Dividend CCC Combo Index Exceeds Dogs Of The Dow In April

by: Fredrik Arnold

April 16, David Fish published his latest CCC findings in three postings on Seeking Alpha: "Dividend Champions: 11 Increases Expected By June 30"; "Dividend Contenders: 19 Increases Expected By The End of June"; "Dividend Challengers: 25 Increases Expected in the Next 11 Weeks." David's stocks are distinguished thus: dividend champion companies that have paid higher dividends for 25 straight years or more; dividend contender companies have paid higher dividends for 10-24 straight years; dividend challenger companies have paid higher dividends for 5-9 straight years.

This article combined the top-10 yielding stocks from each group, then utilized the dogs of the index strategy to sort the combined index of 30 into a suitable grouping of 10 to trade.

This effort was part an ongoing one to respond to the question, "which dividend stocks were good, better, best, bad or ugly in March?"

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.

Dogs of the Index Metrics Cull Out Current Bargains

Given the top 10 dividend champions, contenders and challengers that constitute the 30 members of the ccc combo index, this article used two key numbers to rank those stocks: (1) stock price; (2) annual dividend. Dividing the annual dividend by the price declared the percentage yield by which each dog stock was ranked.

Historically, investors utilized this ranking system to select portfolios of five or 10 stocks in any one grouping to trade. They optimistically 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.

Classic Dogs of the Index theory trades selected Dow stocks. Thus, the Dow is used as a standard of comparison to conclude this article.

The top 30 dividend ccc combo stocks listed below were ranked by yields calculated as of April 27.

Dividend CCC Combo Index

CCC index dogs posting the biggest dividend yields in April included firms representing five of nine market sectors. Top stock Inergy LP (NRGY) was the lone utility sector representative. The balance of the top 10 included three financial, Dynex Capital Inc. (NYSE:DX), PennantPark Investment Corp. (NASDAQ:PNNT), and Triangle Capital Corp. (NYSE:TCAP); two consumer goods, Vector Group Ltd. (NYSE:VGR), and Pitney Bowes Inc. (NYSE:PBI); one service, StoneMor Partners LP (NYSE:STON); three basic materials firms, Exterran Partners LP (EXLP), Natural Resource Partners LP (NYSE:NRP), and Vanguard Natural Resources LLC (NYSE:VNR), represented market sectors.

Up and Down Moves for CCC Combination Dogs

The past four months, one firm Inergy LP, claimed the yellow tint at top of this list by yield. Color code shows: (Yellow) firms listed in first position at least once between January and April; (Cyan Blue) firms listed in 10th position at least once between January and April; (Magenta) firms listed in 20th position at least once between January and April; (Green) firms listed in 30th position at least once between January and April. Duplicates are depicted in color for highest ranking attained.

(click charts to enlarge)

Bullish upward price moves since March 26, were made by four of the top 10 ccc combo stocks: Top dog Inergy LP delivered a 17.76% price gain; Triangle Capital Corp posted a 2.58% price gain; StoneMor Partners LP etched a 5.63% gain; Vanguard Natural Resources grew 1.912% in price.

Bearish downward price moves for the same period hit the rest of the top 10 ccc combo index dogs: Dynex Capital entered a 1.77% price drop; PennantPark Investment Corp. inked a 1.04% price decline; Vector Group Ltd. flicked off a 1.86% decline in price; Natural Resource Partners dropped 2.45% in price; Exterran Partners LP notched a 4.44% price decline; Pitney Bowes posted a 4.45% price decline.

CCC Combo Dogs Meet Dow for Dividend vs. Price Results

Graphs below show relative strengths of the top 10 dividend ccc combo index stocks by yield and price from January to April along with those of the Dow Index. Using four months of historic projected annual dividends from $1000 invested in the 10 highest-yielding stocks each month and the aggregate single share prices of those 10 stocks created the data points for each month shown in green for price and blue for dividends.

Conclusion: CCC Dog Dividends Sag as Price Sings

The CCC group of top 10 dividend stocks by yield in April showed annual dividends from $1000 invested in each of the 10 stocks coming down 1.924% from their brief flight over the $1000 level as their aggregate single share prices rebounded 1.19%% toward the $200 mark.

The Dow index on the other hand saw the dividend from $1k invested in each of the top 10 creep up 2.12% in the month past while aggregate total single share price jumped 11.18% to exceed dividends by $44.50 past the $400 mark in April, signaling an overbought condition.

The top 10 CCC Composite Index stocks currently pay 146.58% higher projected annual dividends from an aggregate single share price 56.3% lower than that of the Dow.

At the end of each month, a summary concludes this series of articles by showing results by yield and price for Dividend Achievers, the Carnevale Power 25 and new Super 29 indices, along with David Fish's Champions, Contenders, Challengers, and Composite lists. Stay tuned and follow these intrepid dogs.

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

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.