For 10 of the last 11 years, these trades have returned respectable returns with dividends.
We expect for 2018 to be even better with stocks hitting new highs.
While some say this strategy no longer works, we beg to differ. In fact, it works very well.
The Dogs of the Dow
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.
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 aren’t a successful trading idea any longer.
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 2018, the Dogs have returned a gain every year since.
- 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
- For 2017, the Dogs returned another 15%
That’s not a bad return at all for buy and hold stocks with dividends to boot. As we begin 2018, the 10 Dogs of the Dow include:
- Verizon (VZ), which pays a dividend of 4.41%
- IBM (IBM), which pays a dividend of 3.89%
- Pfizer (PFE), which pays a dividend of 3.73%
- Exxon Mobil (XOM), which pays a dividend of 3.62%
- Chevron Corporation (CVX), which pays a dividend of 3.39%
- Merck (MRK), which pays a dividend of 3.42%
- Coca-Cola (KO), which pays a dividend of 3.25%
- Cisco (CSCO), which pays a dividend of 2.99%
- Procter & Gamble (PG), which pays a dividend of 3.04%
- General Electric (GE), which pays a dividend of 2.67%
For the strategy to work well, investors diversify an equal amount among each investment, holding until the 1st of 2019 while collecting dividends throughout the year. Another way that investors trade the Dogs is by buying the ELEMENTS Dogs of the Dow ETF (DOD), which exploded from a December 2017 low of $21.50 to $28.