The Daily Dow
Tuesday, July 29, 1997
by Robert Sheard

HILTON HEAD, SC. (July 29, 1997) -- Confusion about the volatility of the Beating the Dow (and Foolish Four) rankings is prevalent of late, so let me take time today to review the dual screening process involved.

The first screen, of course, is dividend yield. The ten highest yielding Dow components make our field of candidates. (Dividend yield is calculated by dividing the annual cash dividend by the current stock price per share. When I calculate these figures, I round off to two places beyond the decimal point. Many papers only carry the yield figure out to a single spot. And beware of some sources which don't even round off the number, but simply truncate it to a single place beyond the decimal point.)

Once we've identified the High Yield Ten, however, the yield number is no longer considered. The second screen, which determines the actual Beating the Dow order, re-sorts those ten stocks by share price, from lowest to highest. It's not unusual, then, to see a stock which is tenth on the yield list rank very high on the Beating the Dow (price) list.

When there are a number of stocks hovering around the tenth, eleventh, twelfth spots on the High Yield list, then, a stock ranked quite high on the Beating the Dow list may completely disappear from the list a day or two later. That simply means the stock has slipped in yield below the #10 spot. And if several stocks compete for the final spot in the High Yield Ten, these seemingly dramatic moves in the rankings can occur daily.

Make sure you understand completely how the process works so changes in the order don't startle you. If you buy a stock one day and it disappears from the list the next, that's not a sign that you should sell out. Stay the course for the entire year.

On another note, I've followed up yesterday's column on taxes in today's Foolish Workshop column. Be sure to drop by the Workshop to hear more about the proposed tax rules.

(c) Copyright 1997, The Motley Fool. All rights reserved. This material is for personal use only. Republication and redissemination, including posting to news groups, is expressly prohibited without the prior written consent of The Motley Fool. ________________________________


1997 Foolish Four Model
Stock  Change   Last
--------------------
T    +   3/8   36.88
GM   +  15/16  59.44
CHV  +   9/16  78.88
MMM  +1  1/16  96.56

          Day   Month    Year
        FOOL-4   +1.08%   3.22%   5.45%
        DJIA     +0.65%   6.43%  26.77%
        S&P 500  +0.62%   6.46%  27.21%
        NASDAQ   +0.56%   9.03%  21.79%

    Rec'd   #  Security     In At       Now    Change
   1/2/97  153 Chevron       65.00     78.88    21.35%
   1/2/97  120 3M            83.00     96.56    16.34%
   1/2/97  179 Gen. Motor    55.75     59.44     6.61%
   1/2/97  479 AT&T          41.75     36.88   -11.68%


    Rec'd   #  Security     In At     Value    Change
   1/2/97  153 Chevron     9945.00  12067.88  $2122.88
   1/2/97  120 3M          9960.00  11587.50  $1627.50
   1/2/97  179 Gen. Motor  9979.25  10639.31   $660.06
   1/2/97  479 AT&T       19998.25  17663.13 -$2335.13


                             CASH    $767.60
                            TOTAL  $52725.41