Source: DogsoftheDow.com.
How the Dogs work
Few strategies are easier than the Dogs of the Dow in terms of implementation. On the last trading day of the year, you take the dividend yields of all 30 Dow stocks. From there, put the stocks in order and take the 10 highest-yielding ones. Then, buy equal dollar amounts of all 10 stocks and keep them in your portfolio throughout the following year. That’s all you have to do until the end of the following year, when you repeat the process.
Over the course of 2021, there wasn’t much change in the stocks that pay the best dividends in the Dow. As a result, although the order of the stocks was different, there was only one replacement, as Intel took the place of Cisco Systems (NASDAQ: CSCO).
Image source: Getty Images.
A second chance for the Dogs in 2022?
The Dogs of the Dow strategy works best when the market focuses on value investing principles. Because most Dow stocks have stable dividends, they tend to move toward the top of the Dogs list when some short-term event causes their share prices to fall. If that’s merely a short-term issue, then the stock often rises over the course of the year, outperforming the broader average and then making way for a new hard-hit stock to take its place.
