This article reports results for the S&P 500 Index as of April 17 using a once per year trading system triggered by yield, called the "Dogs of the Index" to determine the best of the best dividend stocks.
Previous articles in this series reported results from two sector indices and the Russell 1000. Upcoming articles in April report dog metrics applied to five additional indices: NYSE International 100; S&P 500 Aristocrats; NASDAQ 100; Dow 30 Industrials; JPMorgan New Sovereigns.
Dogs of the Index Metrics
Two key numbers determined yields to rank the 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. Investors selected portfolios of five or ten stocks in any one index or sector by yield to trade. They awaited the results from their investments in the lowest priced, highest yielding stocks they selected 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 the S&P 500
Listed below are the top thirty S&P 500 stocks by yield as of 4/17/12 per Yahoo Finance data. McGraw Hill, publisher of the Index states
Standard & Poor's strives to provide investors who want to make better informed investment decisions with market intelligence in the form of credit ratings, indices, investment research and risk evaluations and solutions.
The company states that the index includes 500 leading companies in leading industries of the U.S. economy, capturing 75% coverage of U.S. equities.
(Click to enlarge)
As of April 17, four of the top ten stocks paying the biggest dividends in this index were technology firms. Frontier Communications (NYSE:FTR) topped this list at 9 to 15% yields for eleven months in 2011. It's tops again at 9.41% for April 2012. The remaining six firms in the top ten include three consumer, one financial, one utility, and one service.
Up and Down Moves for S&P 500 Index Dogs
Color code shows: (Yellow) firms listed in first position at least once between December 30, 2011 and April 2012; (Cyan Blue) firms listed in tenth position at least once between December 30, 2011 and April 2012; (Magenta) firms listed in twentieth position at least once between December 30, 2011 and April 2012; (Green) firms listed in thirtieth position at least once between December 30, 2011 and April 2012. Duplicates are depicted in color for highest ranking attained.
Bullish upward price moves since March 10 were made by just two of the top ten S&P 500 dogs from March: Supervalu (NYSE:SVU) dropped a notch to ninth place in the top ten for April on a 1.577% price gain; Altria Group Inc (NYSE:MO) share price flared up 5.02% stubbing it out of the top ten.
Bearish downward price moves for the same period hit the rest of the dogs of the S&P 500: Top dog Frontier Communications' share price disconnected 3.63%; Windstream Corp's (NASDAQ:WIN) price dropped 5.95%; Pitney Bowes (NYSE:PBI) saw share price fall 7.12%; RR Donnelley (NASDAQ:RRD) saw a 4.27% price slump; Century Link (NYSE:CTL) shares dropped 2.08%; Pepco Holdings Inc.'s (NYSE:POM) stock price plunged 5.16%; AT&T Inc. (NYSE:T) shares swooned 2.34%; Health Care REIT (HCN) jumped by yield from tenth to eighth slot as its price sagged 1.76% last month. Reynolds American (NYSE:RAI) replaced Altria in the top ten based on a .358% price decline for RAI.
Dividend vs. Price Results for S&P 500 Index Top 10
Below is a graph of the relative strengths of the top ten S&P 500 index stocks by yield as of April 17, 2012. Projected annual dividend history from $1000 invested in the ten highest yielding stocks each month and the total single share prices of those ten stocks created the data points for each of the past six months shown in green for price and blue for dividends.
Click to enlarge:
S&P 500 constituents showed projected dividend totals for $1000 invested in the top ten rising away from their aggregate total single share price point for April. The bulls held sway since February as S&P 500 top ten dividend yields dropped 10.47% as stock price increased 6.32%. In the past month, however, dividends from $1k invested in each of the top ten S&P stocks by yield increased 3.46% while the aggregate single share price for those stocks inclined 2.35%. This decline in price happened when the $10 higher priced Reynolds stock replaced Altria in the top ten.
Will S&P 500 share price gains return in May? 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. 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.