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The Dogs of the Dow

Dogs of the Dow is one of the simplest dividend strategies to beat the market. Over the coming year, I'll track the Dogs performance and keep you abreast of news affecting these companies.

The strategy
Dogs of the Dow is an investing strategy that buys and holds equal dollar amounts of the 10 best-yielding dividend stocks of the Dow Jones Industrial Average (INDEX: ^DJI  ) . It banks on the idea that blue-chip stocks with high yields are near the bottom of their business cycle and should do much better going forward. Investors in this strategy then would not only get large dividends but also gains in the stocks underlying those dividends.

High-yield dividends
High-yield portfolios are often dismissed as inferior to their growth counterparts for various reasons:

  • Many people fear that increasing dividend yields mean lower portfolio returns.
  • Others believe that dividend payments mean management believes that the business is done growing.

Evidence compiled by Tweedy Browne refutes these falsehoods. Research shows that portfolios of high-yield dividend stocks outperform lower yielding portfolios and the market in general. In fact, a study by noted finance professor Jeremy Siegel found that over 45 years, the highest yielding 20% of S&P 500 stocks outperformed the S&P 500 by three times! The highest-yielding stocks turned a $1,000 investment in 1957 into $462,750 by 2002, compared with $130,768 if the same money was invested in the index.

The Dogs of the Dow returned 12.3% in 2011, which beat the Dow's return of 5.5%.

Check out 2012's Dogs of the Dow's performance


Initial Yield

Initial Price

YTD Performance

AT&T 5.82% $30.24 0.90%
Verizon Communications 4.99% $40.12 (1.73%)
Merck 4.46% $37.70 1.64%
Pfizer 3.80% $17.91 0.92%
General Electric 3.70% $21.64 5.19%
DuPont (NYSE: DD  ) 3.58% $45.78 5.72%
Johnson & Johnson 3.48% $65.58 (0.49%)
Intel 3.46% $24.25 3.67%
Procter & Gamble 3.15% $66.71 (1.35%)
Kraft Foods 3.10% $37.36 1.10%
Dow Jones Industrial Average     1.67%
Dogs of the Dow     1.56%
Dogs Return vs. Dow (percentage points)     (0.12%)

Source: S&P Capital IQ as of Jan. 13.

Since the beginning of the year, the Dow Jones Industrial Average rose 1.67%. The Dogs of the Dow rose less than the Dow, underperforming the index by 0.12%.

It's earnings season for the Dow with six stocks reporting this week. However, the only Dogs reporting this week are Intel and General Electric, which report on Thursday and Friday, respectively.

Movers and shakers
The biggest mover so far this year has been DuPont, which has risen 5.72%. DuPont had a banner 2011, beating earnings every quarter.

More ideas
Consider the 10 tickers above along with the 11 names from a new free report from The Motley Fool's expert analysts called "11 Rock-Solid Dividend Stocks." To get instant access to the names of these 11 dividend stocks, click here -- it's free.

Dan Dzombak holds no position in any company mentioned. Click here to see his holdings and a short bio. The Motley Fool owns shares of Intel and Johnson & Johnson. The Fool owns shares of and has bought calls on Intel. Motley Fool newsletter services have recommended buying shares of Procter & Gamble, Pfizer, Intel, and Johnson & Johnson; creating a diagonal call position in Johnson & Johnson; and creating a bull call spread position in Intel. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On September 18, 2014, at 7:00 PM, Oily2 wrote:

    Do you have an opinion on DOD? I think I am going to try this strategy to try save on fees, which I pay way too much each year. I plan on buying the ten stocks when I have an enough so the fees aren't too much.

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Related Tickers

10/24/2016 12:03 PM
^DJI $18225.84 Up +80.13 +0.44%
DD $69.93 Up +0.23 +0.32%
DuPont CAPS Rating: ****