The “Dogs of the Dow” strategy is on pace to outperform the Dow Jones Industrial Average for the fourth year in a row. To execute the Dogs of the Dow strategy, you buy the 10 highest yielding stocks at the start of the year and hold them for 12 months. The strategy is simple, but not easy as it often means buying the most unloved and out of favor Dow components.
Steven Russolillo gives some more detail on the Dogs’ 2016 performance in The Wall Street Journal:
The dogs approach mimics what was the hottest trade in the first half of the year: chasing yield. Many of the market’s top-performing sectors earlier this year, such as utilities, telecom and consumer staples, sported the highest dividend yields. That trend hit the skids in the third quarter, with declines accelerating following the election.
Still, all 10 dogs are up in 2016, led by Caterpillar Inc. and Chevron Corp. which have each rallied by more than 30%. Pfizer Inc. has been the worst of the bunch, only slightly positive for the year. Three dogs are down since the election— Merck & Co., Procter & Gamble Co. and Cisco Systems Inc.
Currently, eight of the 10 dogs this year would stay the same in 2017. Merck and Wal-Mart Stores Inc. would be dropped from the list, replaced by Coca-Cola Co. and Boeing Co., whose yields have risen. Coke is one of only two Dow components that are in the red for the year. Nike Inc. is the other but its 1.4% dividend yield is far lower than the average 3.4% yield among the 10 current dogs.
Read more here.
Jeremy Jones, CFA
Latest posts by Jeremy Jones, CFA (see all)
- American Stocks Can’t Outrun the World Forever - April 25, 2019
- Just Four Stocks Have Generated Half of the NASDAQ 100’s Gains in April - April 24, 2019
- Will Every Recession Now Demand Extraordinary Fed Intervention? - April 23, 2019