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Dogs Of The Dow
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| FYI - For 2011, Dow up, Dogs of the Dow up more (double digits) |
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Dogs of the Dow is a popular investment strategy. The basic approach of Dogs of the Dow is to select ten of the 30 Dow Jones Industrial Average (DJIA) stocks that have the highest dividend yield. These are "Dogs of the Dow" because the relatively high dividend yield is suggestive of a company that is being shunned by investors. You invest an equal amount in each of these Dogs of the Dow. You hold the shares for one year and then repeat the same steps. Some Dogs of the Dow will remain part of your portfolio, while other Dogs of the Dow will no longer have the highest yields and be replaced by worse performers. The logic behind the Dogs of the Dow is that most if not all the bad news is already out and priced in the stock. The relatively high dividend payments that the Dogs of the Dow provide add significantly to total return. Dogs of the Dow are large blue chip companies that have significant resources (i.e. quality management) which increases the probability of a turnaround.
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