Dogs of the Dow
Candlefocus EditorThe Dogs of the Dow is an investment strategy that seeks to capitalize on the highest dividend yields from the DJIA. To do this, the investor selects the top ten dividend-yielding stocks from the DJIA and invests in them for a one-year period. At the end of the year, the investor then sells these investments and, at the same time, re-invests in the new, highest-yielding stocks in the DJIA. This process is repeated annually to maximize the investor's dividend yield.
Since its inception, the Dogs of the Dow strategy has been proven to be quite successful. During the 10-year period following the financial crisis, the Dogs of the Dow outperformed the Dow Jones Industrial Average. Over that same period, the Dogs of the Dow earned a 246% return versus the Dow’s 129% return - meaning a better return on the investor’s dividend money.
The Dogs of the Dow strategy is appealing to investors because it is a simplistic yet effective way to invest. Investors are not required to trade frequently or to research and analyze different stocks. In addition, investors can remain diversified by investing in a variety of stocks from the DJIA that offer varying levels of dividends.
The Dogs of the Dow strategy is certainly not without risks, however. Any investment can lose money, and the performance of a particular stock or the entire portfolio does not guarantee future returns. Additionally, the high dividend yields of the Dogs of the Dow can mask the underlying performance of a company. As a result, the investor should remain mindful of the potential risks associated with the strategy and be diligent in monitoring the progress of the investment.
Ultimately, the Dogs of the Dow strategy is a valuable way for investors to take advantage of the dividend offerings of the DJIA and to bolster the yield on their investments. While no strategy is foolproof, the strategy’s track record of success demonstrates the possibility of greater returns on investment than those achieved by simply investing in the DJIA. As with any investment option, however, proper research on the stocks included in the strategy and vigilance in monitoring the portfolio’s performance is essential.