Consumer Goods June Dogs: 16.21% Gains Projected For 2013

by: Fredrik Arnold

This monthly series was initiated in December 2011. Dog dividend screening methodology was applied to each of eight major market sectors. In alphabetical order those sectors were: basic materials, consumer goods, financial, healthcare, industrial goods, services, technology and utilities.

The ninth sector, conglomerates, according to Yahoo Finance, contained just eight firms, five of which paid dividends. Thus the reporter declined to apply dogs of the index metrics a sector containing fewer than ten dividend equities.

Dogs of the Index Metrics Selected Ten Top Consumer Goods Stocks

Two key metrics determined the yields that ranked these sector dog 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, dividend dog investors utilized this ranking system to select portfolios of five or ten stocks in any one index, sector, or survey 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).

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 increased (and whose dividend yields therefore decreased) could be sold off once a year to sweep gains and reinvest the seed money into higher yielding stocks in the same index.

Comparative Methods Used

First, the entire list of consumer goods sector companies was sorted by yield as of June 1 and July 2 using to reveal the top thirty. Market performance of these thirty selections was then reviewed using six months of historic projected annual dividend history from Yahoo Finance, along with annual divided projections adjusted for market realities.

Thereafter, this article assessed the relative strengths of the consumer goods sector top ten dividend dogs as of June 1 and July 2 opening prices vs. the Dogs of the Dow May 11 and June 14 stock list. Annual dividends from $1000 invested in the ten highest yielding stocks in the sector and index were compared to the aggregate single share prices of the top ten stocks in each.

Finally, analyst mean target prices and estimated forward looking dividends as reported by Yahoo Finance were used to report estimated price and dividends as of June 2013.

Consumer Goods Dividend Dogs

The top ten consumer goods stocks showing the biggest dividend yields in May and June represented six industries. Top stock, Pitney Bowes (NYSE:PBI) was the only equipment firm. Second dog, Vector (NYSE:VGR), was from the cigarette industry. Three of the top ten firms were also in the cigarette industry; Reynolds (NYSE:RAI) and Altria (NYSE:MO) were the other two. Two textiles - apparel clothing firms are, Cherokee (NASDAQ:CHKE) and Crown Crafts (NASDAQ:CRWS). There are also two personal products industry firms: CCA Industries (NYSEMKT:CAW) and Avon Products (NYSE:AVP). The balance of the top ten are: auto parts, Douglas Dynamics (NYSE:PLOW); home furnishings and fixtures, Leggett & Platt (NYSE:LEG).

Dividend vs. Price Results Compared to Dow Dogs

Below is a graph of the relative strengths of the top ten consumer goods dividend sector stocks by yield as of market close 7/2/2012 compared to those of the Dow. Using six months of historic 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 month shown in green for price and blue for dividends.

Conclusion: Consumer Goods Dogs Now Service

Reversing course since April 30, your top ten consumer goods dogs aggregate single share price dropped 26.9% while projected dividends from $1k invested in each of those ten stocks elevated .945%.

Meanwhile, the Dow index has stabilized in an overbought pattern where aggregate single share prices exceed the annual estimated dividends from $1k invested in those ten by $75 or 18.75% as of June 14.

Consumer goods sector top ten dogs now show $244.78 or 61.17% more dividends (with equally bigger risk) at a $298.75 or 62.86% lower aggregate share price for the top ten dogs than those of the Dow as of July 2.

Conclusion Too:

2013 Projects Possible 16.21% Net Gain from 10 ConGo Dogs

Top ten dogs for the consumer goods (ConGo) sector were graphed below to show relative strengths by dividend and price as of June 1, 2012 and those projected to June 1, 2013.

Historic prices and actual dividends paid from $1000 invested in the ten highest yielding stocks and the aggregate single share prices of those ten stocks created the data points for 2012. Projections based on estimated increases in dividend amounts from $1000 invested in the ten highest yielding stocks and aggregate one year analyst mean target prices, as reported by Yahoo Finance, created the 2013 data points: green for price and blue for dividends.

Yahoo projected 13.3% lower dividends for this group, while price was projected to increase by 8.4% in the coming year. Probable profit generating trades revealed by Yahoo for 2013 were Pitney Bowes netting $249.21, Vector Group netting $333.11, Douglas Dynamics netting $195.44, Avon Products netting $276.73 and Leggett & Platt netting $326.43 in the coming year, to make the total gain 16.21% from $10k invested.

A summary will conclude this series of articles each month showing comparative results of yield and price for all eight sectors reported: basic materials, consumer goods, financial, healthcare, industrial goods, services, technology, and utilities. Stay tuned also for periodic updates on how well or whether the projected gains for 2013 hold.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

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