in each of the top ten dogs in May.

    Stay Tuned

    Each month a summary concludes this series of articles by showing results of yield and price for these Carnevale Power 25 and Carnevale Super 29 stocks compared to David Fish's Champions, Contenders, Challengers, and Composite lists, along with the Dow. Stay tuned and follow these intrepid conservative dividend dogs to learn if they grow or no.

    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 are listed without consideration of fees, commissions, taxes, penalties, or interest payable due to purchasing, holding or selling same.

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

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