This end of month summary compared relative strengths of eight stock indexes by yield and dividend vs price gaps using projected annual dividends from $1000 invested in the ten highest yielding stocks in each index. Results for the Dow index were also presented as a baseline standard and the ninth index.
This was another chapter in the ongoing effort to respond to the question, "what dividend stocks are good, better, best, bad or ugly?" The effort also heeded 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 depicted the gyrations.
Previous summaries in January and February used Dogs of the Index methodology on five indices: (1) Chuck Carnevale's Power 25 Index, David Fish's vaunted (2) Champions, (3) Contenders, and (4) Challengers, plus a (5) Composite CCC Index. March added (6): Dividend AchieversTM 50. April added (7) Carnevale's Super 29 Index. May added (8) Russell 50. All of it was based on (9) Dogs of the Dow.
Dog Metrics Selected Ten in Each Index
Two key metrics determined the yields that ranked these index 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, investors utilized this ranking system to select portfolios of five or ten 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).
This Dogs of the Index strategy, popularized by Michael B. O'Higgins in the book "Beating The Dow" (HarperCollins, 1991), revealed how low yielding stocks whose prices increase (and whose dividend yields therefore decrease) can be sold off once each year to sweep gains and reinvest the seed money into higher yielding stocks in the same index.
Top ten dogs for each index were graphed below to show relative strengths by dividend and price from January to May. Using five months of historic projected annual dividends from $1000 invested in the ten highest yielding stocks each month and the aggregate single share prices of those ten stocks created the data points for each month shown in green for price and blue for dividends.
Carnevale Power 25 Index
Seeking Alpha blogger, respected stock analyst, and creator of Fastgraphs, Chuck Carnevale, published Our 25 Dividend Growth Stocks Are Dirt Cheap in November. He listed top 25 blue chip dividend growth stocks that: (1) were available at current valuations; (2) were significantly below their historical norms; (3) remained profitable through the great recession of 2008 and 2009.
Carnevale's top ten Power 25 stocks paying the biggest dividends as of May 29 included firms representing six market sectors. The top stock as revealed by Yahoo Finance data, was one of two in the service sector, RR Donnelley & Sons (NASDAQ:RRD), and Sysco Corporation (NYSE:SYY) in sixth place. The balance of the top ten Power 25 included: two consumer goods, Avon Products (NYSE:AVP), and Procter & Gamble (NYSE:PG); two basic materials, Alliance Resource (NASDAQ:ARLP), and Chevron Corp. (NYSE:CVX); one utility, Nextera Energy (NYSE:NEE); two healthcare firms, Novartis AG (NYSE:NVS), and Johnson & Johnson (NYSE:JNJ); one financial, Aflac Inc.(NYSE:AFL), representing market sectors. The full list of 25 stocks has five service, five healthcare, three consumer goods, one financial, three basic materials, five industrial, one utility, one technology and no conglomerates representing market sectors.
Bullish upward price moves in the past month (since April 26) were made by only two of the top ten Power 25 dogs: Nextera Energy Inc. connected with a .2483% surge; Pepsico (NYSE:PEP) popped 1.72%.
The Carnevale Power 25 collection of top ten dividend dogs by yield displayed March aggregate single share stock price for the top ten exceeding the total annual dividend returns from $1k invested in each of those stocks by over $125 or 29.28%.
In April the price over dividend gap retreated to just over $55 or 12.57% for this collection of low risk but overvalued power dogs.
May found the dividends back on the higher side of price by $18.94 or 3.9% which showed a healthier balance of between aggregate single share prices and projected dividends from $1k invested in each of those top ten stocks.
Carnevale's New Super 29 Index
April 2, 2012, Seeking Alpha blogger, respected stock analyst, and creator of Fastgraphs, Chuck Carnevale, published 29 Dividend Champions That Beat The Market, Inflation & 2 Recessions Since 2001. He listed top 29 blue chip dividend growth stocks that: (1) consistently raised dividends for 37 years (or more); (2) were at or below fair market value in 2001; (3) outperformed the S&P 500 on a total return basis.
Carnevale's Super 29 top ten stocks showing the biggest dividend yields as of May 29 included firms representing five market sectors. The top stock as revealed by Yahoo Finance data, was one of two consumer goods firms, Leggett & Platt Inc. (NYSE:LEG), Procter & Gamble Co. (PG) the other consumer goods firm was in seventh position. The balance of the top ten included: one financial firm, United Bankshares Inc. (NASDAQ:UBSI); one in the service sector, Bowl America Class A (NYSEMKT:BWL.A); two basic materials firms, Nucor Corp.(NYSE:NUE), and RPM International Inc. (NYSE:RPM); four utilities, Consolidated Edison (NYSE:ED), Northwest Natural Gas (NYSE:NWN), California Water Service (NYSE:CWT), and Connecticut Water Service (NASDAQ:CTWS). The full list of 29 stocks has four service, two healthcare, six consumer goods, two financial, three basic materials, six industrial goods, four utility, no technology, and one conglomerate representing eight of nine market sectors.
Bullish upward price moves in the past month (since April 26) were made by only two of the top ten Power 25 dogs: Nextera Energy Inc. connected with a .2483% surge; Pepsico popped 1.72%.
The Carnevale Super 29 collection of top ten dividend yielders continued to display remarkable calm over the five months graphed. Overall dividends from $1k invested in each of the top ten popped 4.83% from December 30 to May 29. Meanwhile aggregate single share stock price for these Carnevale Super 29 increased 5.45% for the period.
David Fish's 3/30/12 Champions list of companies paying increasing dividends for 25 consecutive years or more was sorted by yield as of May 31 to reveal the top thirty. Data for all four Fish indices is sourced from Mr. Fish's drip investing tools.
Ten Champion dogs that promised the biggest dividend yields in May included firms representing four market sectors. The top stock Pitney Bowes (NYSE:PBI) was one of three firms in the consumer sector. The other two consumer goods top dogs were Leggett & Platt Inc. (LEG), and Altria Group Inc. (NYSE:MO). The balance of the top ten included: six financial, Old Republic International (NYSE:ORI), Washington REIT (NYSE:WRE), Mercury General Corp. (NYSE:MCY), United Bankshares Inc. (UBSI), and HCP Inc. (NYSE:HCP); one technology, AT&T Inc. (NYSE:T); one service, Bowl America Class A (BWL.A), representing market sectors.
Bullish upward price moves since April 27 were made by just two of the top ten Dividend Champion Dogs: AT&T Inc dialed up a 4.53% price gain; Altria Group Inc. ignited a .156% price gain.
The Champions top ten reliable dividend stocks showed a 4.14% ten share price drop over the past month while their dividends soared 5.68%.
The Contenders list (from here) paid increasing dividends for 10 - 24 years. The top dividend contenders stocks listed below were ranked by yields calculated as of May 31.
Contender dogs in May lost Inergy (NRGY) the former leader of the pack when the firm sent cut a clear sell signal by cutting its dividend in half this quarter. The newly reconstituted top ten contenders included firms representing five of nine market sectors.
The new top dog, Vector Group Ltd. (NYSE:VGR) was the only one from the consumer goods sector. The balance of the top ten included one utility, Suburban Propane Partners LP (NYSE:SPH); five basic materials firms, NuStar Energy LP (NYSE:NS), Buckeye Partners LP (NYSE:BPL), TC Pipelines LP (NYSE:TCP), Alliance Resource Partners LP (ARLP), and Kinder Morgan Energy Partners (NYSE:KMP); two financial firms, Omega Healthcare Investors (NYSE:OHI), and Universal Health Realty Trust (NYSE:UHT); one technology firm, Communications Systems Inc. (NASDAQ:JCS) representing market sectors.
Bullish upward price moves since April 27 were made by not one top ten dividend contender stock. They all tanked, led by their (former) leader as Inergy LP cut its dividend to throw itself out of contention.
This contenders collection of top ten dogs by yield in May showed dividends from $1k invested in each of the top ten stocks decreased 3.9% as their aggregate single share prices sagged 9.33%.
David Fish's Challengers list (from here) is distinguished as companies that have paid higher dividends for 5 to 9 straight years. Dividend challenger stocks listed below were ranked by yields calculated as of May 31.
Ten challenger dogs posting the biggest dividend yields in May included firms representing three of nine market sectors. The top stock Dynex Capital Inc. (NYSE:DX) was one of three in the financial sector. The other financial firms in the top ten were: PennantPark Investment Corp. (NASDAQ:PNNT); Triangle Capital Corp. (NYSE:TCAP). The balance of the top ten included one service, StoneMor Partners LP (NYSE:STON), and six basic materials firms, Exterran Partners LP (EXLP); Vanguard Natural Resources LLC (NYSE:VNR); Natural Resource Partners LP (NYSE:NRP); AmeriGas Partners LP (NYSE:APU); Boardwalk Pipeline Partners LP (NYSE:BWP); Transmontaigne Partners LP (NYSE:TLP), representing market sectors.
Bullish upward price moves since April 27 were made by only one top ten dividend challenger stock: Triangle Capital Corp recorded a .296% price gain.
This Challengers collection of stocks by yield showed a 7.7% pop in projected dividends from $1k invested in each of the top ten stocks while their aggregate single share price also inclined 12.96% in May. A mixed message of bearish dividends accompanied by bullish price movement was heard.
CCC Combined Index
The combination of David Fish's lists (from here) were ranked by yields calculated as of May 31.
CCC combined index dogs projecting the biggest dividend yields in May included firms representing five of nine market sectors. April's top dog Inergy LP (NRGY) was disqualified in May when it cut its dividend payment by half. The reconstituted CCC combo top ten included: three financial firms, Dynex Capital Inc. DX), PennantPark Investment Corp. (PNNT), and Triangle Capital Corp. (TCAP); two consumer goods, Pitney Bowes Inc. (PBI), and Vector Group Ltd. (VGR); three basic materials firms, Exterran Partners LP (EXLP), Natural Resource Partners LP (NRP), and Vanguard Natural Resources LLC (VNR); one service, StoneMor Partners LP (STON); one utility, Suburban Propane Partners LP (SPH), representing market sectors.
Bullish upward price moves since March 26 were made by just one of the top ten ccc combo stocks: Triangle Capital Corp posted a .296% price gain.
The CCC group of top ten dividend stocks by projected yield in May showed annual dividends from $1000 invested in each of the ten stocks inclining 2.62% to again exceed the $1000 level. Aggregate single share prices rebounded 1.32% toward the $200 mark.
Dividend AchieversTM 50
Dividend AchieversTM 50 Index was chosen from here. The selected subset below was constituted from "the 50 US companies with the highest current dividend yield as of the last trading date in December." The selected list was then updated with price data as of 1/30; 2/27; 3/29; 4/27; 6/1/2012 from historical prices available on Yahoo Finance.
Dividend Achievers top ten stocks paying the biggest dividends as of June 1 included equities representing five market sectors. The top stock as revealed by Yahoo Finance data, was another one of four in the consumer goods sector, Pitney Bowes Inc (PBI), which replaced April's top dog, Vector Group LTD (VGR). The other two consumer goods firms were Avon Products Inc (AVP), and Leggett & Platt Inc (LEG). The balance of the top ten included: three financial, Old Republic International (ORI), Mercury General Corp (MCY), and Peoples United Financial (NASDAQ:PBCT); one service, Meredith Corp (NYSE:MDP); one utility, PPL Corporation (NYSE:PPL); one technology, AT&T Inc (T) representing the sectors.
Bullish upward price moves since April were made by just two of the top ten April Dividend Achiever dogs: AT&T dialed up a 3.7% gain; PPL Corporation generated a .549% price surge.
This Dividend Achievers collection of top ten dividend payers displayed bearish action for the five months surveyed. Dividends from $1k invested in the top ten rose 9.87% to stay above aggregate total single share prices which dropped 5.83% between January and May.
This past month, however, the Achiever top ten showed intensified bearish action as projected annual dividends from $1k invested in each stock soared 8.47% while the aggregate single share price of those stocks plummeted 10.86%. May aggregate single share stock price for the top ten Achiever dogs exceeded the total annual dividend returns from $1k invested in each of those stocks by over $448 or 204.8%.
Dow 30 Index
CME Group, publisher if this index, states, "The Dow Jones Industrial Average (DJIA) is a price-weighted index of 30 blue-chip U.S. companies representing nine economic sectors including financial service, technology, retail, entertainment and consumer goods."
Two technology firms showing the biggest dividend yields on the Dow as of June 1 were: (1) AT&T (T); (2) Verizon (NYSE:VZ). The rest of the Dow 10 dogs include three healthcare, Merck & Company (NYSE:MRK), Pfizer Inc. (NYSE:PFE), and Johnson & Johnson (JNJ); one industrial, General Electric (NYSE:GE); one financial, JPMorgan Chase (NYSE:JPM); two basic materials, Chevron (CVX), and Dupont (DD); one consumer goods firm, Procter & Gamble (PG), representing six of nine market sectors. Thirty Dow stocks include seven technology companies, three consumer goods, four financial, four services, four basic materials, two industrial, three health care, no utilities, and three conglomerates.
Bullish upward price moves since April 17 were made by only two of the top ten Dow 30 dogs: AT&T Inc. dialed up a 10.24% share price increase; Verizon Communications connected with a 8.95% price bump.
Dow 30 Index dogs reflected bear market symptoms since February as projected dividend totals for $1000 invested in the top ten increased 3.833% while their aggregate total single share prices dropped 1.27%.
December 30th 2011 marked the last time projected dividends from $1000 in each of the top ten Dow dogs exceeded the aggregated single share price of those ten. March 13 aggregate price came within $8 over dividends. Until dividends exceed price by this standard the Dow will show as overbought. A great bearish drop in aggregate single share price is accompanied by a big increase in projected dividends from $1k invested in the top ten Dow dogs is long overdue.
All Together Now
Each graph below shows monthly points of comparison between annual projected dividends resulting from $10,000 invested as $1,000 each in the top ten high yield stocks (blue points) versus the total prices of one share of each of the ten stocks (green points) by index. Grouped together the graphs display four months of comparative gyrations of the nine indices described.
Dog Teams Vie for Dividend Dominance
The following graph shows annual dividends projected from $1000 invested in each of ten stocks with the top yields in eight indices.
Annual Dividends Forecast from $1k Invested in each of 10 Top Yielding Stocks in 8 Indices & Dow
The chart plotted projected yields as of a specific purchase date each month since January. Only two of the nine indices showed dividends decreasing in bull market fashion the past month. Just the Contenders, and Dow indices showed those decreases in dividends.
Projected dividend yield amounts from these eight indices and the Dow over the past four months displayed nine distinct yield levels.
These indices were ranked for risk as of May 29, 2012 in the following manner: (1) Add the single share prices of the top ten stocks on an index list. Then, (2) add the total annual dividend amounts projected from $1000 invested in each of those ten stocks. Finally, (3) compare the resulting two numbers. Lesser divergence between dividend amounts above single share prices revealed the indices with lesser risk. Overvalued stock indices showed negative divergence.
By that baseline standard of divergence, these eight indices and the Dow rank themselves by risk as follows:
These eight indices and the Dow component stocks have ongoing stories to tell. These graphs and lists will be updated again for publication following a review of each index in late July and thereafter.
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.