Dogs Of The Nasdaq 100 Index 2011 Report

by: Fredrik Arnold

To determine the best of the best dividend stocks, many investors rely on a once per year trading system triggered by yield, called the "Dogs of the Index" strategy. This strategy gives the investor the tactical advantage of obtaining all the wisdom and knowledge of the well-paid wizards of investment for free, merely by choosing the existing collection of equities built by the experts.

Charts below for the NASDAQ 100 Index reveal low-yielding stocks whose prices increase (or whose dividends decrease) as candidates to be sold off once each year in order to sweep gains and reinvest the seed money into higher yielding stocks in the same index.

Two key metrics determine the yields that rank the NASDAQ 100 dog stocks: (1) Stock price; (2) Annual dividend. Dividing the annual dividend by the price of the stock declares the percentage yield by which each dog stock is ranked. Thus the investor is able to follow, trade, and await the results from an investment in the lowest priced, highest yielding five or 10 stocks in the index.

Instant investment wisdom from the NASDAQ 100 Index

Listed below are the top 30 NASDAQ 100 Index stocks by yield as of 12/30/11 per data. NASDAQ states, "The NASDAQ-100 Index includes 100 of the largest domestic and international non-financial securities listed on The Nasdaq Stock Market based on market capitalization. The Index reflects companies across major industry groups including computer hardware and software, telecommunications, retail/wholesale trade and biotechnology. It does not contain securities of financial companies including investment companies."

For December, six of the top 10 stocks paying the biggest dividends in this index were technology companies. Vodafone (NASDAQ:VOD) and Seagate (NASDAQ:STX) Technologies have traded places at the top of this list twice over the past seven months throwing 5% to 8% yields in 2011. VOD was tops again in December at 8.38%. The remaining four companies represented two business sectors with two consumer, and two service companies.

2011's vertical moves by NASDAQ 100 index dividend payers

In 2011 four companies exchanged places at the top of the list, VOD, STX, GRMN, and MCHP.

A notable move by Expedia (NASDAQ:EXPE) put it in fifth position for its first ever appearance on the NASDAQ top 30 by yield at 3.86% as of December 30. Also BRCM, AVGO, & EXPE replaced ROSS, COST, & CSCO on the NASDAQ 100 Index top 30 list by yield.

Color code shows: (Yellow) companies listed in first position at least once between January and November 2011; (Cyan Blue) companies listed in 10th position at least once between January and November 2011; (Magenta) companies listed in 20th position at least once between January and November 2011; (Green) companies listed in 30th position at least once between January and November 2011. Duplicates are depicted in color for highest ranking attained.

(Click charts to enlarge)

2011 Dividend VS. Price Results for NASDAQ 100 Index Top 10

Below is a graph of the relative strengths of the top 10 NASDAQ 100 index stocks by yield as of December 30, 2011. Twelve months of historic projected annual dividend history from $1000 invested in the 10 highest-yielding stocks each month and the total single share prices of those 10 stocks creates the data points for each month displayed in blue for dividends and green for price.

The NASDAQ 100 December top 10 yield components signaled somewhat bearish market divergence with annual dividend yields rising as aggregate total single share prices stayed flat.

Perhaps the bulls will return in the months to come and these share prices will converge with or pass dividend yields. Stay tuned.

Disclosure: I am long INTC.

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.