With the Dogs of the Dow, you’re simply buying the highest yielding 10 Dow Jones stocks that fell out of favor, investing an equal amount in each, liquidating by January 1 of the following year, and repeating for nearly predictable rewards. Even better, it's easy to use, and it performs well.
The way you pick the Dogs is very simple.
When the year starts, look at the top 10 yielding dividend stocks in the Industrials. Invest equal amounts of money in all 10 stocks. Then, hold onto those stocks throughout the year. At the end of the year, we do it all over again.
While some, including Barron’s once reported that the “Dogs of Dow Investing Strategy no Longer Works,” that’ not true. Others have noted that research confirmed back in 2007 that the Dogs of the Dow is no longer a successful concept. And still others argue investors are barking up the wrong tree with the theory.
While 2007 was flat, followed by a 38.8% decline in the Dogs for apparent subprime reasons, the Dogs have returned a gain every year since.
In fact, in 2009, they were up 16.9%. In 2010, they jumped 20.5%.
In 2011, there were up 16.3%. In 2012, they jumped 9.9%. In 2013, they returned 34.9%. In 2014, they returned 10.8%. In 2015, they did okay, returning just 2.6%.
In 2016, the Dogs returned 16% on average. So the idea that the theory is dead is laughable.
So far, as of December 2017:
- Verizon (VZ) was flat for the year
- Pfizer (PFE) ran from $32 to $36 so far
- Chevron (CVX) ran from $116 to $119 so far
- Boeing (BA) ran from $150 to $276
- Cisco (CSCO) ran from $29 to $37
- Coca-Cola (KO) ran from $40.50 to nearly $46
- IBM (IBM) fell from $160 to $154
- Exxon Mobil (XOM) fell from $88 to $83
- Caterpillar (CAT) ran from $90 to $141
- Merck (MRK) fell from $59 to $55
While there are some laggards in there, the 2017 Dogs have done well overall.
Even the ELEMENTS Dogs of the Dow ETN (DOD) did okay, running from a January 2017 low of $18 to $22. While the 2018 Dogs of the Dow have not yet been released, it’s a good idea to keep an eye on whatever names are added for 2018. One of the potential Dogs of the Dow is Merck (MRK) after taking quite a hit this year.