Two articles in the past two weeks described consolidated year to date results from the top 10 high yield stocks comprising (Dog) stocks in each of seven or eight indices. Last week's article concluded by ranking eight indexes by risk from low to high:
- JPMorgan New Sovereigns Dogs
- S&P 500 Aristocrats Dogs
- Dow Industrial Index Dogs
- NASDAQ 1000 Index Dogs
- NYSE International Index Dogs
- S&P 500 Index Dogs
- Top Dog Stocks by Sectors
- Russell 2000 Index Dogs
This is the first article in an eight part series launched as another step toward Yale economist Robert Shiller's admonishment to "make conservative preparations for possible bad outcomes." Future articles in this series will describe the complete component listings for all eight indices listed above.
This article reviews the underlying top thirty component dividend stocks of the Russell 2000 Index. This is the highest yielding and presumed highest risk of the eight indices listed above.
The "Dogs of the Index" Strategy Employed
Investopedia explains the strategic concept as "An investing strategy that consists of buying the 10 dogs of the Dow [dogs of the index] stocks with the highest dividend yield at the beginning of the year. The portfolio should be adjusted at the beginning of each year to include the 10 highest yielding stocks."
This strategy is so simple you don't need more than15 minutes per year to decide which stocks to buy because just two key metrics determine the yields that rank the index dog stocks: (1) Stock Price; (2) Annual Dividend. Dividing the annual dividend by the price of the stock reveals the percentage amount by which each stock is ranked. After selecting a pool of thirty stocks that throw the highest dividend yields from any index , the investor follows, trades, and awaits the results of an investment in the lowest priced, highest yielding one third of the pool. A third variable of broker commission of $10 per trade is deducted from every transaction to reveal net income each year.
Data from Yahoo Finance reveals the following thirty stock portfolio -- as of September 9, 2011:
Russell 2000 Index Dog Pound
Eight of the top 10 stocks in this index are financial firms paying out huge dividends. In August and September Invesco Mortgage topped this list at 22.8% and 23.83%. For the first six months of the year American Capital Agency Corp. was the leader with yields between 18% and 20%.
Just seven of the above list of thirty firms are not in the financial sector. Three are shipping firms in the Service sector. One performs outsourcing services in the Service sector. One is a telecom in the Technology sector, one a biotech in Healthcare, and another is a cigarette company in the Consumer Goods sector. With over 75% of these stocks being in the financial sector this index is not well diversified.
Russell 2000 Index Dog Pound Component Profiles
Below are links to business profiles of the thirty top Russell 2000 Dividend paying stocks for September 2011 from Yahoo Finance.
4. Resource Capital Corp. (RSO) [Sector: Financial; Industry: REIT Retail]
7. MCG Capital Corporation (MCGC) [Sector: Financial; Industry: Asset Management
15. Fifth Street Finance Corporation (FSC) [Sector: Financial; Industry: Credit Services]
18. Knightsbridge Tankers Limited (VLCCF) [Sector: Services; Industry: Shipping]
29. Walter Investment Management Corp. (WAC) [Sector: Financial; Industry: Asset Management]
Follow the Peripatetic Russell 2000 Dividend Paying Top 30
Over the past nine months three different firms have bubbled to the top of the list. Color code shows: (Yellow) firms listed in first position at least once between January and September 2011; (Cyan Blue) firms listed in tenth position at least once between January and September 2011; (Magenta) firms listed in twentieth position at least once between January and September 2011; (Magenta) firms listed in twentieth position at least once between January and September 2011; (Green) firms listed in thirtieth position at least once between January and September 2011. Duplicates are depicted in color for highest ranking attained.
Notice how several stocks disappeared from the list after the quarterly component updates. Gone are GOOD, MAIN, SUI, GRT, HKE, CZNC, HTGC, & GMR as of July.
September Dividend vs. Price Results for Russell 2000 Index Top 10
Again in September Invesco Mortgage topped this list at 23.83% Yield. Annual projected dividend totals for $1000 invested in each stock blew away the aggregate total single share prices again this month and have begun to diverge further with a decrease in total single share price. This divergence is caused by lower priced stocks with high dividends replacing stocks on the list whose prices increased thus reducing their yield percentage.
Throughout the rest of this month the complete component listings for the seven remaining indices will be described. Thereafter consolidated year to September dividend vs. price comparisons of the top 10 high yield (Dog) stocks in all eight indices will be updated for the month.
Perhaps the Annual projected dividend totals for $1000 invested in the top ten Russell stocks will begin to converge toward the aggregate total single share prices in October. That is when another review of the quarterly updated list of Russell top 30 dividend stocks will be reported. Stay tuned
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.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.