Dogs of the Dow
Dogs of the Dow refers to an investment strategy that involves selecting the ten highest dividend-yielding Stocks from the Dow Jones Industrial Average (DJIA) at the beginning of each year. The idea is to invest in these Stocks as they are perceived to be undervalued and likely to rebound, providing both income through dividends and potential Capital Appreciation.
Investors typically hold these Stocks for a year, then reevaluate to see which Stocks still qualify as the highest yielding and repeat the process.
Examples:
- In 2022, if the highest yielding Stocks in the Dow included companies like Coca-Cola and IBM, an investor following the Dogs of the Dow strategy would purchase these Stocks at the start of the year.
- For 2023, the highest yielding Stocks might change, leading the investor to adjust their portfolio accordingly, potentially selling Stocks that no longer qualify and buying new ones that have higher yields.
Cases:
- In 2020, the Dogs of the Dow strategy outperformed the broader market due to a recovery in certain sectors that had high Dividend Yields.
- In 2015, a downturn in the oil sector impacted some of the Dogs of the Dow, demonstrating the risks associated with relying solely on Dividend Yield without considering other factors like market conditions.