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When Bigger Isn't Better

As with many aspects of life, it's possible to have too much of a good thing with your investments. When it comes to dividends, for example, many investors make a big mistake by immediately gravitating to the highest-yielding stocks they can find.

One popular strategy looks specifically at the top-yielding Dow stocks. Known as the "Dogs of the Dow" method, the strategy has you buy the stocks in the Dow that have the highest yields at the beginning of the year. These stocks remain in your portfolio throughout the year, and you replace them at the end of the year with whichever stocks are then the highest yielders in the Dow.

Unfortunately, that method hasn't had the best track record. In 10 of the past 16 years, it has underperformed the Dow itself.

One reason is that the highest-yielding stocks in the Dow tend to be in the same industrie