Dogs of the TSX
by Craig on 17/12/09 at 8:24 am
The Dog’s of the Dow has been a favoured strategy of many investors for decades, in part due to some great performance in years past (not recently) and in part thanks to its simple nature. Following the strategy has investors buying the 10 highest yielding stocks among the Dow Jones Industrial Average at the beginning of the year. The Dow is comprised of 30 large capitalized companies. At the end of the year, investors rebalance to reflect the new 10 highest yielding. Unfortunately, the last 3-years has not been kind to this strategy as it has lagged the performance of the overall Dow. Based on yesterday’s closing prices, the Dog’s of 2009 have returned 16.0% compared to 22.1% for the Dow (including dividends). Not helping matters, 5 of the 10 Dog’s cut their dividends during the year (BAC, GE, PFE, AA & JPM).
If you used today’s prices to calculate the Dog’s for 2010 the list would include AT&T (T), Verizon (VZ), Du Pont (DD), Kraft Foods (KFT), Merck (MRK), Pfizer (PFE), McDonalds (MCD), Chevron (CVX), Intel (INTC) and Home Depot (HD). Interestingly, the current average yield for this group is 4.8%, well below the abnormally high 6.2% average of last year. Also noteworthy is there are no financial companies in the list for 2010, which is a rarity.
This isn’t our kind of strategy as it is very dependant on how value oriented stocks perform in a given year than much else. But just for fun, we took a look at how a similar strategy would have performed in Canada for 2009. The table below is a list of the highest yielding companies at the end of 2008 in the S&P/TSX 60, excluding income trusts. Of the ten names, all six major banks made the list. The average price change for the group was 39% compared to a 43% average for the other 50 stocks making up the TSX 60 (not including dividends). Not bad, but not great. Although worth noting if you remove Teck Resources (+556%), Inmet (+237%) and First Quantum (+361%) from the non Dog’s, the average for the remaing 47 companies drops to only 21%. Just showing how much those three contributed.
Dog’s of the TSX 60 for 2009
| Yield on | Price on | Price on | Price | ||
| Company | Ticker | 31-Dec-08 | 31-Dec-08 | 16-Dec-09 | Change |
| BIOVAIL CORP | BVF | 16.0 | $11.54 | $14.73 | 28% |
| BANK OF MONTREAL | BMO | 9.0 | $31.25 | $54.20 | 73% |
| NATL BK CANADA | NA | 7.9 | $31.30 | $60.74 | 94% |
| CAN IMPL BK COMM | CM | 6.8 | $51.09 | $68.66 | 34% |
| HUSKY ENERGY INC | HSE | 6.5 | $30.87 | $29.40 | -5% |
| ENCANA CORP | ECA | 6.5 | $30.24 | $32.58 | 8% |
| BANK OF NOVA SCO | BNS | 5.9 | $33.31 | $48.50 | 46% |
| BCE INC | BCE | 5.8 | $25.13 | $26.38 | 5% |
| TORONTO-DOM BANK | TD | 5.6 | $43.45 | $64.91 | 49% |
| ROYAL BANK OF CA | RY | 5.5 | $36.10 | $55.26 | 53% |
| Average | 39% | ||||
| Avg other 50 Stocks | 43% |
Also just for fun, if you selected the Dog’s of the TSX as of today the following would be the list for 2010: BCE (BCE), Telus (T), Bank of Montreal (BMO), CIBC (CM), Transalta (TA), Sunlife (SLF), TransCanada (TRP), Power Cp (POW), National Bank (NA) and Husky Energy (HSE). With the strong performance of the Canadian banks this year, only three still make the list. And the insurers are present in Sunlife and Power Cp (largest component is Great-west Life).
