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What is a Dividend Dog Catcher
I’ve been a dog catcher for years since 2005. I bought ten stocks from the Dow 30 Index under the strict guidelines and tutelage of the strategists at www.dogsofthedow.com.
To quote my mentors:
“Dogs of the Dow is a stock picking strategy devoted to selecting the highest dividend paying Dow stocks.
Investing in the Dogs of the Dow is relatively simple. After the stock market closes on the last day of the year, of the 30 stocks that make up the Dow Jones Industrial Average, select the ten stocks which have the highest dividend yield. Then simply get in touch with your broker and invest an equal dollar amount in each of these ten high yield stocks. Then hold these ten “Dogs of the Dow” for one year. Repeat these steps each and every year. That’s it! It’s Free!”
Dividend Dog Catching
- Identification
- Catching Trends
- What is a Dividend Dog Catcher vs. Never Fall In Love With A Dog
- Dog Training
Identification
Dividend dogs are easily identified by means of The Dividend Dogs Rule:
Stocks earn the “dog” moniker by exhibiting three traits:
- Paying reliable, repeating dividends
- Their prices fall to where…
- yield (dividend/price) grows higher than their peers.
Thus, the highest yielding stocks in any collection become known as “dogs.”
Catching Trends
My monthly survey of Dividend Dogcatcher followers reveals the following preferences:
Follower Votes
My August 8 message blast to 6,500 Arnold Seeking Alpha followers requested their e-mail address, favorite dividend stock, and favorite team. In exchange for their answers, I offered a summary and quarterly reports describing my 2 best performing dogs of the week (DOTW) and a future top performer when announced August 22. Similar offers went out in September, December, March, April, May and June. DOTW selections are published every Sunday exclusively in my Seeking Alpha premium pages. That site now lists all 52 ace DOTWs for the past year.
Now here are tangible DDC financial results for August…
Thirty one follower favorites were sorted by yield calculated as of market close 8/15/16. Only two of nine Yahoo sectors were represented in the top ten: financials (8) (included four exchange traded issues and one closed end fund); services (2). Four of the top ten favorite dogs paid monthly dividends.
Eight top financials and the whole pack was led by the exchange traded note, UBS ETRACS Mthly Py 2xLvg Mortg REIT ETN (NYSEARCA:MORL) [1]. The rest of the financials were second, fourth through eighth, and tenth, by yield: Cornerstone Strategic Value Fund (NYSEMKT:CLM) [2]; UBS ETRACS Mthly Py 2xLvg Closed-End ETN (NYSEARCA:CEFL) [4]; InfraCap MLP ETF (NYSEARCA:AMZA) [5]; UBS ETRACS 2xLvg Lng WF Busn Dev Co ETN (NYSEARCA:BDCL) [6]; Apollo Investment Corporation (NASDAQ:AINV) [7]; New Residential Investment (NYSE:NRZ) [8]; Fifth Street Finance Corp. (NYSE:FSC) [10]. Four of these financial entities paid monthly dividends.
Third FFave stock by yield, Frontline Ltd. (NYSE:FRO) [3] was joined by one more service sector stock this month, Navios Maritime Acquisition Corporation (NYSE:NNA) [9] to complete the representation of market sectors in the August “follower favorite” top ten by yield.
Never Fall In Love With A Dog
Summary
-
- Public companies are not to be loved. They are made to make money for you.
- Don’t care what a company does but do know how well they do it.
- To effectively manage a kennel of dog stocks, you must maintain neutrality.
- Basic dog strategy is a one year commitment from date of purchase of five to ten stocks selected by yield to be sold off individually.
- Plan your work. Work your plan. Don’t fall in love with the dogs.
I don’t care what a company does. I don’t care if they are in healthcare, utilities, or technology, or even in finance. I am equally impartial to all the indexes, sectors, collections, lists, funds, trusts. I’m market neutral.
I really like to find money making companies that have little (or no) competition. I like companies that are growing rapidly. I like companies that have a monopoly or near monopoly. I also like dividends. The more the better and the safer the better.
So, I don’t care what a company does but I want to know how well they do it. I even do a monthly list of “bad as” stocks. I create that list by finding the highest yield companies in industries that harm, hurt, insult, and scam us. However, they all pay dividends! Does that mean all is forgiven? You get to make that choice.
To effectively manage a kennel of dog stocks, you must maintain neutrality. You may root for and cheer for and favor an underdog but you need a good clear plan in place when you add any dog to the team.
Remember the basic dog strategy is a one year commitment from date of purchase. Five or ten stocks selected by yield to be sold off individually.
That sale is made at an annual point downstream when a stock’s price gets so high that its current yield is below a certain threshold, say 3% or 4%. Then you reinvest the sweepings in another high yield stock to ride into the next sunset of higher price generating lower yield. No love. Just a clear understandable plan.
Plan your work. Work your plan. Don’t fall in love with the dogs.
Dog Training
How to best use Fredrik Arnold’s Dividend Dog Articles
Here’s the instruction:
Each Arnold dividend dog article lists ten high yield stocks. If those ten agree with your investor appetite, get in touch with your broker and invest an equal dollar amount in each. Then hold those ten dogs for one year. Next year look at the list again, sell off the stocks no longer listed and buy the recommended replacements, Repeat these steps every year.
Sometimes Arnold posts a 5 lowest price dog recommendation as follow-up to the ten by yield. These are five Dogs with the lowest stock price. In this case get in touch with your broker and invest an equal dollar amount in each of these 5 high yielding, low priced stocks. Then hold these five “small dogs” for one year.
As usual, the articles are or informational and educational purposes only and should not be construed to constitute investment advice. Nothing contained herein shall constitute a solicitation, recommendation or endorsement to buy or sell any security.
The subscription – COMING SOON:
$27/mo. ($217/yr *best) subscriber pages give you exclusive access to supplemental articles and recommendations. You’ll find Arnold amusements, reflections, opinions, and weekly picks called “dogs of the week.” These dogs of the week are not weak. They are fetched weekly (every week) based on their proven ability to consistently deliver dividends and upside gains to investors. At $27 per month or only $217 per year, the Dividend Dog Catcher™ premium pages are sweet when you are ready. Click here to review and subscribe to The Dividend Dogcatcher premium site.
Fredrik Arnold, The Dividend Dogcatcher Marketplace Roundtable Responses
To Eight (12) Key Questions From Seeking Alpha Editor Daniel Shvartsman 10/12/16
Q: One of the big questions of 2016 has been whether investors are chasing yield too much. Utilities, consumer staples, and other ‘defensive’ stocks have traded at high valuations throughout the year. So, a two-part question: first, how do you avoid chasing yield? FA: I don’t ever avoid or discount yield. It is the first thing I look at. All my published stock lists are ordered by highest to lowest yield.
Q: And second, do these high valuations on dividend stocks suggest any broader implications about the market for you, or are they to be expected? FA: There is no way to make the market perfect, except by market actions. Dow 30 dogs, S&P500 Aristocrats, David Fish’s Champions are all overbought and overpriced. A 30% to 40% correction is needed to bring these bubbles down to earth.
Q: What’s the biggest risk you see to your approach right now? FA: Two risks: (1) Insufficient corporate cash flow yield to cover dividend yield; (2) capricious and arbitrary board actions to cut or curtail even “safe” dividends covered by sufficient cash.
Q: Is there an example in your portfolio of how you’re facing or protecting against that risk? FA: I compare reported cash flow yield with current dividend yield for each stock I report. I prefer monthly paid dividends so I get more frequent company reports in the form of dividend checks.
Q: What’s one dividend stock or sector that you are avoiding currently, and why? FA: I have fear and loathing for energy and basic materials dividend stocks. Instead of avoiding them I am watching them closely. I distrust financial service company financial reports. They lie.
Q: When considering a dividend stock, what is your typical focus for return? Are you looking for capital appreciation or just for the yield?
FA: Ideally, I look for minimum 5% yield with 30% annual upside. Out of 52 weekly picks this past year, I found 5 that delivered those numbers but I expect all 52 to eventually deliver the goal numbers. Maybe not in my lifetime.
Q: What unique angles do you take to try to find value in the dividend space? FA: I have always focused on small, mid, and large cap dividend stocks. I’ve found encouraging signs in the mini and nano cap environment and will be reporting on them, too.
Q: Related to the last one, do you have any concerns that the dividend/income/dividend growth space has become too crowded, which makes it harder to find good values? FA: Dividend stocks remain the most reliable source of passive income for conservative and prudent investors. Dividend stocks are the “boy scouts” of the financial world: trustworthy, loyal, helpful, friendly, courteous, kind, obedient, cheerful, thrifty, brave, clean, and reverent.
Q: If you do, how do you combat that in your investing? FA: Look for bad boys, too!
Q: What’s a current favorite stock in your portfolio, and why are you holding it? FA: T. AT&T (T) was the first Dow dividend dog I bought in 2005 and it’s never cut or paused it’s dividend and continues to deliver over 5% yield while it’s price has continued to climb, too.
Q: What is a stock (or type of stock) that you have on your watchlist as a potential add? FA: A real bad boy: Former dividend payer Calumet Specialty Products (CLMT), can it battle back in that loathsome energy sector?
Ideosyncratic Dog Catching
Sectors
Dozens of schemes exist for classifying the work what corporations do. Each financial publication for convenience, adheres to one. These classification systems create Sector names for broad bases of business activity with industries as subsets below those sectors.
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Indexes
Reader requests prompted the dog catcher series of index-specific articles reporting dividend yield plus price upside results for: Dow 30; S&P 500; S&P Aristocrats; NASDAQ 100; Russell 1000; Russell 2000; Champions; Contenders; Challengers; CCC Combined; and Global. Bonus reports cover Bad eBoy AllStars, and Sector Leaders.
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Variable Dividend Calculations
Dividends are never assured until they are paid. Until a company shows you the money, all their dividends are estimates.
Sure there are companies that have paid the same dividend amount every month, quarter, half-year, or year, for years (dividend kings; achievers; aristocrats). There are also those that have paid steadily increasing dividends every year for years (dividend challengers; contenders; champions). Yet nothing counts until the cash is in hand.
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MoPay Dividends
Quarterly, Semi-Annual and Annual dividend investors anxiously await announcements from a firm, fund, or brokerage to learn if their next dividend will be higher, lower, or paid at all. Monthly pay stocks, funds, trusts, and partnerships inform the holder every four and one third weeks by check and/or statement. If the entity reduces or suspends a payment, the holder can sell out of the investment immediately to cut future losses.
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